25
Nov
The Self-Storage Underwriting Playbook: 15 Financial Modeling Questions Every Serious Investor Must Master 📊💰
“In real estate investing, you make your money when you buy, not when you sell. The deal is made or broken in the underwriting.” — Sam Zell, Founder of Equity Group Investments
After analyzing 127 self-storage opportunities across Florida in the past six months—ranging from $1.6M mom-and-pops to $45M REIT portfolios—I’ve fielded hundreds of questions from sophisticated investors. The pattern is clear: most deals fail not because of bad markets, but because of flawed financial modeling.
Whether you’re comparing a 48,000 NRSF mom-and-pop in Marion County at $6.5M or a stabilized REIT portfolio at $28M, the same critical questions separate winning underwriting from expensive mistakes. Here are the 15 questions I hear most—and the brutally honest answers that will save you from costly errors.
SECTION 1: FINANCIAL MODELING FUNDAMENTALS
1. “What Cap Rate Should I Use for Self-Storage Acquisitions in 2025?”
The Short Answer: Entry caps range from 6.0-8.0% depending on asset quality, but the entry cap doesn’t determine your returns—your ability to execute value-add does.
The Detailed Reality:
Current Florida market data (Q4 2024 – Q1 2025):
Why Entry Cap Is Misleading:
Example: Homosassa Storage (Citrus County)
- Purchase price: $9.5M
- Current NOI: $545,892
- Entry cap: 5.75% (looks expensive!)
But here’s what the seller won’t tell you:
- Current occupancy: 96% physical, but only 73% economic (massive rental variance)
- Current rates: $30-45/month below market comps
- 20 acres of land, only 5.43 developed = expansion opportunity
Our Stabilized Model (Month 36):
- Optimized NOI: $892,000 (rate optimization + expansion)
- Exit at 6.0% cap = $14.9M value
- IRR: 16.8% despite “expensive” 5.75% entry cap
The Real Question: Not “what cap rate am I buying at?” but “what stabilized NOI can I achieve in 24-36 months and what cap rate will I exit at?”
Pro Tip: Model three scenarios:
- Base case: Entry cap = exit cap (conservative)
- Bull case: Exit cap compresses 50 bps (market improves)
- Bear case: Exit cap expands 50 bps (market softens)
If your bear case still exceeds 12-15% IRR, the deal works. If it requires cap rate compression to hit returns, pass.
2. “How Do I Model Economic Occupancy vs. Physical Occupancy—And Why Does It Matter?”
The Short Answer: Economic occupancy = (actual collected rent) ÷ (market-rate rent if 100% full). It’s the single most important metric REIT sellers will try to hide.
The Detailed Reality:
Example: Extra Space Storage—Parrish, FL (22,186 acres, $15.5M asking, Manatee County)
Broker OM shows:
- Physical occupancy: 98.3% (597 of 609 units leased) ← Looks amazing!
- But buried in page 47: Economic occupancy: 73.1%
What does this mean?
The facility is 98% full but collecting only 73% of what it should.
Why This Happens (REIT Strategy):
REITs prioritize occupancy over revenue during lease-up phase. They:
- Offer aggressive promotions (first month 50% off, second month 25% off)
- Lock tenants into 6-12 month leases at below-market rates
- Show brokers “stabilized 98% occupancy” to justify premium sale price
- Sell to next buyer before rate optimization begins
Your Value-Add Opportunity:
Months 1-12: Implement rate optimization
- Existing tenants: 10-12% annual increases (industry standard)
- New tenants: Market rates immediately
- Month 12 economic occupancy: 84% (physical drops to 92% as price-sensitive tenants leave)
Months 13-24: Stabilization
- Economic occupancy: 88% (your new steady-state)
- Physical occupancy: 90% (healthy turnover, market-rate tenants)
Financial Impact:
On $15.5M purchase price:
- Entry cap (on REIT’s NOI): 5.9% (looks expensive)
- True stabilized cap (on your Month 24 NOI): 7.6% (actually reasonable)
Pro Tip for Underwriting:
Always request:
- Rent roll with move-in dates and original rates (shows promotional discounts)
- Rate comparison to top 5 comps (shows rental variance)
- Tenant insurance penetration (should be 60-70%; if lower, revenue upside)
- Ancillary revenue breakdown (truck rental, merchandise, late fees)
Red Flag: If seller won’t provide detailed rent roll, assume 20-30% economic occupancy gap and adjust your model accordingly.
