When a seller pro forma assumes rent growth on the back of a housing thaw, what belongs in the model

I'm reading this twice like everything else, so a slow question. When you say economic occupancy is 81 against 89 physical, is that eight points of discounts and free months, or is it people not paying? Those seem like very different facilities to me and I can't tell which one you're looking at.

Juniper, that gap is usually concessions and promotional rates that never got stepped back up, plus a slice of delinquency. Ledger, that's where the time should go before anyone touches the growth assumption. If eight points of the gap is 200 tenants sitting on a first-month-free rate from 2024 that nobody raised, you have rate growth available inside the rent roll without needing anybody to sell a house. That's a different kind of upside, and it's one you control.

Anchor's point is the one that changes the deal. Ledger, can you actually see rate history per tenant in the seller's software, or only the current rate?

The three-case spread you built is the right shape, and the answer depends on which of two things you're underwriting. Street rate growth and in-place revenue growth are separate lines and they respond to different drivers.

Street rate is the price you post to fill a vacant unit. It's set by local supply and by move-in volume, and move-in volume is where the frozen housing market bites. Yardi's slowdown heading into 2026 and its projection of a gradual, uneven recovery are statements about street rate in aggregate. You have no edge forecasting when home sales move, and neither does the broker, so treating that line as flat is defensible.

In-place revenue is different. It moves with tenure, with how far existing tenants sit below current street, and with whatever rate increase practice the seller has or has not been running. Your 17-month average stay against 12 two years ago is consistent with the longer-tenure pattern being reported sector-wide, roughly 60 percent of surveyed users expecting to stay past a year. Longer tenure means more of your revenue base is exposed to existing-customer increases rather than to move-in volume.

So the model that survives scrutiny puts street rate flat, then prices in-place growth off the actual gap between in-place and street, unit type by unit type, with a churn assumption attached because some tenants leave when the rate moves.

One caution on the year-five value. If you hold street rate flat for 24 months and then apply an exit cap tighter than entry, you've moved the recovery bet from the revenue line to the exit and it's harder to see there. Keep the bet in one place.

The exit cap point is the one I'd have missed. I've watched people do exactly that on land deals, hold the income honest and then just assume the buyer pool is better in five years. They never actually write that assumption down anywhere.

Flat is the safer number. A deal that only works on a forecast neither party can actually make functions as a rate bet with a fence around it, no matter how dependable the asset class is reputed to be.

Depends heavily on where this is. In small markets that have seen essentially no new supply for years, street rates never ran up much in the first place, so there is less to give back. If Ledger's 212 units sit in a metro that added three facilities in 2022, flat is optimistic and a decline in year one is the more defensible line.

Hollow, that is the split nobody prices properly. The language about recovery favoring low-supply markets is doing a lot of work, and it means the same 4 percent assumption is reasonable in one county and fantasy in the next one over.

The delinquency slice inside that eight points would worry me more than the concessions. What's the process for a non-paying storage tenant, and how long does it take before the unit is back on the market? I assume that varies by state.

Wren, it does, quite a lot. Lien and auction procedure for self-storage is set by state statute and the notice periods and advertising requirements aren't the same anywhere, so anyone underwriting delinquency needs the rules for that specific state confirmed with a local attorney rather than a general rule of thumb.

The same discipline applies here as on any small apartment deal. Underwrite what the asset does today, and treat everything else as the reason to be pleased in year three rather than the reason to buy in year one. A building that works on in-place numbers alone is one where a later rate lift, if it comes, is a bonus. If it doesn't come, the owner still holds something that pays.

That framing is the one that holds up over long holds. One thing worth adding on the land side: what's the excess dirt situation on this site? If there's expansion pad available and it's zoned for it, that's an option being acquired for something close to free at a 6.1 on trailing, and it's worth more in a low-supply submarket than any rent growth assumption. Zoning and setback treatment for storage expansion differs by jurisdiction, so confirm the specifics with the planning department before assigning it value.

Flat street rate, and then the expense side of the seller's forward deserves the same treatment. Seller pro formas routinely carry property insurance flat, and it hasn't been flat in years. Same with the payroll line if the property is understaffed at the counter right now.

The payroll point matters more than people think. If a seller has been running a facility with one person 30 hours a week, and a buyer plans to staff it properly, the expense line moves before the revenue line does.

Ledger, stop calling it a growth assumption and call it a move-in volume assumption, because that is the input the housing market actually touches. Build the model so move-ins per month is an explicit driver, then sensitize the thing you are worried about instead of a percentage that mixes rate and occupancy together. Run that on a facility already at 89 percent physical occupancy and the answer usually comes out that it has far less to gain from a relocation thaw than the broker implies. There is not much room to fill. The thaw shows up mostly as pricing power on the vacant units, and this one has 23 of those.

23 vacant units is the whole 4 percent story then. That is the part worth sitting up for.

Sextant's reframe is going in my notes. I'd never have separated move-ins from rate.

What does the rate increase program cost you in churn though? If Ledger raises in-place tenants to close that gap to street, some of them walk, and now he's refilling units into a market where nobody's moving. Feels like the in-place upside and the flat street rate assumption fight each other.

Tally, that's the tension I couldn't articulate. The two levers aren't independent.

They aren't independent, and the way operators handle it is to increase by cohort and watch move-out rates rather than pushing everyone at once. Longer average tenure helps here, a tenant 17 months in has more inertia than one three months in. Doesn't make it free. It makes it measurable, which is more than you can say for the housing forecast.

On the renovation question the thing I'd want priced is the deferred stuff, because it always turns out bigger than the walkthrough suggested. Roof age on the metal rows, pavement, gate motor, camera system that was new in 2016. On an 89 percent occupied facility you can't do that work at your convenience, you do it around tenants with trucks. Ledger, has anyone been up on those roofs?

Reading this whole thread back, the answer that holds up is flat street rate plus in-place growth, which is basically what rena-expert laid out and what sextant made operational. What is easy to miss is how little the housing question ends up mattering once the lines are separated. A deal like this lives or dies on the vacant units and a rate roll that has not been touched, and both of those can be looked at directly rather than argued about.