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Unlock Your Property Investment Potential: Consider Garages and Parking Spaces
While tech giants like Apple, Google, and Amazon famously began in garages, launching a trillion-dollar enterprise might be a long shot for most. However, garages and parking spaces present an accessible entry point into the property investment market, offering a unique avenue to bolster your portfolio. With house prices soaring, making traditional property investment increasingly challenging, these often-overlooked assets provide an alternative investment strategy with compelling returns.
The Appeal of Garage and Parking Space Investments
The escalating cost of residential properties, now reaching approximately 7.2 times the average salary, poses a significant hurdle for prospective buyers striving to save for a deposit. Experts suggest that garage and parking space investments offer a practical, often ignored, solution for generating income. These assets can be acquired at a lower cost compared to conventional buy-to-let properties, while also being subject to fewer regulations and expenses.
Affordable Entry into Property Ownership
Marc von Grundherr, a director at Benham & Reeves, a London estate agency, proposes a novel approach for young individuals struggling to enter the property market: ‘It may seem unconventional, but for those starting out without a flat deposit, acquiring a £10,000-£20,000 parking space is a viable first step into property investment.’ He further notes that outside of London, parking spaces can be secured for as little as £3,000-£5,000, representing a significantly reduced financial barrier.
Real-World Success: Building a Portfolio from Parking
Josh Thomas-Parr, a 28-year-old trainee GP based in Abergavenny, South Wales, exemplifies the potential of this investment strategy. Over the past four years, he has accumulated a portfolio of over 40 garages and parking spaces.
His inspiration stemmed from observing a family friend’s success in renting out a house with an accompanying garage: ‘The garage generated so much more interest; it prompted me to consider focusing solely on garages,’ he explains.
Following the success of his initial garage investment, Josh gradually expanded his portfolio using savings, eventually incorporating his ventures into a limited company. He effectively sources tenants through social media and word-of-mouth referrals, and now benefits from a waiting list of prospective renters.
Maximizing Rental Yields
Josh employs a straightforward method for determining rental rates, benchmarking against local community housing associations that lease garages and setting his prices slightly below theirs.
One garage he purchased from Welsh property auctioneer Sage & Co, listed with a guide price of £8,900, came with an existing tenant generating £720 annually, equating to an impressive 8% annual yield. This yield surpasses the typical 5%-6% return often associated with residential rental properties.
Financial and Tax Considerations
Generating rental income from garages or parking spaces is subject to standard personal income tax. Additionally, any profits realized upon selling the property will be subject to capital gains tax.
Market Trends and Demand Drivers
According to James Paterson, auctions partner at Barnard Marcus, prices for garages and parking spaces have mirrored the growth trajectory of residential property values. He highlights that increased demand stems from several key factors:
- The necessity for secure parking in urban centers.
- The rising need for electric vehicle charging infrastructure.
- The demand for accessible and cost-effective storage solutions.
Mr. Grundherr reinforces the high demand in metropolitan areas: ‘Parking spaces in London are highly prized. Businesses rarely receive sufficient parking permits. Demand is strong in cities, and every parking space and garage we list is leased rapidly.’
Enhancing Value with Electric Vehicle Chargers
Mr. Paterson suggests that installing electric vehicle chargers in parking spaces can further augment their earning potential. However, this undertaking involves an initial investment, with charger installation costs ranging from £1,000 to £2,000, according to Carwow. Furthermore, ensuring the garage possesses a suitable electrical system is crucial. Services like Co Charger facilitate payment processing for tenants utilizing charging facilities within your garage.
Storage Solutions: An Alternative Revenue Stream
For individuals or businesses requiring extra space, lock-up garages serve as an economical substitute for renting conventional storage units, creating another avenue for generating rental income.
Reduced Regulatory Burden
Mr. Paterson emphasizes that garage and parking space investments involve ‘considerably less bureaucracy than almost any other form of property investment.’ This advantage arises because standard tenant protection regulations, such as those pertaining to mold remediation or rent increase limitations, typically do not apply to garages.
Essential Due Diligence
Mr. Paterson advises prospective buyers: ‘Thorough due diligence is paramount. Upon the auctioneer’s gavel falling, a legally binding contract is formed. It is crucial to complete all necessary checks before placing a bid.’
Location is Paramount
Josh Thomas-Parr underscores the significance of location: ‘For storage or parking purposes, the garage must be situated in a densely populated area. Demand simply won’t exist in rural locations.’
Potential Pitfalls and Considerations
Experts caution that garage investments are not without potential drawbacks. Ryan Saunders, auction director at Sage & Co, recommends inspecting standalone garages for essential maintenance issues: ‘We frequently auction garages that may have been neglected for extended periods. Checking for water ingress and structural integrity is advisable.’
For parking rentals, ensure the space accommodates larger modern vehicles. Older garages might not be dimensioned for contemporary family SUVs, potentially limiting their appeal for parking purposes. Such spaces might be more suitable for storage solutions.
Financing and Loan Options
A key consideration is that traditional banks are unlikely to offer mortgages for garage or parking space purchases. While personal loans are an option, the potentially higher interest rates could diminish overall investment returns.
Conclusion: A Promising Investment Avenue
Mr. Paterson concludes that garages and parking spaces offer a ‘favorable option with a low entry threshold and potentially superior returns compared to some conventional investment types. However, as with any investment decision, seeking professional financial advice before committing to a bid is always prudent.’