When it comes to financial investment, there are so many options available today that it can be challenging to decide where to invest your hard-earned money. If you want to invest in real estate but don’t have the capital or resources to buy a building, purchasing a parking lot might seem like a viable option.
But is buying a parking lot a good investment? Buying a parking lot can be a good investment if you find a suitable location and do proper due diligence. According to Statista, the revenue from parking lots and garages in the U.S. is predicted to reach about 11,3 billion U.S. Dollars by 2024. However, like any business, buying a parking lot carries risk.
Just like any other investment, parking lots have their own set of disadvantages and advantages. Read on to explore whether buying a parking lot is a good investment or not. Check out this article if you wonder whether you can make money from building a parking lot.
Factors to Consider When Investing In Parking Lot
Before investing in a parking lot, be sure to carefully consider the following factors:
- Location is crucial. I encourage you to make sure the lot is easily accessible, and there is a demand for parking in that area.
- Consider the size of the lot and the number of parking spaces available. A larger lot with more space will increase your revenue potential, but it will also increase your maintenance and operating costs.
- Research any local laws or regulations that may impact your ability to operate a parking lot.
Pros of Buying a Parking Lot
One of the main advantages of investing in a parking lot is the potential for steady revenue. Parking lots can generate income from parking fees, monthly leases, and event parking. If you buy a parking lot near a popular destination, like a shopping mall or a sports stadium, you could generate significant revenue.
In addition, parking lots often require minimal upkeep and operating costs, making them a low-risk investment.
Here are a few advantages of buying a parking lot:
1- Parking Lots Are Low-maintenance Properties
Another advantage of owning a parking lot compared to other real estate investments is that it requires minimal maintenance.
Unlike a building, a parking lot doesn’t generally have any HVAC systems or elevators that need upkeep, which can save you thousands of dollars per year. Apart from cleaning and repainting the parking lines, there’s no need for extensive renovations or upgrades.
2- High Demand For Parking Spaces
Another advantage of owning a parking lot is that, depending on your location, there will always be a demand for parking spaces, which is especially true for urban areas where parking is a valuable commodity.
Therefore, even if you don’t have any tenants renting your commercial spaces, your parking lot can still generate income as long as you price it reasonably and invest in proper advertising.
3- Low Entry Cost
Compared to other real estate investments, parking lot investments have low entry costs. You don’t need to have a substantial amount of capital to purchase a lot.
In some cases, you can even opt for owner-financing, where the seller acts as the mortgage lender. Low entry costs and ease of financing make parking lot investments an attractive option for beginners in the real estate market.
Cons of Buying a Parking Lot
The major disadvantage of investing in a parking lot is competition. If there are already several parking lots in the area, it may be challenging to capture a significant percentage of the market. Moreover, parking lots are subject to seasonal changes and economic downturns, which can impact your revenue.
Also, keep in mind that parking lots require maintenance and upkeep, such as repaving or restriping, which could add to your operating costs.
Like any investment, parking lot ownership has some risk factors to consider. Here are a few drawbacks of buying a parking lot
4- Risk Factors To Consider
A major risk associated with investing in parking lots is the presence of other parking spaces in the area. If your lot is in a competitive area, it can be challenging to attract customers and generate income.
Another risk factor is the cost of maintenance for entrance gates, security cameras, and lighting in high-crime areas. Furthermore, the risk of damage, vandalism, and theft is also higher in parking lots.
5- Income Potential Varies
The income potential of parking lots varies according to location, market demand, and seasonality. Although parking lot ownership can generate passive income, it may not always be consistent.
Certain areas may have higher demand in the summer months, while others may see lower demand in winter. Thus, I recommend you do your research and come up with a realistic business plan to forecast the expected revenue streams.
6- Other Threats
Nowadays, Uber and Lyft are becoming real threats to parking lot businesses because they are creating conditions for people to leave their cars at home, according to ACE Parking, one of the leading parking companies in North America.
Consider Alternative Investment Options
Investing in a parking lot may not be for everyone; here are a few alternative investment options:
- If you’re looking for an alternative investment option, consider parking garages, which offer a covered parking option and less competition than open lots.
- If you’re interested in investing in real estate without owning physical property, consider real estate investment trusts (REITs) that invest in parking lot assets.
- Also, if you’re looking for a more hands-off investment option, consider professionally managed funds that specialize in infrastructure investments.
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Wrapping Up
Parking lots can be a good investment, but I believe that it is essential to fully understand both the benefits and risks that come with it. Although parking lots have low-maintenance costs, high demand, and low entry costs, it’s still necessary to consider the presence of competitors in the area, regulations, and seasonality.
Proper financial planning and research are crucial to making profitable parking lot investments. Therefore, I suggest you take the time to assess your location’s potential, discuss with professionals, and come up with practical strategies to attract customers.