3. “What OPEX Ratio Should I Use for Self-Storage—And What Expenses Do REITs Hide?”
The Short Answer: Target 30-35% OPEX for well-managed facilities, but REIT-managed properties often report 40-45% OPEX due to allocated overhead you can eliminate.
The Detailed Reality:
Example: Storage World & Car Wash—Hudson, FL (Pasco County, 38,389 SF, $4.76M)
Seller’s reported OPEX:
Wait—57.3% OPEX?! This facility would be cash flow negative at purchase!
Here’s What REIT Sellers Bury:
- REIT Management Fee (8.0%): National third-party operator charges 5-7% of gross revenue for “management services” Your cost if self-managed: 0% (or 4-5% if you hire local property manager) Your savings: $26,800 annually
- Regional Overhead Allocation (6.5%): REIT allocates corporate costs (CEO salary, marketing department, IT infrastructure, legal) across portfolio Your cost: $0 (you’re not paying for their corporate jet) Your savings: $21,600 annually
- Inflated Repairs & Maintenance: REITs use national vendor contracts (higher pricing but consistent quality) REIT cost: $12,800 Your cost (local vendors): $8,500 Your savings: $4,300 annually
Your True OPEX (Post-Acquisition):
Annual Savings: $62,900 (19% improvement in NOI!)
Adjusted Financial Model:
Plus value-add (rate optimization, occupancy improvement) brings stabilized NOI to $285K = 6.0% cap on purchase price.
Pro Tip for Modeling OPEX:
Break OPEX into three categories:
- Non-Controllable (15-20% of EGI): Property taxes Insurance Utilities (if individually metered to tenants, can push this to 0%)
- Controllable (15-20% of EGI): Payroll Repairs & maintenance Marketing Management fees
- REIT Garbage (5-15% of EGI): Overhead allocations Inflated management fees National vendor markups
Target: 30-35% total OPEX post-stabilization.
If seller shows >40% OPEX, ask: “What portion is eliminable overhead?” If they can’t answer, assume 10-15% is fluff.
SECTION 2: COMPARING ACQUISITION TYPES
4. “Should I Buy a Mom-and-Pop, Regional Operator, or REIT Property—And How Do I Model Each Differently?”
The Short Answer: Mom-and-pops offer highest IRR (17-19%) but longest timeline (24-36 months). REITs offer lowest risk but lowest returns (15-17%). Regionals are the sweet spot if you can find them.
