What Makes a Self Storage Project Actually Profitable?

Here’s the Formula We Use—And Why Yours Should Be Tailored

There’s no denying that self storage, when done right, can be one of the most powerful commercial real estate investments out there. It’s simple in theory: low maintenance, high cash flow, and consistent demand. But the difference between a facility that just exists and one that generates serious returns is found in the details—and in how well those details match the goals of the person building it.

At Rocket Self Storage Advisors, we’ve developed a proven framework we use to evaluate every new development project we take on through our Launch Pad Program. It’s not a one-size-fits-all approach, because every investor walks in with a different level of capital, experience, and desired outcome. That’s why we build a custom roadmap for each owner we work with.

But we still follow core financial fundamentals—and here’s what that looks like, with the nuance and strategy that real success requires.

Land Price

Land is often where projects win or lose profitability before construction even begins. While we generally target land costs that allow for strong margins based on expected rents, there are a lot of variables.

A site might look cheap on paper, but if it comes with zoning hurdles, off-site utility needs, detention ponds, or slope challenges, your “cheap” land can turn expensive quickly.

What we’re really after is value per buildable square foot. Not just total acres. Not just price-per-acre. The goal is to land on a site that, once developed, can support strong returns based on the actual usable square footage it yields.

That’s why our first step with Launch Pad clients is to walk the land, pull plats, overlay setbacks, run topographic studies, and talk to city officials. We don’t just hope the land will work—we prove it.

Construction Costs

Development costs will fluctuate depending on market, building design, labor availability, and finish levels. A basic, drive-up facility in a rural town is a very different build than a climate-controlled, multi-story project in a growing suburb.

That said, we work with our clients to stay within a budget range that reflects healthy yield potential. Most projects we guide should land in a zone where the total construction and soft costs leave enough margin for solid net income.

Cost overruns often stem from late-stage changes or unforeseen site challenges. That’s why we push hard on pre-development due diligence and provide guidance on reading and comparing GC bids—because a lot can hide in the fine print.

Rental Income

Your average rental rate per square foot is the engine that drives the return on your facility. But getting that number right isn't just about pulling comps. It’s about understanding your competitive position.

We look at more than advertised rates. We dig into effective pricing, availability, fees, discounts, and what customers are actually paying. Then we position your facility to compete effectively—either by offering better visibility, better customer service, or better value.

Our target rent is based on your specific market. A new build in a fast-growing town with no climate-controlled options might justify a premium. In a saturated urban area, we may advise a different mix of unit types and size offerings.

We also help you map out lease-up timelines, adjust projections based on ramp-up periods, and model realistic stabilization dates.

Market Demand & Saturation

We don’t put much stock in generic "square footage per capita" metrics anymore. Markets can be "overbuilt" on paper and still full of underperforming, outdated facilities. Just because there’s a facility down the road doesn’t mean it’s real competition.

Our analysis goes deeper:

• Is the existing supply truly competitive?

• Are there underserved segments—contractors, boat/RV, small business storage?

• What’s the trend line for new homes, traffic patterns, or seasonal demand?

In short, we look for real opportunity, not just broad market averages. We help you find niches in the market where your facility can lead.

Operating Expenses

Operating expenses need to be modeled carefully—not guessed at. We typically see well-managed facilities land in the range of 30–35% of gross revenue in operating costs. But that percentage can shift depending on management strategy, automation, local utility rates, and your approach to staffing.

We provide custom OPEX templates for our Launch Pad clients that reflect actual line items—everything from security systems to credit card processing to call center support.

The more accurate your forecast, the better your decisions will be.

Property Taxes & Insurance

These are two areas that quietly kill profit margins if you don’t account for them correctly from day one.

Property taxes are especially dangerous after construction. Once your facility is built, many counties will reassess based on an income-producing value. That means your $30K tax bill can double or triple if you’re not ready for it. We help owners plan ahead and protest valuations where appropriate.

Insurance is also market-dependent. Coastal regions and hail-prone states can drive premiums up significantly. We make sure those costs are accounted for in the initial modeling.

Financing & Capital Stack

Financing a self storage project requires strategic alignment between your lender, your equity, and your timeline.

Right now, most of our clients are getting rates in the 6.5–7.5% range, depending on their creditworthiness and experience. Lenders typically want 25–30% equity in the deal and a debt service coverage ratio (DSCR) above 1.25.

But the trickier part is the carry period—those 12 to 24 months where your facility isn’t fully stabilized. You’ll likely be cash-flow negative for a while. If you don’t plan for that, it can get tight quickly.

That’s why we build full lease-up cash flow models, accounting for carry costs, working capital, and interest reserves.

We also walk owners through SBA options, DSCR loans, and refinancing strategies once the property stabilizes.

Pre-Development & Soft Costs

These are the costs that hit before a shovel touches the ground—and many people underestimate them.

Between architectural drawings, civil engineering, traffic and drainage studies, permitting fees, and legal work, you’re likely spending a few hundred thousand before construction ever starts.

We help owners create a complete pre-dev budget so they’re not blindsided by expenses that can delay projects or kill deals.

Management Strategy

This is often one of the most overlooked (and most personal) decisions a self storage owner will make.

Some of our clients want to run lean, self-manage, and keep as much margin as possible. Others prefer a third-party manager to handle day-to-day operations, even if it means paying 6–10% of gross revenue in management fees.

There’s no wrong answer—but there is a right fit for each owner. We help you evaluate your goals, bandwidth, and experience to build a system that works for you.

Sometimes that means a hybrid model. Sometimes it means fully automating operations. But it’s never a default decision.

So, What’s the Bottom Line?

The truth is, there’s no “perfect” self storage deal. There’s only the deal that aligns with your goals, your capital, your market, and your capabilities.

At Rocket Self Storage Advisors, we don’t push cookie-cutter playbooks. We don’t hand you a folder and wish you luck. We build out a full, tailored development and ownership strategy designed around who you are and what you’re trying to achieve.

We do this because we’ve seen too many good people lose money trusting the wrong advisors, buying into the wrong projects, or building in the wrong markets with the wrong assumptions.

You don’t need to go it alone.

If you’re serious about becoming a profitable self storage owner, let’s talk. We’ll build a plan that fits you—and then help you execute it with confidence.

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Kevin Harless CEO, Rocket Self Storage Advisors Helping individual investors become successful, profitable self storage owners. 📩 DM me or reach out directly at kevin@rocketstorageadvisors.com