Garage rental - how successful have you been?

[Adam F.]

Hey everyone,

Can renting out garage space for cars or storage be a reliable and consistent source of income?

I'm in negotiations for a small Multi family rental property (4 units), and everything about the property seems really great but the seller will not budge on her price and to be fair, the cap rate is reasonable for the area at her price. However, the COC return is lower than Id be willing to pay for at that price. There are 2 garages that were used for storage by the seller, so they are now cleaned out. There is already enough driveway space for the current tenants. If I can get the rents up to where I believe they can be based on comps, or rent out the 2 garages, or BOTH, the deal becomes good or even great for me.

I’m wondering if this potential extra garage income is worth relying on in order to pay her full asking price. I don't have any experience renting out garages so I can't say for sure that they will rent, but my gut tells me they will since parking in the city is tough enough.

Aside from the cash on cash, the cap rate is fair, the building is in good condition, in a great area with a great tenant pool (university faculty), walking distance from the university which is in an improving city, etc. The area is a great alternative to college staff and students looking to rent in a quieter more affordable area, right outside the city. Will provide good consistent income and also has the potential for greater appreciation due to the improvements going on in the city.

Part of me wants to walk away simply because the returns do not meet my criteria in its current state, however I do feel this is a great property and I don’t want to under estimate the potential for higher rents and garage income.