The Mysterious Yet Fundamental Concept of Self-Storage Cap Rates #selfstorage #selfstorageinvesting
[{"id": "e8sc8qd", "text": "Good article.  The point I have tried to make on this sub so many times:\n\n&gt; expense numbers need to reflect the market labor cost of running a self-storage property, which should include an onsite manager\u2019s salary, even if the owner is currently doing the work for free.\n\nThe \"going out\" cap rate, representing the trailing actual NOI?  That's nice, but a lot of times its irrelevant.  As an investor, I don't buy a property based on the income you the seller were netting, I buy based on what I will net, using market expenses.  I will hire a real, competent manager.  I will do repairs and maintenance on schedule and professionally.  I will advertise and (expanding beyond self storage into other property types) I will use a good agent to lease the property up.\n\nAnd my cap rate will be based on MY PROJECTIONS, not the previous year's income that may be completely off.  ", "replies": [{"id": "e8scpzr", "text": "Where are you getting \"my cap rate\"?  And are you valuing the real estate, the business, or both?", "replies": [{"id": "e8sewhy", "text": "Self storage isn't leased; the income is through contracts.  So really it's a going concern value, and the business and real estate can't be separated, from an investor's standpoint.\n\nI've tried to educate you about different cap rates before, so I won't bother to discuss it this time.\n\n", "replies": [{"id": "e8so634", "text": "Self storage is leased in some cases and SOME are owner occupied.  Uh, just like hotels!  There are different values for the real estate and the storage/hotel BUSINESS.\nHow can YOU educate anyone about cap rates when you can't even explain what \"my\" cap rate is or of what use it is?   \nGeez, you are either clueless or a wannabe scammer.  ", "replies": [], "depth": 4}], "depth": 3}], "depth": 2}, {"id": "e8scuev", "text": "I was scratching my head since I thought everything you said was pretty obvious to be an informed buyer, but I've also realized that it's still mostly Average Joes trading Self-Storage, though big institutions are starting to put money in huge self-storage portfolios. Also, I feel like people don't understand that in many major states -California, Florida, and Georgia come to mind, they reassess your property value after sale and the taxes can be wildly different (especially in California, if the property is older and hasn't been sold since before 2008)", "replies": [], "depth": 2}], "depth": 1}, {"id": "e8st2yw", "text": "From the article, \n\nEssentially, a cap rate tells an investor what he should expect to earn as a percentage if he purchases a property using all cash.\n\nWhen you hear anyone define cap rate like this you will know they are clueless. A cap rate is the result of the analysis of a closed sale that determines what the NOI sold for.  It is not a return.  The author has confused return/COC/ROI with cap rate.  Direct capitalization ignores financing.", "replies": [], "depth": 1}, {"id": "e8vbbzv", "text": "I'm an MAI appraiser in charge of my firm's self storage practice group for the entire midwest. AMA", "replies": [{"id": "e92sjfp", "text": "Maybe you can address the ignorant cap rate discussion.", "replies": [{"id": "e99948k", "text": "A cap rate is a tool to estimate value based on a property's income producing capability. You're right that the author got it way wrong.", "replies": [], "depth": 3}], "depth": 2}], "depth": 1}]