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The Self-Storage Appraisal Process: Understanding Valuation Approaches Used Today

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The potential gross income consists of rental and other income. Rental income is derived from the self-storage units. The only reliable way to calculate it is by individual unit as outlined in the table, "Market Rent Forecast - All Units." Analyzing rent per square foot can be very misleading and cause erroneous results because rental income is dependent on the unit mix.

View "Market Rent Forecast - All Units."

Ancillary income includes late fees, administrative fees, retail sales, truck rentals and other miscellaneous items. It's typically 2 percent to 5 percent of gross income. In our example, other income is derived from all these sources except truck and equipment rentals. The forecast rent roll, detailing potential gross income, is summarized in the table.


Vacancy is comprised of three main components: stabilized or physical vacancy, collection loss or credit, and concessions. In the subject analysis, all three are combined to form a long-term vacancy factor. Considering the subject facility's competitive position and typical turnover, a physical-vacancy factor of 20 percent is concluded. As to credit loss, the market will remain over supplied. This prediction is consistent with the forecast of market equilibrium, long-run vacancy trends, and the subject competitive position within the market.

Operating Expenses

The subject self-storage facility operates on a full-service or gross basis, meaning all operating expenses are paid by the owner, including fixed and variable expenses. Fixed expenses do not vary with occupancy and include real estate taxes and insurance. Variable expenses vary with the level of occupancy. They include repairs and maintenance, administration, on-site management, off-site management; utilities, advertising, and miscellaneous.

Self-storage property rarely incurs reserves for replacement in direct capitalization. Due to a relatively low breakeven point with respect to occupancy, self-storage expenses tend to be relatively inelastic or stable (in terms of total amount).

Self-Storage Operating Expenses***

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