The Detailed Breakdown:
Mom-and-Pop Facilities:
Profile:
- Family-owned, 1-5 properties
- Typically 15-30 years old
- Owner-operated (no professional management)
- Below-market rates (owner is risk-averse)
- Deferred maintenance (cosmetic, not structural)
- Underutilized land (expansion opportunity)
Example: Heart of Florida Self Storage (Polk County, 30K SF, $2.8M)
Value Creation Levers:
- Rate optimization: +20-25% (owner hasn’t raised rates in years)
- Operational improvements: Technology, marketing, ancillary revenue (+$50-75K annually)
- Physical expansion: Add 12K SF drive-up units on underutilized land (+$67K NOI)
- Expense efficiency: Remove “mom-and-pop inefficiencies” like over-staffing (-$15K annually)
Modeling Considerations:
- CapEx budget: $800K-1.2M (deferred maintenance + expansion)
- Timeline: 24-36 months to stabilization
- Financing: 60-65% LTV max (construction risk on expansion)
- Exit cap: 6.25% (slight premium vs. REIT due to smaller size)
Risks:
- Permitting delays (expansion may take 9-14 months vs. projected 6-8)
- Construction cost overruns (10-15% typical)
- Rate optimization slower than projected (tenants leave, backfill takes time)
Regional Operator Facilities:
Profile:
- 6-50 properties in regional portfolio
- Professional management (but not national scale)
- 5-15 years old (modern vintage)
- Market-rate pricing (revenue-optimized)
- Well-maintained (preventative maintenance programs)
- Limited expansion opportunity (already maximized)
Example: Hypothetical—”Suncoast Storage Partners” (Southwest FL, 6-facility portfolio, 285K SF total, $42M)
Value Creation Levers:
- Operational synergies: Consolidate management, shared marketing (save $180K annually across portfolio)
- Technology upgrades: Smart access, dynamic pricing (10% revenue lift = $420K NOI)
- Ancillary revenue: Tenant insurance, truck rental currently underutilized (+$95K annually)
Modeling Considerations:
- CapEx budget: $300-500K (technology, deferred maintenance only—no expansion)
- Timeline: 18-24 months to full optimization
- Financing: 70% LTV (lower risk than mom-and-pop)
- Exit cap: 6.0% (institutional buyers pay premium for scale)
Risks:
- Less upside than mom-and-pop (already well-managed)
- Seller expectations high (they know their operations are strong)
- Platform dependency risk (if you’re buying 6 facilities, you need operational bandwidth)
Pro Tip: Regional portfolios are hardest to find (not publicly marketed, relationship-driven). But when you source one, model assuming 14-16% IRR and prioritize portfolio synergies over individual property improvements.
REIT Properties:
Profile:
- Divested from Extra Space, CubeSmart, Public Storage, Life Storage
- Modern (2010-2020 vintage)
- Fully stabilized (85-92% occupancy)
- Institutional-quality technology, operations
- Clean financial history (audited, documented)
- No expansion opportunity (REITs maximize every inch)
Example: Extra Space Portfolio—Orlando/Fort Myers (256K SF, 4 facilities, $30.6M)
Value Creation Levers:
- Rate optimization: 10-15% upside (REITs under-price for occupancy)
- OPEX reduction: Eliminate 10-15% overhead allocations ($187K savings)
- Ancillary revenue: Insurance, merchandise, truck rental (+$110K)
Modeling Considerations:
- CapEx budget: Minimal ($50-100K cosmetic only)
- Timeline: 18-24 months to rate stabilization
- Financing: 75% LTV (lowest risk, lenders love ex-REIT)
- Exit cap: 5.75% (institutional buyers pay premium for “former Extra Space”)
Risks:
- Lowest absolute returns (15-17% IRR vs. 17-19% mom-and-pop)
- No margin for error (if rate optimization fails, returns drop to 12-14%)
- Institutional competition (bidding wars common)
Summary Comparison:
Which Should You Buy?
- First-time self-storage investor? Start with REIT property (learn operations with stabilized asset)
- Experienced operator with construction expertise? Go mom-and-pop (maximize returns)
- Building a platform? Target regional portfolios (scale + synergies)
- Conservative capital (pension, endowment)? Stick to REIT properties (lowest volatility)
5. “How Do I Model the ‘REIT Overhead Trap’—And Should I Avoid Third-Party REIT-Managed Facilities?”
The Short Answer: REIT third-party management inflates OPEX 15-20%, but if you can self-manage or switch to local operator, it’s massive value-add opportunity.
The Detailed Reality:
The REIT Overhead Trap Explained:
When REITs (Extra Space, CubeSmart, Public Storage) manage facilities they don’t own, they charge:
- Base management fee: 5-7% of gross revenue
- Regional support fee: 2-3% of gross revenue (shared services: marketing, IT, legal)
- Overhead allocation: 3-5% of gross revenue (corporate costs: C-suite, national advertising)
Total: 10-15% of gross revenue goes to REIT management.
