Investing in Parking Spaces, a Growing Phenomenon
The current climate is not conducive to saving and investing via the traditional routes. Interest rates in the UK are at a record low of 0.5% this January 2015, and many people are looking for better returns than they’d achieve with a savings account, which generally give a measly 3% at best. Finally, house prices have risen by 10% over the past year, making it increasingly difficult to grow a property portfolio.
This has led to people considering alternative places to put their money. One idea currently being bandied about is the prospect of investing in parking spaces. They can make a great investment as they are low maintenance, and of course are cheaper than purchasing an entire property. The number of cars on UK roads is set to increase to 39 million by 2030, and this kind of increase will put a huge amount of pressure on the UK’s parking supply. The likelihood is that this supply will not increase in line with the demand. Not to forget that the UK parking industry generates an estimated £12.5billion in gross parking revenues each year, so there’s certainly money to be made.
Many existing landlords have caught on, often renting out a flat and parking space separately having seen the value of a parking spot as an entity in itself. And fewer properties now come with a parking space, particularly in new inner city developments, which can put people off these properties. However, if people have the option of renting secure, off-road spaces in the local area, this can truly make or break a decision to either purchase or rent a property.
Buying a space
We can talk about buying a parking space but where should you go if you’re considering going down this route?
One place to do this is through a classifieds marketplace like Gumtree. Another route is to go via an estate agent, although this could potentially involve hefty fees, and therefore impinge on profits. There is a final alternative that appears to be becoming more mainstream, with proponents encouraging pensioners to get involved. It comprises investing via a specialised scheme such as this one. This particular scheme allows you to purchase a parking space at Glasgow Airport, for a set price of £20,000, which is then leased back to the parking company who manages the long stay airport parking.
What to consider
Doing some market research is key with regards to what platform to use to purchase – it is best to figure out what is the best option for you personally before jumping in.
Area too is crucial – it is advisable to carry out research (preferably on the ground) to scope out the local market. You need to know how much the space will set you back, and what kind of rental prices might be attainable, to assess whether it is a worthwhile investment. As a marker, spaces in London can cost anything from £10,000 in Zones 3-4 to £50,000 in central London, Zone 1. Outside of London, spaces become considerably cheaper.
Some degree of scepticism is always welcome with regards to investment, however some would argue that the concept of buy-to-let for parking spaces and garages is in fact a proven model. One example would be Rodger Dudding, also known as Mr Lock Up, who reportedly owns a portfolio worth over £100m all as a result of buying up garages and parking spaces to rent out.
Renting out your space
And how do you go about finding a tenant for your parking space you might ask?
If you live in a block with limited parking you can start by asking neighbours, some might not own a space but need one, and others may need a space for a second car.
Most people will opt to join a marketplace like YourParkingSpace.co.uk. The advantage here is that they’ll manage the rental for you, collecting payments and enforcing the notice period. The downside is that you will pay for this as these marketplaces charge commission.
Alternatively, Gumtree is an option here as well, although you’ll have to do the legwork of taking enquiries and collecting the rent. You could also consider putting up adverts in your local newsagents or town hall, as well as placing an ad in the local newspaper.
Like any investment, there are risks involved; there’s no guarantee you’d make your money back, and it’s not impossible that you’d end up with a disruptive tenant, or damages to deal with. Moreover, parking spaces are not that liquid, which should also be taken into account when considering investing.
For a relatively hands-off way to invest a small to medium amount of cash it’s definitely worth considering – just make sure you do your homework!