Buying a house was too expensive so THIS is what I bought instead. There's no stamp duty and I've made thousands… and this is how you can do it too

Unlock Property Investment: Explore Opportunities in Parking Spaces and Garages

With average house prices currently around 7.2 times the typical annual salary, prospective homeowners face a significant challenge in accumulating a deposit. However, financial experts suggest an often-overlooked avenue for generating funds and potentially initiating a property investment portfolio: parking spaces and garages.

An Affordable Entry Point into Real Estate

Compared to traditional buy-to-let properties, garages and parking spaces present a more accessible entry point into the real estate market. They can be acquired at a considerably lower cost and rented out with fewer regulatory hurdles and expenses.

Marc von Grundherr, a director at Benham & Reeves, a London real estate agency, highlights the potential for young investors. ‘It might seem unconventional, but for young individuals struggling to save for an apartment deposit, purchasing a £10,000-£20,000 parking space is a viable first step,’ he advises.

According to Mr. Grundherr, spaces can be found for as little as £3,000-£5,000 outside of London, offering even more affordable investment opportunities.

Case Study: Josh Thomas-Parr’s Success in Garage Investments

Josh Thomas-Parr, a 28-year-old trainee doctor from Abergavenny, South Wales, exemplifies the potential of this niche market. Over the past four years, he has amassed a portfolio of over 40 parking spaces and garages.

His interest was sparked by observing a family friend’s successful rental house investment, where the accompanying garage generated substantial tenant interest. This observation led him to consider focusing on garage investment as a standalone strategy.

Building a Rental Income Portfolio

After his initial garage investment proved successful, Josh progressively expanded his portfolio using savings, eventually establishing a limited company to manage his assets. He efficiently finds tenants through social media and word-of-mouth referrals and now maintains a waiting list of prospective renters seeking garage and parking space rentals.

To determine competitive rental rates, Josh benchmarks against a local community housing association’s garage rental prices, typically offering slightly lower rates.

Attractive Yields and Investment Returns

One garage Josh sold through Welsh property auctioneer Sage & Co was listed with a guide price of £8,900 and already had a tenant providing £720 annually – representing an 8% annual yield. This rental yield surpasses the typical 5%-6% yield often seen in residential rental properties, showcasing the strong return on investment potential of garage and parking space investments.

Tax Implications and Financial Considerations

Generating rental income from garages or parking spaces is subject to standard personal income tax, along with capital gains tax on any profits realized from future sales.

James Paterson, auctions partner at Barnard Marcus, confirms that garage and parking space values have increased at a similar rate to residential property values, highlighting the solid real estate investment aspect.

Driving Demand: Parking, Storage, and EV Charging

Increased demand for parking in urban areas, the growing need for electric vehicle (EV) charging facilities, and the demand for convenient storage solutions are key factors fueling the market for parking spaces and garages.

Mr. Grundherr notes, ‘Parking spaces in London are highly sought after. Demand in cities is robust, and every parking space and garage we list for rent is quickly leased.’

Mr. Paterson suggests that installing electric vehicle chargers can further enhance the value of these investment properties.

Considerations for EV Charger Installation

Installing an EV charger, while adding value, can be an investment. Costs can range from £1,000 to £2,000 according to Carwow. It’s crucial to ensure the garage’s electrical system is compatible. Services like Co Charger can facilitate payment processing for tenants using your EV charger.

Storage Solution Alternative

For individuals needing extra space, lock-up garages offer a cost-effective alternative to traditional storage units, providing an additional tenant base for garage owners.

Reduced Red Tape and Regulatory Burden

Mr. Paterson emphasizes that garage and parking space investments involve ‘significantly less bureaucracy than almost any other form of property investment.’ Tenant protection regulations prevalent in residential rentals, such as those concerning mold remediation or rent increase restrictions, generally do not apply to garages, streamlining management and reducing potential landlord obligations.

Essential Due Diligence for Buyers

Mr. Paterson advises, ‘Thorough due diligence is crucial for buyers. Upon the auctioneer’s hammer fall, a legally binding contract is formed, so ensure all necessary checks are completed prior to bidding,’ highlighting the importance of pre-purchase inspections and assessments.

Josh underscores the significance of location. ‘For storage or parking purposes, location within a built-up area is essential. Demand in rural locations may be insufficient,’ he cautions.

Potential Pitfalls and Key Checks

Experts caution that garage investments are not without potential drawbacks. Ryan Saunders, auction director at Sage & Co, recommends physical inspections, particularly for standalone structures, to assess essential conditions. ‘We often auction garages that have been neglected, so inspecting for issues like water ingress is advisable,’ he states.

For parking space rentals, ensure the dimensions accommodate larger modern vehicles. Older garages may not be suitable for larger SUVs, potentially limiting their rental appeal and making them more suitable for storage.

Financing Considerations: Loans vs. Mortgages

Banks typically do not offer mortgages for parking space or garage purchases.

Personal bank loans are an option, but higher interest rates could potentially diminish the overall returns from rental income. Carefully consider financing options and their impact on profitability.

Conclusion: A Viable Investment with Due Diligence

Mr. Paterson summarizes garages and parking spaces as ‘a favorable option with a low initial investment level and potentially better returns than certain other investment classes. However, as with all investments, seeking professional advice before committing to any bids is crucial,’ reinforcing the need for informed decision-making in this burgeoning real estate niche.