invest in a parking space: market, insurance and rentability

tim123456789

sheff6107 wrote: »

Am I right with the maths? £10,000 divided by £70 = 143 months = 12 years before you even break even?

why do you need to break even?


This is an capital investment that you will still have


not an improvement in a house purely to save heating costs


tim

sush40

Thank you

The parking space to sell is part of a residential building (undercover, secured by gates). There are 28 in total, so I believe there would be service charges to pay.

The agency who sells to space can offer to manage it, but they ask for 30 pounds a month for insurance and service charges; I just think it's quite a lot (especially if the rent doesnt exceed 70 a month) and 10% management fee on top of that.

I can still have the option to do everything myself (post ads, meet tenants and create a contract) but I have no idea how to sort out the insurance (can i get one only for a car space) as well as the service charges.

AdrianC

booksurr wrote: »

you are both wrong

the £1,000 "micro entrepreneur" allowance is available to anyone (irrespective of their tax bracket/income) who has income derived from property letting and is simply a tax free allowance against the first £1,000 of rental income meaning those in receipt of less than that will pay no tax at all, and those in receipt of more than that will pay tax on the net amount.

Furry muff, I'm very happy to sit corrected. I'd missed that one.

LEJC

sush40 wrote: »

Thank you

The parking space to sell is part of a residential building (undercover, secured by gates). There are 28 in total, so I believe there would be service charges to pay.

The agency who sells to space can offer to manage it, but they ask for 30 pounds a month for insurance and service charges; I just think it's quite a lot (especially if the rent doesnt exceed 70 a month) and 10% management fee on top of that.

I can still have the option to do everything myself (post ads, meet tenants and create a contract) but I have no idea how to sort out the insurance (can i get one only for a car space) as well as the service charges.

I assume that at some point this parking space was tied to a property in the complex and the owner is trying to sell it as a one off because they have no need for it.

It's my understanding that if it is part of a property that forms part of a leasehold development and you buy it,you will become responsible for the service charges pro rata for that space...presumably thats been calculated at £30 per month....you will need to pay those to maintain the underground carpark in the same way that other owners of properties with tied spaces also do.
In terms of will it retain its value...I expect it will,there are usually people who are prepared to pay for parking that is secure,but my guess is that it would only really have appeal to owners within the 28 properties so that kind of restricts the potential market a little.
One thing you may want to check before you go too far into the potential purchase is that the lease actually allows you to rent out the space....
I own a flat with a tied parking space which can be rented out as a complete unit...property and space but the lease specifies that if the space were to be sold independently to the property it must only be used by the leaseholder and not subsequently sub let. This is presumably to prevent access on a regular basis to cars and people with little connection to the complex.All leases are however different and you need to read the lease applicable to the development you are considering purchasing on.

teddysmum

A friend lives and rents a flat in a complex with external and internal parking (the latter under cover , underground with electronic gates.)

There have been problems with the gate mechanism and leaking from the concrete ceiling, which is under the external car park and expenses are met by the owning HA, but if someone had a private car slot, they would have to pay a share, just like a private owner in a block of council/HA flats has to contribute to general maintenance.

davidmcn

Have you taken into account your initial costs? Conveyancing is relatively expensive for a £10k property.

sush40

Ok I quickly contacted the agency who sells the parking space so they can confirm the details and here they are:

- maximum rent to expect for the undercover parking space is £75per month (these are the most popular)
- maximum rent to expect for the open-air parking space is £70 per month
- expenses for insurance and service charges are £35 per month (do they cover all the maintenance charges or is it just the gate?) Cover everything including electricity.
- management fee / agency fee, your free to manage it and rent it yourself. If you want us to do it, we charge one month rent tenant find, managed 10%
- minimum tenancy period- 6 months

So basically I'll end up with 35 pounds a month after all the charges?
That's why I'm wondering if I can find a way to pay the insurance / service charges without going through the agency (I know i could, but how?)

steampowered

To me personally, the admin and hassle doesn't sound worth it for the sake of £70 a month.

Let alone if you are only left with £35 a month after deduction of expenses. That's a yield of 4.2% which is not great. Plus you need to take into account void periods. In a residential block it is easy to see a situation where nobody wants to rent a space if there is already enough parking for all of the residents.

The other point to mention is that you would not typically "own" a space in a rental block. You wouldn't go on the land registry or anything like that. You might find that the only thing you are actually buying is a contract with the people who manage the building. For example you may need the consent of the management company if you ever wish to sell the space in future.

sush40

This is what I think as well, I don't think it's worth it if I only get 35 pounds after deduction of all the charges. I could only earn more money quickly in the case where the value of the car space rose just before decide to sell (considering it is located 5/10 min walk from Manchester centre). But can alos lose a lot of money if at the contrary the value decreases, that';s why i think it might be risky

sheff6107

tim123456789 wrote: »

why do you need to break even?


This is an capital investment that you will still have


not an improvement in a house purely to save heating costs


tim

Because you're assuming it's a) worth £10k and b) you'll recoup at least £10k when you sell it on, either on its own or added to the flat.

If you want to sell the flat in 3 years it might only add £4k to the asking price, which means you're £3.5k down.

If you're buying to rent out you still need to do the sums, not assume you'll make more than £10k in the future and the rental money is free cash.

How much would you save paying £10k off the mortgage as well, for comparison?