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The garage as an investment – Credit

The garage and driveway have become a very popular form of investment lately. As with any investment, this can be done well and badly, you can be lucky with a good location and be left empty in another residential park by the car parker, there are advantages and disadvantages. You can get involved in buying a bad garage just as much as buying a flat.

I have a client who has taken ten parking garages in various upscale downtown residential parks, but has since regretted it. You have to hunt for tenants who are getting fewer. Many have sold the second car and are more likely to be on the street with the first. In spite of the paid parking, the occupants receive a free rental.

The space on the lower level of the two-storey garage is almost impassable. They also have a hard time selling places, even if they are cheaper than they bought.

Garage prices have fallen in recent years, as have other real estate prices. Of course, this is good (better) for those intending to buy now, but for example, the aforementioned gentleman has also failed a lot. So here too, it is possible to suffer a loss of capital, not only for residential real estate or shares.

They are the ones who have not really got into this form of investment.

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Peter is the one who came in to become a garage expert over the years.

So I asked him to describe how he thinks this investment can be done well and what his experience is.

If you have a question, write in the comment, it will answer it.

The following lines are his writing and his opinion. I hope you find it useful.

Garage, a passive investment

Garage, a passive investment

A couple of years ago I started investing in garages. At the request of Miklós I write about my experiences in this field.

I run a successful business and have a steady flow of cash that I don’t have to reinvest, because in my area I only need expertise, not so much capital. In addition, I was looking for an activity that required capital and less work, so I found the garage as an opportunity. It was a rented apartment in the family, and based on bad experiences, I would rather reject it.

I currently have nearly 50 garages and several other smaller properties.

I don’t want to convince anyone who has this type of investment, some doesn’t. I see more benefits than disadvantages, I can handle the disadvantages, so it’s good for me.

Types of garages

Parking garage: Parking garages are mostly listed as undivided common property, with a certain percentage of ownership, but their specific parking space is also registered, so it is not disputed who can use them. They are not accepted as collateral for credit.

Municipal custom garages: These garages are typically superstructures built on the site of the municipality, and the municipality has to pay a monthly fee of around USD 3,000 (varying per garage). Garages are typically built for 30-40 years with brick, corrugated or similar. Pay attention to the soak! Municipalities explicitly conclude unilateral contracts, the owner does not have much rights and there are several non-market risks.

Private Custom Garages: These are mostly on your own property, but some have condominiums, see previous. Warehouses, shops, DIY workshops can be good, but if you do not use it, you will get a lower return because the tenant will not appreciate these options as the seller.

What does the revenue come from?

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Rent: I think the rental yield is pretty good at around 10%, but at least it can be raised by inflation every year, so that is the only reason why the yield automatically increases every year (or works as a real yield). In addition, municipalities are constantly increasing packing rates and expanding parking zones, so renting can be increased due to the rise of “substitute product”, street parking. In one place I started with a rent of 9,500 USD / month for 3 years, now the new tenants already pay 12,000 USD. We managed to increase the rent by 26% in three years! (doesn’t go everywhere at this rate)

Inflation tracking value increases: the property value will rise in the long term due to inflation (if not the climax shopped), while a bank deposit is not (there is interest also included) obviously so when compared to the yield bank deposits, this value increase / decrease will be added to the rent. Of course, prices can drop in theory, but parking fees act as a support.

Even if bank interest rates go back to 10% over time, they are not expected to contain brutal real yields, but inflation will go with it, and rents and property values ​​will increase.

Occasional buyer chances: Condominiums always have the same number of garages as apartments, or fewer, fewer. Thus, current or future owners of non-garage homes, and new occupants moving into the house, are willing to purchase the garage at an additional cost if their apartment is accessible by elevator. Regardless of the price of the apartment, if the garage is a few hundred thousand USD more expensive, the value of the apartment will be increased for convenience, if you do not have to park three streets away.

Especially since there will be a second car over time, she will be even more afraid of her car on the street, less want to scrape ice, so she will need a second garage. For this reason, investing in a garage is also an ‘option’, once a house resident who wants to get in a slipper, elevator and worth a few hundred thousand forints above the market price to have a garage in his staircase.

