What does it cost to buy a self-storage facility?
The short answer: about $7,960,000 for the facility below. The longer answer is the lender’s math — and on the standard SBA terms most buyers assume, this deal does not cover its debt. That is the point of the page.
The short answer
This is a modeled 520-unit self-storage facility, built from researched benchmarks — not a listing, and not a promise about any specific facility. The numbers come from the free Parallel Space acquisition calculator’s self-storage preset: 520 units, 88% economic occupancy, $145 average monthly rent.
| Figure | Amount |
|---|---|
| Year-1 revenue | $796,224 |
| Net operating income (65% of revenue) | $517,546 |
| Purchase price (NOI ÷ 6.5% cap rate) | $7,960,000 |
| Cash to close on standard SBA terms (15% equity + 2% closing + SBA fee) | ≈ $1,541,000 |
| Acquisition loan at 85% of price | $6,766,000 |
| Annual debt service (10%, 10 years) | ≈ $1,073,000 |
| DSCR on standard SBA terms | ≈ 0.48× |
Price is the calculator’s default, rounded to the nearest $10,000: $517,546 ÷ 6.5% is $7,962,240, rounded to $7,960,000. That is 15.4× NOI — the same number as a 6.5% cap rate, stated the other way round.
How the price is set
Storage is not priced on an earnings multiple. It is priced on a cap rate: price equals net operating income divided by the cap rate. At a 6.5% cap, $517,546 of NOI supports $7,960,000. The sector average cap rate is about 6.59%, so 6.5% is a fair-market assumption, not an aggressive one.
NOI here is 65% of revenue. The preset’s costs are site operations 8%, labor 10%, and other operating expenses 17% — 35% in total. Revenue is units × occupancy × rent: 520 units × 88% × $145 a month × 12 months is $796,224. Use economic occupancy — after concessions and delinquency — not the physical occupancy on the rent roll. Every point of occupancy is about $9,000 of annual revenue at this rent.
Why not a revenue multiple? Because two facilities with the same $796,000 of revenue can earn very different NOI — one at 65%, another at 50% after a manager, taxes, and insurance. Buyers pay for NOI, and the cap rate is the market’s price for that NOI.
The lender’s math — where this deal breaks
Most buyers borrow most of the price. At 85% financing the loan is $6,766,000. Two separate problems follow.
First, the loan does not fit SBA 7(a) at all. The standard 7(a) program caps a single loan at $5,000,000. The loan this structure needs is $1,766,000 over that cap, so no 7(a) lender can fund it as drawn — regardless of how good the facility is.
Second, even ignoring the cap, the debt does not cover. At 10% over 10 years — prime at 7.00% plus the 3.0% maximum SBA spread for loans over $350K — annual debt service is about $1,073,000. NOI is $517,546. Divide the two and the debt-service coverage ratio is 0.48×, against the SBA’s 1.25× benchmark. The facility earns less than half of what the loan costs each year.
This is negative leverage, and it is structural, not a rounding issue. The cap rate is 6.5%; the loan constant on 10-year money at 10% is about 15.9% a year. When the cost of the debt is more than twice the yield on the asset, no amount of occupancy improvement inside the modeled range closes the gap — the deal only works on different money.
Read this carefully: under SBA SOP 50 10 8.1 (effective October 1, 2026), the 1.25× DSCR test runs on historical earnings — trailing tax returns, not your projection. The 0.48× above is a forward-looking model. It is a benchmark for judging the deal, not a pass/fail verdict from a lender. The lender will test the facility’s actual past earnings — and a lender will also test it on the loan you actually take, not the 10-year SBA terms shown here.
