Multifamily, Storage - is Quantity Better than Quality?

Owning self-storage facilities or apartment buildings typically takes more owner management compared to large NNN single-tenant properties, and this difference is reflected in their cap rates. In self-storage and apartments, landlords handle tenants, maintenance, vacancies, and often daily operations. Vacancy risk is spread across many small units, providing diversification, but requiring constant efforts to maintain occupancy.

As of late 2025, self-storage cap rates average 7-8% locally, while multifamily cap rates range from 5.5-7.5%, depending on size and quality. These higher returns compensate investors for management demands.

In contrast, NNN single-tenant properties offer a more passive investment with the tenant responsible for taxes, insurance, and maintenance, resulting in lower cap rates. This minimizes owner involvement to essentially collecting rent and monitoring lease compliance, often with long-term leases and built-in yearly rent increases.

These lower returns reflect less landlord obligations,  but higher concentration risk: a single tenant default can lead to 100% vacancy, requiring months (or years) to backfill.

Thus, while NNN assets suit landlords seeking hands-off predictable income, self-storage and apartments attract those willing to actively manage operations in exchange for higher returns and greater control over income growth.