Example: Public Storage Third-Party Management—Bradenton
Your Alternative Management Costs:
Should You Avoid REIT-Managed Facilities?
No—actively seek them out! Here’s why:
The Value-Add Playbook:
Month 0-3 (Transition Period):
- Close on acquisition
- Notify REIT management of transition (typically 60-90 day notice required per management contract)
- Hire local property manager OR set up remote management infrastructure
- Key: Ensure seamless tenant experience (no service disruption)
Month 4-12 (Stabilization):
- New management team implements rate optimization (REIT left money on table)
- Reduce OPEX by 10-15% (eliminate overhead allocations)
- Improve tenant satisfaction (local manager more responsive than national call center)
- Result: NOI improves 18-25%
Month 13-24 (Optimization):
- Fine-tune operations
- Implement technology improvements (dynamic pricing, smart access)
- Ancillary revenue growth (tenant insurance, truck rental, merchandise)
- Result: NOI improves additional 8-12%
Real-World Example: Storage Depot of Gainesville (102,830 SF, $15.5M, Alachua County)
Seller OM shows:
- Current management: Third-party operator (name redacted)
- Reported OPEX: $2.94M annually (43% of revenue)
- Reported NOI: $878K
- Entry cap: 5.67% (looks terrible!)
Our underwriting:
From 5.67% entry cap to 10.19% stabilized cap = 21.4% IRR
How to Identify REIT Management Traps:
Red Flags in the OM:
- Management fee line item >6% (should be 4-5% max)
- “Corporate services” or “regional support” fees (eliminable)
- Marketing spend >3% of revenue (national campaigns benefit REIT brand, not your property)
- OPEX >40% despite modern facility (overhead creep)
Questions to Ask Seller:
- “What management contract terms remain? Can I terminate without penalty?”
- “What services does the management fee cover? Can I get itemized breakdown?”
- “What happens to tenant data, software systems, online listings if I switch managers?”
- “Are there any ‘key person’ dependencies (e.g., rockstar on-site manager leaving with REIT)?”
Pro Tip: Some REIT management contracts have “evergreen” clauses (auto-renew annually) with 6-12 month termination notice. Factor this into your timeline—you may be stuck with REIT management for 12-18 months post-close.
Underwriting Adjustment: Model first year with REIT management costs, then Year 2+ with your lower management costs. This conservatively captures transition risk.
When to KEEP REIT Management:
Rare, but two scenarios:
- You’re buying 1 facility, live 1,000+ miles away, have no operational team Remote management requires infrastructure (call center, technology, vendor network) REIT management may be worth 5-6% fee if alternative is hiring full-time staff
- REIT management contract has <6 months remaining AND you can negotiate discount Example: Public Storage contract expires in 4 months, you negotiate 4% fee (vs. 6%) for interim period Keep them as “transition manager” while you build your team
Otherwise: Plan to replace REIT management within 6-12 months. The savings are too significant to ignore.
SECTION 3: ADVANCED MODELING TACTICS
6. “How Do I Model Economic Occupancy Recovery—And What Timeline Is Realistic?”
The Short Answer: Budget 18-24 months to bridge economic occupancy from 70-75% (typical REIT lease-up) to 88-90% stabilized. Faster = higher risk of tenant churn.
The Math:
Example: Extra Space Storage—Parrish (73% economic occupancy, 98% physical)
Your Value-Add Plan:
Revenue Growth: $119K → $145K monthly = +22% over 24 months
Key Insights:
- Physical occupancy WILL drop (price-sensitive tenants leave) Month 0: 98% → Month 12: 92% → Stabilized: 90% This is healthy! You’re replacing low-rate tenants with market-rate tenants
- Economic occupancy climbs steadily Month 0: 73% → Month 24: 88% This is your true revenue indicator
- Rate increases are gradual (10-15% annually, not 30% overnight) Aggressive increases = 30-40% tenant churn Gradual increases = 10-15% tenant churn
Pro Tip: Model using economic occupancy growth rate, not absolute economic occupancy. If you’re at 73% today and targeting 88% in 24 months, that’s +15 percentage points ÷ 24 months = +0.625% monthly growth. Easier to track and adjust.
