Monday, July 9, 2018

How to invest in parking spaces

 



Investing in parking spaces is not for the faint of heart, but in several situations can produce excellent returns.  The reason I loved it was because there wasn’t the hassles of renting an residential space.

 

Do your homework up front as if you were purchasing an investment property. 

Calculate your annual gross rental yield and compare it to the risk free rate.  I always like to see a yield of above 12%.  Calculate the CAP rate and P/E ratio.  CAP has to be above 8% to make it worth my time.  This is nothing new for the seasoned real estate investor. 

The most important thing is comps.  How desperate are people for spaces and how much are they willing to pay.  It doesn’t take much effort to figure this out, however it is essential.  Get your ass out there and look for spaces to rent.  See how difficult it is to pick one up.  If its easy and people are willing to negotiate, find another area.  This is where the money is made so don't be lazy.  SpotHero and SPACER are great resources to provide data and comps.

Income first, appreciation second.  However, appreciation can take off in certain scenarios especially around new developments.  It doesn't hurt to spend some time at the county building and find out what the parking allotment around new developments and do a little math with existing demographics.

Parking spaces have many complexities.  They are often deeded with condos, there can be several restrictions and you cannot get a mortgage for them. It's a cash game unless you want to embark on some P2P lending.  It’s these same difficulties that that make these investments interesting since they keep most investors away.

From the NY times:  Marc Wisotsky and his partner, Jackie Lew, bought two spaces in 2005 in a parking garage near their home in Park Slope, Brooklyn, for around $45,000 each. They used one and rented out the other for $600 a month, pocketing $310 after taxes and the garage fee.  It was a tidy, reliable income, Mr. Wisotsky said, but the real payoff came when he and Ms. Lew sold their extra space last year for $285,000. “We could have gotten more — the prices just keep going up and up,” he said. “There are never as many parking spaces as residential units being built.”

Check out this ridiculous story.  Makes me want to get back in the game! 

https://www.bloomberg.com/news/articles/2018-07-05/hong-kong-car-owners-get-squeezed-with-765-000-parking-spaces

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