Charging rent for parking space

[Edmund Chiang]

Hey Guys,

Need a little guidance on this one. I recently purchased a 16 unit multifamily that is cash flowing well with a Cap rate of 11.3% and 21.5% ROI. The tenants has expressed a frustration with the parking situation because there are 16 units and 16 parking spaces in the rear of the building which means each unit is entitled to a spot which currently is free. Some tenants have more than 1 cars and therefore take more than one spot. This leaves a tenant that comes home late without a spot. My thought today was to have each space numbered and give each tenant one parking sticker. If they violate the parking rule than the car will be towed and the expense of this towing will fall on the perpetrator. I was planning on charging $25/month for a parking spot which I think is reasonable for a parking spot in this market area. $25 x 16 units = $400/month or $4,800/year. At a cap rate of 11% that would increase property value by $43,636. The previous landlord said he thinks the tenants will take exception to this new parking rule. The tenant base is 75% section 8 tenants. Should I charge for a parking space or should I just let it be free but have assigned parking spots anyways and therefore each tenant has each spot with no fee. Please Advise!

Thanks in Advance,

Edmund