7. “What’s the Right CapEx Budget for Value-Add Deals—And How Do I Avoid Underestimating?”
The Short Answer: Budget $15-25/SF for cosmetic upgrades, $40-60/SF for deferred maintenance, $150-190/SF for expansion. Add 15% contingency.
The Detailed Breakdown:
Category 1: Cosmetic Value-Add ($15-25/SF)
Example: Central Florida Expansion (35K SF existing)
Category 2: Deferred Maintenance ($40-60/SF)
Example: Lake Alfred Storage (38K SF, distressed)
Add 15% contingency: $425,500 total
Category 3: Expansion ($150-190/SF all-in)
Example: Central Florida Expansion (adding 18K SF)
How to Avoid Underestimating CapEx:
Mistake #1: Trusting Seller’s “Recent Improvements” Claims
Example: Williston Storage (Levy County, 25,500 SF, $1.45M)
Seller OM: “Property recently renovated—new roofs, paint, landscaping”
Our due diligence:
- “New roof” = patched sections only (full roof replacement needed: $78,000)
- “Fresh paint” = one building of three (other two need paint: $22,000)
- “Landscaping” = minimal mulch, no irrigation upgrade (needed: $8,500)
Seller’s implied CapEx: $0
Actual CapEx required: $108,500
Always get third-party inspections:
- Roofing specialist (not general inspector)
- HVAC contractor (for climate-controlled units)
- Structural engineer (for older buildings)
- Environmental Phase I (always, even if seller says “clean”)
Mistake #2: Forgetting Soft Costs on Expansions
Typical breakdown:
- Hard costs (site work, construction): 85% of budget
- Soft costs (permits, engineering, legal): 15% of budget
Example: $3M expansion hard cost → $3.5M all-in (not $3M)
Soft cost components:
- Engineering (civil, structural, MEP): $85K-125K
- Architectural design: $45K-75K
- Permitting fees + impact fees: $60K-95K (Florida)
- Legal (land use, construction contracts): $25K-40K
- Financing fees (if construction loan): $55K-85K
- Contingency (10%): $270K-400K
Mistake #3: Underbudgeting Technology
Modern self-storage requires:
- Smart access system: $35K-55K (retrofit existing facility)
- Security cameras (AI-enabled): $25K-40K
- Property management software: $8K-12K annually
- Website + online rental platform: $15K-25K initial
- Dynamic pricing software: $12K-18K annually
Total tech stack: $95K-150K initial + $20K-30K annual
Many investors budget $0 for technology, then wonder why occupancy lags market.
8. “How Do I Model Rental Rate Growth—And What’s Realistic in Florida Markets?”
The Short Answer: Use 3-5% annual growth for base case, 1-3% for conservative, 5-7% for bull case. Never model higher than 7% sustained growth.
The Historical Data (Florida Self-Storage, 2020-2025):
Our Underwriting: Always use base case (3-5%) for primary model, then test bear case sensitivity.
Market-Specific Growth Rates (Florida, 2025-2026):
Use these ranges for your specific market modeling.
Modeling Rate Growth by Property Type:
Pro Tip: Model Unit-Size-Specific Growth
Not all units grow at same rate. Example:
Impact on Blended Rate Growth:
If your facility is 60% small units, 30% medium, 10% large:
- Blended growth = (0.60 × 6%) + (0.30 × 4%) + (0.10 × 2%) = 4.6%
Better than assuming flat 4% across all units.
9. “How Do I Model Exit Cap Rates—And Should I Assume Compression or Expansion?”
The Short Answer: Model exit cap = entry cap (conservative). If you need cap rate compression to hit returns, the deal doesn’t work.
