How to Successfully Buy a Parking Space?

How to Successfully Buy a Parking Space?

A rental investment does not only concern the acquisition of housing. You can also diversify your investments in the stone thanks to the purchase of parking space. Indeed, buying car parks with a view to renting them offers profitability that can sometimes be around 10%. On the other hand, to succeed in your investment, it is necessary to weigh the pros and cons before starting!

We explain everything about buying car parks: what are the advantages and disadvantages? How to choose a car park? How much does a parking space cost? Which cities offer the best profitability? Here we go, follow us!

Why Invest in a Parking Space?

Investing in rental real estate does not only concern the purchase of housing, you can diversify your investments by buying car parks to rent them out. However, to successfully purchase a parking space, you need to know the advantages and disadvantages of this investment before you start!

What are the advantages of buying a parking space?

Although the policy of most communities tries to reduce the use of cars in the city center, we are in dire need of parking spaces in the big cities. This shortage, therefore, leads to an increase in the demand for car park rentals. The consequence is an increase in rental and purchase prices. But we will come back to the profitability of buying a parking space a little later!

But investing in a car park offers some significant advantages, namely:

  • A flexible rental regime: Managing the rental of a car park is much less restrictive than residential accommodation. Indeed, when a car park is rented alone, that is to say, that it is not linked to the main residence, the lease is subject to the provisions of the Civil Code. In other words, the rent, the duration, and the terms of the end of the lease are set freely. In addition, it is much easier to recover a rental car park in order to sell it to recover liquidity.
  • Few condominium charges: Indeed, the charges of a building correspond to thousandths and are distributed between each lot. The share of parking is low, therefore the cost of maintenance is low.
  • A simplified tax system: A small area limits the cost of taxes. Income is generally less than €15,000 per year. You thus benefit from the micro-land regime and its 30% reduction in rental income. On the other hand, capital gains tax is non-existent in the event of the resale of a car park. Indeed, sales with a capital gain of less than €15,000 are exempt.
  • A rental investment at a lower cost: It allows you to start in real estate and diversify your assets.

What are the disadvantages of investing in a parking lot?

Notary fees are the first drawback. Indeed, they are calculated on a fixed basis and proportional to the purchase price. Thus, for a parking space, notary fees can represent 20% of the sale price if the property costs less than €20,000.

When buying a parking space in a new building, notary fees are reduced in the same way as the acquisition of housing.

On the other hand, this investment should also be considered with caution. As we said before, the mayors of big cities want to reduce or even stop the use of vehicles in the city center and encourage citizens to use public transport. The demand for parking is then likely to drop.

Moreover, if electric cars actually become the majority, car park owners will have to adapt to this development by equipping car parks with charging terminals.

In order to avoid making an investment that could become obsolete, we immediately give you some advice for choosing a car park for purchase!

How to choose a parking lot to buy?

As for the acquisition of a home, the criterion to be favored is the location! Indeed, the better you favor an attractive location, the easier it will be to find tenants and obtain a good return.

Also, it is advisable before buying to check the following points:

  • Avoid proximity to public transport: Tramway, bus, metro, etc. In this case, residents will have less need for a car and therefore a car park.
  • Check that there is no public parking nearby or managed by private companies like Vinci which offer annual subscriptions with preferential rates for residents.
  • Be careful when buying in the city center: as we have seen, restrictive measures are pushing residents to part with their cars. This is why you should always check the relationship between supply and demand.
  • Check the works and the reports in order to check that there is no risk of flooding in the underground car parks.

Other elements are also to be checked in order to successfully purchase a parking space, such as:

  • Checking whether car parks are available near airports, and train stations, for example, can be a good investment opportunity.
  • Choose spacious seats (at least 3 meters wide and 5 meters long) that are easily accessible.
  • Check that the parking space is secure and protected against the risk of damage or theft. This is why a covered car park or a closed box located in a secure building will be more attractive. In the case of a purchase in an underground car park, it is better to invest in a place in the first basement, and close to an elevator!

How profitable is parking?      

   

Another essential point to check when buying a car park is of course the profitability!

For a good return, it is advisable to find a car park whose purchase price is minimal with all the positive points mentioned above to be certain of finding a tenant. And of course to check that you are in a tense area where demand is high!

So to be interesting, the profitability of a car park must be at least 5%, but can quickly rise to 10% or 12% depending on the city or municipality!  

The amount of the rent depends among other things on the location, the surface, and the accessibility of the car park.

Do not forget to take into account in the calculation of the profitability of a car park the additional costs and taxation (property tax, non-recoverable charges, the acquisition price including notary fees, the amount of income tax, but also any management fees if you go through an intermediary). You will thus obtain net profitability!

Which cities offer the best profitability in buying a parking space?

As we have seen previously, the average profitability of a car park is around 5%.

Let’s take a closer look at which cities offer the best investment:

On the other hand, it is advisable not to be blinded by the announced profitability. Indeed, what is worth checking above all is the tension indicator, that is to say, the areas where there is a strong demand for parking rental. An investment is profitable only if your car park is rented! In fact, the rental vacancy is likely to significantly reduce the announced profitability.

This is why, to succeed in the purchase of a car park, it is certainly necessary to look at the profitability, but also the location and the demand for rental! If in doubt, do not hesitate to seek advice from experts who will be able to guide you in your purchase project!

Stanley Cole

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