Welcome to Part 6 of “Making More Money,” our series on earning more from your properties. Our previous post discussed the revenue opportunities you can achieve by adding storage space for your tenants. In this article, we cover another big potential moneymaker: parking spaces for rent. As with any project in this series, research your market thoroughly before getting started.
Many people are attached to their pets, and just as many love their cars. Case in point: In the toney, tree-lined section of Boston known as Back Bay, two parking spots were auctioned off in 2012 for a total of $560,000. And in New York City, a spot 12 feet wide, 23 feet long, and more than 15 feet high, sold for $1 million.
If you have space available in an area where on-street parking is prohibited or metered, you have the opportunity to make a lot of money. Okay, not as much as those property owners in Boston or Manhattan, but depending on your location, the returns can still be substantial.
For example, Tami Hunt, who has managed properties for 25 years, says that in Back Bay, tandem spaces—spots shared by two cars owned by different people—go for about $250 per month.* A tandem spot in Back Bay alone can bring in $6,000 in annual revenue. Not bad for some pavement and stripes. In the nearby Fenway neighborhood, individual spaces (no sharing arrangement) range from about $185 to $200 per month.
*All monetary figures in this series are estimates based on interviews with property managers working in the 2015 Boston market. Your costs and revenue will vary based on your location, your suppliers, your contractors and subcontractors, and other factors.
Again, these types of opportunities clearly aren’t available in every neighborhood, so conducting market research is a must before you invest in offering parking space for rent. But there are still plenty of possibilities to make lots of money in many cities and towns.
Before you do, though, make sure to check your local laws and ordinances first.
Benefits of Adding Parking Spaces to Your Property
How you manage parking spots can make an enormous difference in how much you can earn from your properties.
#1: In a Metro Area Where Parking is Limited, Lease Spots to Non-Tenants
You can charge a premium for each spot and also should consider leasing spots to non-tenants. “But If you do lease spaces to non-residents, be careful,” warns David Last, owner of Last2Development. “You don’t want to lose out on a great tenant who decides not to move in because you’ve leased all your spaces to non-tenants.”
Hunt recommends that you add language to your parking lease agreements with non-tenants that let you or your client terminate the contract with 30 days’ notice. That way, you can offer the spot to a great new tenant who insists on having one with his or her unit – and in the process, make sure you fill that vacancy quickly and capture the monthly rent.
#2: Make More Money from Tenants with Multiple Cars
For a multifamily home in the suburbs where overnight parking is prohibited, you could include a free parking space with each unit in the lease but charge $50 or more for each additional car per unit for tenants who own multiple vehicles.
#3: Provide Numbered & Premium Spots
To make tenants feel they’re getting the most for their money, assign a numbered spot (or spots) to each unit. Additionally, depending on your layout, you can charge a premium for spots closer to the building or those in a covered garage, especially in northern climates with harsh winters.
#4: Earn a Project Management Fee
As the property manager, think about supervising the project for your clients and charge a project management fee for adding this new feature that will bring in additional revenue. Like most capital improvement projects, what you can make managing the project usually depends on the complexity of the job and the cost.
Not surprisingly, costs are much higher when you convert an unutilized space or one that was originally designed for another purpose, like a playground. In addition to painting spots and putting up signs, you may have to:
- Level the land
- Install drainage
- Repave the area
- Build speed bumps
- Carve a curb from the existing sidewalk
Example: Creating a 10-Space Parking Lot
In this example, we’ll create 10 parking spaces for rent from 3,000 square feet of land that doesn’t require leveling, installing drainage, or adding speed bumps.
At $3 per square foot, repaving will cost about $10,000.
If you or your maintenance staff acquires the materials to paint the spots and add the signs, you could spend as little as $500. Hiring a contractor to do the job would cost about $1500.
In the Boston area, some cities and towns charge owners about $200 to carve a curb from the sidewalk.
By serving as the project manager or GC on the job and having your staff handle painting and signage, you could charge 8 percent of the $10,700 cost and earn a project management fee of $856.
Getting Started: 3 Tips
Remember to dot your Is and cross your Ts before you begin adding or reconfiguring parking spaces.
Treat Each Parking Lease Agreement Like an Apartment Lease
For a unit that comes with parking, the terms and rights to the spot are spelled out in the lease. But when you’re renting a spot to a non-resident, have an attorney draw up a parking lease agreement, Hunt recommends. Also, ensure the contract protects the owner from any liability that may result from accidents, scratches, theft, or vandalism. Last also recommends requiring parking lessees to carry renters insurance, which covers valuables left in the car if they’re stolen.
Nail Down Your Security Policy If You Have an Indoor Garage
This is especially important if you lease spots to non-tenants. “Extra diligence such as background checks should be done, and a certificate of insurance from the renters (should) be provided because now you have ‘outsiders’ who access your property when they enter your garage,” Last says. Additionally, for indoor garages, he stresses that cleanliness and proper lighting are important to make lessees feel safe and welcome. Finally, he says that security cameras, which no longer cost a fortune, lend an extra measure of security and peace of mind.
Make Sure in Tandem Parking Agreements That Tenants Know the Rules
“In the lease, state that tenants are responsible for moving their cars and letting one another out,” Hunt says. “In my career, I’ve never had to referee residents with tandem spots,” she adds. “Especially in the inner city, where spots are few and far between, people will gladly pay a premium for a tandem spot and agree to work things out amongst themselves.”
Pro Tip: Reorganize Your Lot to Provide Tandem Spots
If most of your existing spaces are large, Hunt recommends changing some or all of them into tandem spots. By accommodating multiple cars like compacts and subcompacts, you could double your parking revenue, depending on your location and supply and demand.Read more on Maintenance & Improvements