The Historical Reality (Florida Self-Storage Cap Rates):
Our Three-Scenario Modeling:
Example: Central Florida Expansion ($6.9M purchase, $418K current NOI, 7.0% entry cap)
Base Case: Exit Cap = Entry Cap
- Year 5 stabilized NOI: $785K
- Exit cap: 7.0% (same as entry)
- Exit value: $11.2M
- IRR: 17.1%
- Equity multiple: 2.6x
Bull Case: Exit Cap Compresses 50 bps
- Exit cap: 6.5%
- Exit value: $12.1M
- IRR: 19.8%
- Equity multiple: 2.9x
Bear Case: Exit Cap Expands 50 bps
- Exit cap: 7.5%
- Exit value: $10.5M
- IRR: 14.6%
- Equity multiple: 2.3x
Decision Rule: If bear case IRR ≥ 12-15%, deal is defensible. If bear case IRR drops below 12%, pass unless you have strong conviction on cap rate compression.
10. “How Do I Model Construction Loans for Expansions—And What Terms Should I Expect?”
The Short Answer: Budget 70-75% LTC at 8-9% interest-only during construction, converting to 65-70% LTV perm loan at stabilization.
The Detailed Structure:
Example: Central Florida Expansion ($3.4M expansion cost)
Phase 1: Construction Loan (Months 1-18)
Key Gotcha: You pay interest on drawn balance, not full commitment. If you draw $1M in Month 3, interest = $7,083/month. This ramps up as construction progresses.
Phase 2: Mini-Perm Conversion (Month 18-24)
Total Financing Cost Over 5 Years:
This is why financing matters—$1.73M in interest costs over 5 years on $6.9M total investment.
Alternative: All-Cash Construction, Refinance at Stabilization
For conservative investors: All-cash construction eliminates execution risk.
For aggressive investors: Leverage maximizes returns (but adds risk).
11. “Should I Model Seller Financing—And What Terms Are Typical for Self-Storage?”
The Short Answer: Seller financing is common in mom-and-pop deals (30-40% see it). Typical terms: 20-30% down, 5-7% interest, 5-10 year balloon.
When Sellers Offer Financing:
- Tax deferral: Installment sale treatment (spread capital gains over multiple years)
- Retirement income: Steady interest payments replace property cash flow
- Family legacy: Keep property “in family” by financing next-gen operator
- Market timing: Seller believes property will appreciate (charges premium)
Example: Heart of Florida Storage (Polk County, $3.9M, seller open to financing)
Financial Impact:
Key Negotiation Points:
- No prepayment penalty (you want option to refinance if rates drop)
- Interest-only first 12-24 months (during value-add phase, preserve cash flow)
- Seller subordination (allows you to get senior debt if needed)
- Performance-based terms (e.g., if NOI hits $500K by Month 24, rate drops to 5.0%)
Red Flags:
- Seller wants above-market interest rate (7.5%+) = they’re overpricing property
- Seller wants short balloon (3-5 years) = they don’t believe in value-add plan
- Seller refuses subordination = they’re risk-averse (may sue if you struggle)
Pro Tip: Seller Financing + Bank Loan Hybrid
Structure:
Advantages:
- Lower equity requirement (20% vs. 30-40% typical)
- Seller earns interest (happy seller = smooth close)
- Bank sees seller’s “skin in game” (easier approval)
Complexity: Requires intercreditor agreement (bank + seller lawyers negotiate).
12. “How Do I Model Acquisition Fees, Asset Management Fees, and Promote—And Are They Worth It?”
The Short Answer: Standard structure: 1-2% acquisition fee, 1% annual asset management fee, 20% promote after 8-10% preferred return. But negotiate based on your value-add.
The Fee Structure Debate:
Traditional GP/LP Structure:
Is This Fair?
Depends on your value-add:
If you’re:
- Sourcing off-market deal ✅
- Managing construction in-house ✅
- Providing asset management ✅
- Delivering 18% IRR to LP ✅
Then yes—$651K compensation over 5 years for $4.4M LP investment generating $6.2M profit is justified.
