A Novel Use of Idle Real Estate!
October 31, 2019
Many of you will remember the 1965 film, A Charlie Brown Christmas. In it, Peanuts character Lucy van Pelt tells Charlie Brown what she really wants for Christmas… Real estate!
Real estate is one of the oldest, most tried and true means of generating income. And it also happens to be one of the themes of my new book, Income for Life.
Today, I am pulling a chapter from the book to show you how you can use real estate to generate real income right away.
Real Estate Investing is Nothing New
According to the Pew Research Center’s analysis of U.S. Census Bureau data, 37% of Americans rent out their homes. While real estate is a common way to make residual income, it comes with a laundry list of responsibilities.
But one of the easier and more lucrative means of generating rental income on a dollar-per-square-foot basis, rather than renting out your house or apartment, is found in leased parking places.
Parking Spots vs. Residential Properties
I remember that when I first lived in Manhattan, on the East Side between First and Second Avenues, my monthly parking fee was substantially more than the lease on my car.
More and more savvy real estate owners are waking up to capitalizing on leasing parking places and in doing so, parking space investments are becoming more popular.
They are both low-maintenance and easy to occupy. The average landlord of a residential property must process tenant applications. This includes background checks, proof of employment, credit score checks and past rental references.
And this doesn’t include the general and specific maintenance and security of the residential properties.
If you’re looking for an out-of-the-box way to rent out real estate, parking spots are one of the simplest strategies.
Before buying every parking spot in sight, let’s first take a look at some of the advantages parking spaces have over residential rentals.
Easy Entry Points
Where I currently reside in the Washington metropolitan area, parking spots can be purchased for anywhere from $10,000 to $50,000.
While a parking space is typically not available to be financed, that’s a low bar to generate relatively easy income. Many folks have that in savings or can partner with others for a group investment.
For prime residential real estate in Washington, DC, like an $800,000 condo, rent would have to be sky-high just for a landlord to make a decent profit. A landlord would have to charge $5,000 just to cover home association fees and to generate a $3,000 profit. (That’s a 4.5% annual return on your investment.)
Monthly parking rates average around $300 in DC. A $20,000 parking space (with a $300 monthly fee) yields an annual return of 18%.
Unlike residential rentals, landlords and property managers have fewer responsibilities with parking lot rentals. Landlords handle general maintenance and repairs (emergencies included).
If there’s a leaky faucet or a broken pipe, the landlord is the first one getting a call. Matters like parking lots are non-factors. Also, residential landlords have to take care of mortgage, taxes, homeowner association (HOA) fees, and accounting and legal fees.
No Rent Control
The last words a residential landlord wants to hear are “rent control,” which poses the risk that a landlord might collect below-market-value rent. But the chances of rent control affecting a parking space are slim to none.
This means less restrictions for parking space owners. And with more municipalities and even states moving to impose rent controls, parking space properties may well become even more valuable.
When renting out a property to an individual, especially one with a family, evictions can become a nightmare. Not only do you have to be concerned with getting into the property, you also have to worry about getting tenants (and their belongings) removed.
If parking spot tenants don’t fulfill their end of the agreement, their cars can simply be towed. Squatter laws will never be an issue.
The Top Five Cities to Rent Out Parking Spaces
Now that we’ve covered the what and why, the next up is the “where.” Here are the top five cities where parking space landlords can get the biggest bang for their buck.
No. 1: San Francisco
Famous for many things, including the Golden Gate Bridge, San Francisco has become a major attraction. Not only does the Golden Gate Bridge attract 10 million people each year, San Francisco has the fourth highest cost of living in North America. This means a landlord can up the rate on her parking fees.
No. 2: Washington, DC
The capital of the United States is filled with attractions that allure people from all over the globe. Washington’s cost of living is the seventh highest in North America.
It’s a place where culture, history and politics meet along with a vastly improving culinary scene with a quick ascent in the number of Michelin-starred restaurants.
No. 3: Los Angeles
It’s a place of glamour, fame and fortune.
Another of my former homes, Los Angeles is the home to many celebrities and aspiring stars, making it prime real estate for renting out parking spaces for expensive events and in expensive neighborhoods.
No. 4: Miami
Miami is a melting pot of its own because of the great tourist attractions and the attractive lifestyle it fosters!
Being a place where yachts and exotic cars roam wildly, it’s ideal for renting out a parking spot.
No. 5: Seattle
Seattle is booming for both leisure and business. Nearly 40 million people came to visit Seattle in 2017. For 2016 and 2017, the rapidly growing city added a combined 33,803 tech jobs (outpacing Silicon Valley).
To keep up with the expanding businesses, employees and residents alike will have a high demand for parking.
Killing Two Birds with One Stone
If you already have multiple rental properties in major cities around the US, you can take advantage of your current parking spaces.
In some areas, parking spaces may not be for sale. However, you might have a condominium with two parking spaces included. If you save one parking space for your renter, you can rent out the other parking space.
This is an effective way to maximize your current assets. The best part is that this strategy will not cost you any additional fees to get started.
This method is particularly useful if your investment properties are located near major tourist attractions, overpopulated areas or business clusters.
A word of caution: Some HOAs have bylaws that prohibit subletting of any kind. Be sure to stay abreast of such rules and regulations.
Get a Piece of the Action
For those looking to put their spare parking spaces on the market ASAP, here are a few websites and mobile apps to consider.
SpotHero: In the information age, mobile apps have made doing business that much easier. SpotHero allows individuals to post their current parking spaces and rent them for hourly, daily and monthly fees.
ParkingPanda: Acquired by SpotHero in April 2017, Parking Panda tag-teams parking from a different angle. It focuses on business-to-business for event parking. If you’re already the owner of a parking lot, here’s another opportunity.
CurbFlip: Here’s another “do it yourself” option for those looking to rent out their parking spots. This app even allows you to rent out your driveway. This might be a complete game changer if you live in a townhouse or single-family home.
Pavemint: Pavemint allows parking spot owners to rent out their spaces without lifting a finger. The app does it all, and the cash goes right into your PayPal or bank account.
Craigslist: Everything is on Craigslist. You can post your parking spaces on this popular third-party platform.
For those looking for prime real estate (parking included), consult a nearby real estate agent. Their services are free. Real estate agents are only paid a commission through the seller’s proceeds.
Your next investment with ample and rising income streams is just a click or call away.
Now, generating cash from your existing parking space or new ones might not seem like my usual ideas for income, but it is just one of the 65 income stream ideas—from investing to side hustles that anyone can easily achieve—that I’ve written about in my new book, Income for Life.
If you’re looking for better returns in the market or just want to make some extra cash, I highly encourage you to check out Income for Life. It includes nearly 400 pages of income-producing investment strategies for all economic conditions as well as additional income-generating “side hustles” that anyone can use successfully.
All My Best,
Editor, Dividend Digest & Profitable Investing
Author, Income for Life