12 Red Flags to Avoid in Self Storage Investing
Dec 03, 2025Self storage can deliver exceptional returns, but it also hides pitfalls that can destroy a deal fast. This article walks you through the twelve most common red flags I see on the ground, why each one matters, and the practical steps you can take when you spot them. Read this now and you will save time, avoid costly mistakes, and build a repeatable checklist you can trust when evaluating any market or facility.
Whether you are a first-time buyer or an experienced operator, the difference between a great investment and a disaster often comes down to spotting the warning signs before you close. Some problems are fixable with better operations or modest capital. Others are structural or market-driven and should either change your price or send you walking.
Treat the list that follows as an operating playbook. Use it during initial screening, during due diligence, and when you are negotiating terms. If you apply these checks consistently, you will underwrite more accurately, negotiate smarter, and increase the odds that your next storage deal becomes a reliable, profitable asset.
1. Declining or stagnant population
Why it matters: Fewer people usually means fewer customers and slower demand growth. In small markets, a small population shift can tip supply and demand dramatically.
What to check: 3 to 5 mile drive-time population trends and the age breakdown. If older residents are leaving and no young households are moving in, demand may erode.
How to react: Ask why the population is changing. If growth is driven by a stable employer or new housing, it might still work. If decline is structural, walk away or stress-test your underwriting for lower absorption.
2. Overbuilt markets
Why it matters: Too much new supply causes a race to the bottom on rents and occupancy. Even one large development can swamp a small market.
What to check: Planned and permitted projects, recent deliveries, and the percent increase in total rentable square footage. A rough rule of thumb: more than 15 percent new supply in a short window is a red flag.
How to react: Talk to planning departments, track current projects, and build conservative scenarios where new supply hits sooner than expected.
3. No economic diversity
Why it matters: Markets reliant on one employer or one industry are fragile. If the main employer leaves, renters leave.
What to check: Major employers, industry mix, and recent job announcements. Look for hospitals, universities, regional logistics, or diversified manufacturing as healthier bases.
How to react: Prefer markets with multiple employment centers or clear growth drivers. If buying in a concentrated market, insist on a much larger margin for error in your underwriting.
4. Low household income or no income diversity
Why it matters: Median household income influences how much customers can pay. Low-income markets force price competition.
What to check: Median household income, distribution, and discretionary spending indicators. Use median rather than average to avoid skew from a few high earners.
How to react: Adjust expected street rates and target unit types that match local affordability. If margins are thin, you either need strong operational upside or walk away.
5. High competitor vacancy
Why it matters: Market-level vacancy shows real demand. High vacancy across competitors usually signals weak demand or oversupply.
What to check: Secret-shop competitor properties to estimate occupancy by unit type. Public websites and third-party tools often understate how empty a facility really is.
How to react: Dig into unit-level demand. If specific unit sizes are empty but others are full, you may be able to reconfigure. If vacancy is across the board, the market may not support another operator.
6. Poor visibility and access
Why it matters: Location is permanent. Bad signage, confusing entrances, or poor road visibility kill walk-ins and increase acquisition cost.
What to check: Drive-by traffic counts, Google Maps pin accuracy, signage, and the approach a customer must take to reach the office. Test how easy it is to find on phone searches.
How to react: Poor online presence can be fixed quickly, but physical access cannot. If location is terrible, only buy at a steep discount and with a plan to create a niche (online marketing, off-site signage).
7. Deferred maintenance and hidden CapEx
Why it matters: Deferred repairs can rapidly consume cash and delay revenue stabilization. Roofs, drainage, door seals, and HVAC are common cost buckets.
What to check: A thorough physical inspection, drainage grading, roof type and fastener condition, door condition, and an itemized CapEx estimate.
How to react: Get repair quotes, budget realistic timelines, and factor those costs into purchase price. If deferred maintenance is large and uncertain, walk away.
8. Environmental or structural issues
Why it matters: Contamination, underground storage tanks, poor soil, or insufficient structural load capacity can be deal killers and lender deal brakes.
What to check: Phase I environmental report and any necessary follow-up studies. For conversions, verify floor load capacities and code compliance.
How to react: Bring specialists early if remediation or structural upgrade costs are large, that often kills the economics.
9. Unrealistic seller pricing or cap rate expectations
Why it matters: You cannot change the price you pay. Overpaying limits upside and leaves you exposed if market conditions worsen.
What to check: Comparable sales, current NOI, and what price would realistically pencil for a buyer doing your level of work. Avoid emotional pricing.
How to react: Underwrite conservatively, submit disciplined offers, and be willing to walk away. If the seller insists on unrealistic terms, the money you tie up could be wasted.
10. Wrong unit mix
Why it matters: Unit types are products. If a facility has mostly odd sizes the market does not want, occupancy and revenue will suffer.
What to check: Competitor unit mix, demand for size types, and local uses such as RV or boat storage. Compare income-per-square-foot across unit types.
How to react: Test demand before tearing down walls. Consider temporary solutions like combining small units online or shifting marketing to underserved unit types.
11. High delinquency and owner manipulation of occupancy
Why it matters: Apparent occupancy can be fabricated by ignoring delinquent accounts, owner-occupied units, or units used for storage by seller affiliates. Economic occupancy matters more than physical occupancy.
What to check: Ask for aging reports, tenant lists, and look for owner-occupied units and non-rent-paying accounts. Confirm move-in dates, leases, and collections history.
How to react: Treat seller-provided occupancy claims skeptically. Build collections and auction processes into your operational plan and price accordingly.
12. Declining rates and occupancy together
Why it matters: When street rates and occupancy fall together, you can be facing a market in structural decline or an oversupply-driven race to the bottom. Recovery may take years or never happen.
What to check: Historical rate trends, recent promotions, and whether large operators are running aggressive acquisition promotions that compress pricing.
How to react: Model worst-case scenarios. If the market shows both declining occupancy and falling rates, avoid the deal unless you have a clear, fast operational strategy and a large cushion.
Red flags you can fix and those you cannot
Not every problem should make you walk away. Separate issues into operational problems that you can fix and physical or market problems you cannot. Operational red flags include poor online presence, weak marketing, bad tenant screening, and sloppy rate management. Those are often opportunities if the market fundamentals are sound.
Physical or market red flags, such as major environmental contamination, an irretrievably poor location, or a massive new supply, are harder to overcome and should reduce your risk appetite.
Due diligence checklist
- Market fundamentals: Population, jobs, new supply pipeline, median household income.
- Competitor secret shops: Estimate occupancy by unit type, note promotions and service levels.
- Physical inspection: Roof, drainage, door condition, seals, utilities, and structural reports for conversions.
- Financials: NOI, aging reports, owner-occupied units, and real economic occupancy.
- Environmental: Phase I and any required follow-ups.
- Zoning and development: Speak with planning departments about pending approvals that could change supply.
Final thoughts
Not every red flag means you should walk away. Some issues are simply challenges that can be fixed with better management, clearer systems, or the right capital improvements. Others are market problems you’ll never be able to change, no matter how good you are as an operator. The real skill is knowing the difference.
When you understand what each issue will cost, how long it will take to correct, and whether the market will reward that work, you can make smarter decisions and avoid betting on hope. Build your underwriting around conservative demand assumptions, solid inspections, and a CapEx budget that reflects the actual condition of the property. If you give yourself a real margin for error, you’ll sidestep the deals that can sink you and focus on the ones that offer true upside.