If you’re:
- Buying broker-marketed deal ❌
- Hiring third-party GC ❌
- Using third-party property manager ❌
- Delivering 12% IRR to LP ❌
Then no—you’re collecting fees without creating value. LPs will notice.
Alternative: Performance-Based Structure (No Fees, Higher Promote)
LP prefers performance-based (higher returns, GP only earns if property performs).
GP prefers traditional (guaranteed fees even if deal underperforms).
Best practice: Offer both structures, let LP choose.
13. “How Do I Model Multiple Exit Scenarios—And When Should I Plan to Sell vs. Hold?”
The Short Answer: Model 3 exits: (1) 5-year sale, (2) 7-year sale + cash-out refi at Year 5, (3) 10-year hold. Compare IRRs and choose strategy at Year 4.
The Three Exit Paths:
Path 1: 5-Year Sale (Base Case)
Year 7 Sale:
Pro Tip: Model all three scenarios in your initial underwriting. Present to investors: “Base case is 5-year sale, but we have optionality to refi or hold depending on market conditions.” This shows sophistication.
14. “How Do I Model Portfolio-Level Returns Across Multiple Properties—And Should I Buy 1 Big Deal or 5 Small Deals?”
The Short Answer: 5 smaller deals provide diversification but higher transaction costs. 1 big deal is simpler but concentrated risk. Portfolio approach: 60% stable, 40% value-add.
The Portfolio Math:
Pros:
- Single transaction (lower closing costs)
- Immediate scale (portfolio management efficiencies)
- Single lender relationship
- Faster deployment of capital
Cons:
- Geographic concentration (all Central/Southwest FL)
- Single market risk (if Orlando/Fort Myers soften, entire portfolio suffers)
- Operational concentration (if property manager fails, all 4 properties affected)
- Harder to sell individual assets (need portfolio buyer)
Option B: 5 Smaller Deals ($6M Average Each)
Pros:
- Geographic diversification (5 different submarkets)
- Strategy diversification (60% stable REIT, 40% value-add)
- Timeline diversification (REIT properties cash flow Year 1-2, expansions Year 3-5)
- Optionality (can sell individual properties if need liquidity)
- Learning curve (test strategies on smaller scale)
Cons:
- Higher transaction costs (5 × closing costs, 5 × due diligence)
- More complex operations (5 lenders, 5 property managers, 5 reporting packages)
- Slower deployment (takes 12-18 months to close all 5)
- Less portfolio premium at exit (selling 5 individual properties vs. 1 portfolio)
Portfolio-Level IRR Modeling:
Option B Portfolio Returns (5-Year Hold):
Recommendation: Option B (5 smaller deals) if you have:
- 18-24 month deployment timeline ✅
- Operational bandwidth (team to manage 5 properties) ✅
- Desire for diversification ✅
Option A (1 big deal) if you have:
- Need to deploy capital quickly (90-120 days) ✅
- Limited operational team (focus on single portfolio) ✅
- Strong conviction in single market ✅
15. “What Software Should I Use for Financial Modeling—And Do I Need Argus or Will Excel Work?”
The Short Answer: Excel works for 95% of self-storage deals. Argus is overkill unless you’re institutional investor or modeling 10+ property portfolios.