What it takes to clear 1.25×
Storage is a real-estate deal, so it is usually financed like one: a longer amortization and more equity. Three structures on the same $7,960,000 price:
| Structure | Loan | Annual debt service | DSCR | Cash to close* |
|---|---|---|---|---|
| Standard SBA terms — 15% equity, 10%, 10 years | $6,766,000 | ≈ $1,073,000 | 0.48× | ≈ $1,541,000 |
| Largest possible 7(a) loan — $5,000,000, 10%, 25 years (real-estate term) | $5,000,000 | ≈ $545,000 | 0.95× | ≈ $3,257,000 |
| CRE terms — 40% equity, 7%, 25 years | $4,776,000 | ≈ $405,000 | 1.28× | ≈ $3,343,000 |
*Cash to close is equity plus 2% closing costs, plus the SBA guaranty fee where a 7(a) loan is used: $187,794 on the $6,766,000 loan in row one, $138,125 on the $5,000,000 loan in row two (both 75% guaranteed). Row three is conventional CRE money, so no SBA fee. Working capital is excluded in all rows.
The honest version: even the largest 7(a) loan available, stretched to the 25-year term the program allows when real estate is included, still only covers 0.95×. This price clears 1.25× only with roughly 39% equity or more and long-amortization money at around 7% — a loan of about $4,880,000 or less, which means about $3,250,000 or more out of pocket before fees. That is the real cash-to-close number for this facility, not the $1,541,000 the standard SBA structure suggests. A buyer who budgets for the smaller number will be short by roughly $1.7 million.
What can go wrong
Occupancy is economic, not physical. The model uses 88% after concessions and delinquency. A rent roll showing 92% physical occupancy with a month free on move-in and 4% delinquency is the same 88% — or worse. Verify collected rent, not occupied units.
Lease-up is not stabilized. This preset models a stabilized facility on a moving-season shape: demand peaks in summer (about 1.20× average in July) and troughs in December (about 0.78×). A new facility leasing up starts near half of stabilized collections in its first months. Price a lease-up on its actual ramp, not on stabilized NOI.
Cap rates move. At a 7.5% cap the same $517,546 of NOI is worth $6,900,000 — over $1 million less. The 15.4× exit multiple in the calculator is the same assumption in reverse: if buyers demand a higher yield at your exit, the price falls even if NOI holds.
Costs are mostly fixed. Property tax, insurance, and a manager do not fall when occupancy dips. At 65% NOI margin there is cushion; at 80% occupancy instead of 88%, NOI falls by about $47,000 a year, and the DSCR on the clearing structure above drops from 1.28× to about 1.16×.
Frequently asked questions
How much cash do I need to buy a self-storage facility?
On a $7,960,000 price, about $3,343,000 at 40% equity plus 2% closing costs — the structure that actually clears the lender’s 1.25× test. The $1,541,000 figure from standard 15%-equity SBA terms is not achievable here: the loan it requires exceeds the $5,000,000 7(a) cap, and its DSCR is 0.48×.
Why a cap rate instead of an earnings multiple?
Because storage is valued as real estate. The market prices NOI at a yield — 6.5% here, about 6.59% sector average — and the price is NOI divided by that yield. A multiple is the same arithmetic (15.4× NOI is a 6.5% cap), but the cap rate is how storage buyers and lenders actually talk about it.
Can an SBA loan finance a $7.96M storage deal?
Not a single 7(a) loan at 85% — the loan would be $6,766,000 against a $5,000,000 program cap. A 7(a) loan can contribute up to $5,000,000 of the stack (and can run to 25 years when real estate is included), but the balance has to come from equity, seller financing, or a second program such as SBA 504, which supports larger real-estate projects.
Is the calculator really free?
Yes. The acquisition calculator is free to use, with 19 industry presets and the same lender math shown on this page. There is a $49 full 10-year Excel model for self-storage if you want the workbook — note it models a different, 600-unit lease-up facility, not this 520-unit stabilized one.
Run your own self-storage deal — free
Change the price, the loan terms, the equity, the occupancy — and see what the lender’s math says about your deal.
Open the free self-storage calculatorWant the full 10-year workbook? The self-storage acquisition model is $49 on Gumroad (600-unit lease-up facility).
Want a custom model built for your deal? David offers custom model builds, valuations, and FP&A advisory on Contra.