The miracle of mini storage facilities is that they often have great occupancy rates and thus they are some of the most profitable properties to own. 

For appraisers it is usually not possible to separate the business entity / management of a mini-storage property from the income produced from the units, thus an appraisal of the “going-concern” is typical sought.  Many mini-storage facilities have a business office and some also have live-in or resident managers who provide 24 hour security.

Mini-storage units do not have “standard” sizes, but most facilities offer a similar product.  5’ X 5’ or 25 sq. foot units are usually the smallest rented.  Many facilities also offer 5’ X 10’ (50 sq. foot), 10’ X 10’ (100 sq. foot), 10’ X 15’ (150 sq. foot), 10’ X 20’ (200 sq. foot) and 10’ X 25’ (250 sq. foot) or larger units.

Mini-storage sales are usually compared on a price per unit or a price per square foot basis, and adjustments can be made to comparable sales when their unit types differ significantly from those of the subject.  Mini-storage facilities offer a range of amenities including; razor wire fences, security cameras, 24-hour gated access, interior / exterior access to units, individual door alarms and climate control.  

Comparable mini-storage buildings are also often adjusted for differences that they have with a subject property, for example, due to; location, age, design, access, quality of construction, on-site amenities (living quarters / office / cell tower / sign income) and condition.

The most expensive units to rent, on a dollar per square foot basis, are the smallest units, and the least expensive per square foot are the largest units.  The most expensive units to rent, on a dollar per square foot basis, are the smallest units, and the least expensive per square foot are the largest units.  The following table displays a rental rate comparison for three properties with similar storage unit sizes, although some of the comparable facilities did not offer all unit sizes.  While more than three facilities are usually studied, this table provides an example of how rates are compared:  

AVERAGE MONTHLY RENTAL RATES
PER SQ. FT. / PER MONTH BY STORAGE UNIT SIZE

Mini-Warehouse
Facility 
                         5’X5’    5’X10’  10’X10’ 10’X15’ 10’X20’ 10’X25’
      
  Property A                   $ 0.80    $ 0.65                   $ 0.55     $ 0.58
  Property B     $ 0.80    $ 0.62    $ 0.65     $ 0.60    $ 0.55 
  Property C     $ 1.32    $ 1.00    $ 0.75     $ 0.72    $ 0.67     $ 0.64

  Subject          $ 1.00     $ 0.70    $ 0.50    $ 0.46    $ 0.40     $ 0.68

Market income forecasts are usually based on historic and actual rentals and expenses.  In dynamically changing markets, like those being experienced in 2008, appraisers make an extra effort to track the performance of similar storage facilities in the market to see how they have been affected.  A declining economy and poor real estate market may see strong mini-storage occupancy.

Expense information on mini-warehouse properties is also generally available in many markets.  The following table provides an example of an expense comparison in a typical mini-storage appraisal report: 

Market Expense Comparison

                         Income         Expense         Actual        Expense
                        Forecast        Forecast          NOI           Ratio
    
Property D     $ 822,706      $ 174,036     $ 647,670     21.2%
Property E     $ 677,088      $ 164,453     $ 512,635     24.0%
Property F     $ 608,052      $ 164,036     $ 444,016     27.0%
Property G     $ 472,581      $ 129,465     $ 343,116     27.4%
    
Subject          $ 287,880       $ 59,192       $ 199,900     23.0%

Capitalization rates are market derived and usually available, and the income approach with direct capitalization and yield capitalization is usually analyzed.  Operating business ratios are compared when “going-concerns” are analyzed by appraisers and on occasion adjustments can be required for atypical expense items.

While the cost approach is generally considered, most mini-storage properties are valued based on comparable sales and based on their income and expense information.

Mini-storage appraisals are complex and they require focused market research to determine historic, current and future occupancy rates, rental rates and expenses.  Since a business entity is usually included in the “going-concern” additional effort is required to analyze the value of the total business enterprise.