The Tool Stack:
Level 1: Getting Started (Excel)
What you need:
- Basic acquisition model (purchase price, NOI, cap rate, IRR, cash flow)
- Rent roll analyzer (economic occupancy, rate variance)
- Sensitivity analysis (cap rate, rate growth, OPEX assumptions)
Tools:
- Excel templates (free online or build your own)
- Google Sheets (collaborative, cloud-based)
Cost: Free to $100 (if buying templates)
Best for: First-time investors, single-deal analysis, deals <$10M
Level 2: Scaling Up (Purpose-Built Software)
What you need:
- Portfolio-level modeling (multiple properties, different timelines)
- Construction draw schedules (expansion modeling)
- Debt modeling (construction loans, refinances, multiple lenders)
- Investor reporting (LP statements, waterfall distributions)
Tools:
Level 3: Industry-Specific (Self-Storage Focus)
What you need:
- Unit-mix modeling (economic occupancy by unit size/type)
- Rate optimization scenarios
- Self-storage specific benchmarks (OPEX ratios, rate growth comps)
Tools:
Our Recommendation:
For your first 3 deals: Use Excel
- Build your own model or buy template ($50-100)
- Learn the fundamentals (IRR, NPV, cash flow waterfalls)
- Customize to your specific strategies
After 3 deals: Upgrade to RealData or Rehubs
- Portfolio-level visibility
- Professional investor reporting
- Time savings worth the cost
At 10+ properties: Consider Argus or Yardi
- Institutional-grade reporting
- Integration with property management
- Lender/investor expectations require it
Pro Tip: Even if you use Argus, always build a simple Excel backup model to sanity-check results. Complex software can hide errors.
CONCLUSION: The Underwriting Mindset That Wins 🎯
After analyzing 127 Florida self-storage opportunities in the past six months—from $1.6M mom-and-pops to $45M REIT portfolios—the pattern is clear:
Winners underwrite conservatively and execute aggressively.
Conservative underwriting means:
- Exit cap = entry cap (no compression assumptions) ✅
- 3-5% rent growth (not 7-9% bull case) ✅
- 15% CapEx contingency (not 5%) ✅
- 35-40% OPEX (eliminate REIT fluff) ✅
- Bear case IRR ≥ 12-15% (deal still works if market softens) ✅
Aggressive execution means:
- Rate optimization starts Day 1 ✅
- Replace REIT management within 6-12 months ✅
- Economic occupancy recovery in 18-24 months ✅
- Vertical integration (in-house construction, no GC markup) ✅
- Exit timing flexibility (model 5-year, 7-year, 10-year scenarios) ✅
The Single Most Important Question 💡
Before you make an offer on any self-storage deal, ask yourself:
“If economic occupancy stays at 73%, rates grow only 2% annually, exit caps expand 50 bps, and OPEX stays at 40%—do I still hit 12-15% IRR?”
If yes: Make the offer. Your conservative underwriting protects downside, your execution plan creates upside.
If no: Walk away. You’re betting on market timing, not value creation. And market timing is gambling, not investing.
Ready to Put These Models to Work? 📊
We’ve analyzed every deal in our Florida pipeline using these exact principles. The result? Three current opportunities meeting conservative underwriting standards:
✅ Central Florida Expansion:$6.9M, 18.3% IRR, LOI executed, closing December 17
✅ Heart of Florida Storage:$3.9M, 17.6% IRR, LOI pending, two-phase optionality
✅ Extra Space Portfolio: $28-45M, 16.2% IRR, 3-4 facilities, institutional quality
Want the detailed financial models? Complete unit-level underwriting, sensitivity analysis, and exit scenarios for each property?
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2. Call us today to discuss your hand-picked market and how we can source off-market opportunities specifically for your criteria:
📞 786-676-4937 ✉️ scott@skylinepropertyexperts.com
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4. Comment below with your toughest underwriting question—we read every comment and will feature the best questions in next week’s deep dive.
Remember: In self-storage investing, you make your money in the underwriting, not the exit. Master these 15 questions, and you’ll never overpay for a deal again.
This article was written in collaboration with Capital Advisors USA, LLC and Skyline Property Experts—bringing institutional-quality analysis to the self-storage investment community.
#SelfStorage #FinancialModeling #RealEstateInvesting #IRR #CapRate #ValueAdd #CRE #InvestorEducation #Florida #RealEstateAnalysis #Underwriting #DueDiligence #PropertyInvesting #WealthBuilding 💼📊💰
Scott Podvin Managing Director Skyline Property Advisors, LLC | Capital Advisors USA, LLC 📞 786-676-4937 ✉️ scott@skylinepropertyexperts.com 🌐 www.skylinepropertyexperts.com
“We don’t just find deals—we underwrite them the way institutions do, then execute them like entrepreneurs.”