Are cap rates accurate for self storage?

A cap rate is simple, but using it correctly is not.

A cap rate measures the relationship between net operating income and value. In self storage, the hard part is not the formula. The hard part is making sure the NOI is real. Are rents achieved or advertised? Are discounts burning off? Is occupancy seasonal? Are payroll, insurance, taxes, repairs, management fees, and marketing normalized? Everyone operates their self storage facility differently so cap rate is often one of the most manipulated metrics in self storage. A owner-operated self storage facility is going to have a drastically different net operating income compared to a third-party managed facility resulting in different cap rates despite the gross operating income being exactly the same. Small assumptions can move value materially.