Renting Parking Spaces

[George Wines]

Although most of these discussions are centered around renting/flipping/building/liens, I thought I would ask the BP community about renting parking spaces. I am in the Denver area and just purchased a condo in a 125 unit building. When I was under contract, I went through all of the HOA documentation during my due diligence period to make sure that I wasnt likely to get a special assessment or have my dues raised. In that research I saw that the HOA owns 10 parking spaces in the lot surrounding the building and is talking with the City and County of Denver so they can put them up for sale.

Since this building is very close to the University of Denver campus, the current parking spots are renting around $100/month. Renting a parking spot sounds very straight forward and I believe that this complex's HOA covers the snow removal and resurfacing of the lot. All the other lots aside from the HOA owned ones, are currently owned by people that are condo owners. I believe that parking spots wont be considered liveable space, no toilets, etc and I think that any car that parks there without right could just be towed.

As I see it, here are some simplified the numbers.

rent - 100/month

vacancy percenage - 10% (conservative)

cost of towing - I dont think there is one to call the tow company. I thought they collect from the towee

Theoretical cost of $10,000

Yearly ROI - (1200*.90)/10000 = 10.8%

Things I dont know: 

loans for parking spots

general metrics or rules of thumb for parking

the law

Is there something that I am missing? Does this sound like a good idea? Why hasnt this been discussed in the podcasts (or at least I didnt find it)?

Questions about the law would be if can you rent to people who arent tenants in the building and how does towing work? I am considering towing the equivalent of eviction in the event of non-payment or somebody parking there that isnt authorized.

[Scott Trench]

I think the problem here is the "Theoretical cost" of $10,000. I don't think that you are buying a parking space here in Cherry Creek for $10,000. I think it would be more like $30,000 - $50,000. Think about a plot of empty land here in Cherry Creek or Wash Park. $500,000+ for a few thousand square feet of empty lot. A standard parking space is 162 sqft.

I also think the parking space is far less valuable, and produces far less rent than the rentable square footage you could replace it with, and thus the parking spaces are a net negative to the real estate investor's cash flow, not a positive one. 

While the parking space model seems sexy because in theory you just buy a lot, paint some lines on it, and charge out the *** for it during the baseball game, I think the reality of it is that you could be doing way better by developing that land, and it is the developers that you will be competing with when you attempt to buy that property. 

If you bought that land 50 years ago for "dirt" cheap, and are now collecting the parking fees, you've got a pretty sweet gig. I think it will be tough to make any money buying them nowadays.

That said, I have never bought a parking space. Anyone with more experience care to comment?