I had a garage buyer in the Sasad Grove condominium who was only willing to contract for a look after he agreed with me on the garage. Of course, the possibility of a bargain was not even mentioned.

This should be seen as an option.

Handling, maintenance

Managing garages doesn’t take much energy, even with Garfield lying down on the couch with a pizza in front of the TV. The leasing process is best illustrated by the example of an VIII garage:
• I place ads on the Internet
• The tenant will see if he or she can decide in advance whether decisive parameters, surroundings and price are appropriate. If not, you won’t even look at who is looking at it and maybe try to fit your car easily (I already know it will fit in because I ask by phone what your car is and my Skoda Octaviam is big enough to viszonyíthassam). Because of this, there are no “garage tourists”, there is no unique factor that can only be decided after viewing, e.g. do you like the tiles, the layout, etc.

• If you call, I will tell you the address, go there, call from the gate, I remotely open the garage with a cell phone, see if it is good.

• If good, I send a contract, fill it out, sign it, mail it and transfer the first rent and deposit.
• If it does, I will tell the joint representative to activate the tenant number and then use it.
• If you cancel your contract or do not pay, I will block your number and no parking.

I don’t even have to be in Hungary during the whole process!

Of course, there is no mobile gate opening everywhere, and once in a while it is okay to meet the tenant, so I have a contract for viewing and everything is done there. Usually the first viewer will take it out, or at most the second one will receive the key, and there is no further action. If you do that, the investment, if you are up to the first tenant, will tend to be half the business.

Even if it is a lot of macera, all tenant-related administration can be issued and it will be completely passive.

risks:

1. Damage, “dwelling” A garage cannot be settled because it consists only of concrete and limestone, the possible damage to the gate is repaired by the owner community, and the proportion of possible damage, proportional to the ownership ratio, can be a few thousand USD. Therefore, you do not even need to check tenants while they are paying. With a $ 1500 common cost and 100 garages, $ 150,000 a month to cover the cost of repairing the jointly owned parts, you could buy a new garage door every year.

2. Empty If not released, no heating, utilities, etc. pay only the common cost (usually about 10-15% of the available rent, about 1000-4000 ft). Those who do not want to wait for a long time can sell it quickly at a market price of one or two thousand forints, and even if the return is only 9% instead of 10%, they have done a good deal.

3. Fall of the real estate market While there may be thousands of alternatives to an apartment or other type of property, from location to size, which cannot be predicted for years, the value of garages is less influenced by the real estate market situation. The demand for this can be well calculated based on simple factors (parking fees, garage prices).

Paid parking is becoming more widespread in Good Finance (eg to be introduced in most of Ócash next year), and district governments are increasing their parking fees. As a result, off-street parking, a free alternative to garages, is narrowing and becoming more expensive.

4. Non-payment Problems: You can easily be excluded from a tenant by blocking entry or parking, no law enforcement coming in with three children under the bridge, no eviction moratorium.

5. Liquidity: Garages can be sold at a price of around USD 1-2 million per unit, especially with a tenant, while high value real estate can only be sold in one. Because they are in different locations, if you advertise five garages in five locations, you will certainly sell two to three within 1-2 months, while the apartment may take up to one year.
Can also be sold as an investment: The leased garage can be sold not only as a car garage but also as a real estate investment.

Where to buy

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I only know the Good Finance market, so the following may not apply everywhere!

“Usually” it is not worth buying a garage, but some specific garages may be good.

In cash I, II, XII practically nowhere, III, XI, cashfok is better. In expensive neighborhoods, the garage is expensive, and tenants don’t pay that much. 1.5Mft garage for 15eft (+ common cost) 12% yield, 4million not paying 40eft. It’s worth watching under 2.5-3 ft.

In Pest, in the inner parts of the city, the situation is as in cash, the rest can be good. It depends a lot on which is the right place, eg.

• density of garages in the area
• the number of residents with a car in the area
• parking fee,
• number of car break-ins

If you want to get started now, I do not recommend buying some empty ones because you do not know the market in the area, so you may be acting as a friend of Nicholas.

When I started, I rented it outright, because I thought I had to pay for it at least once. If you want to be very sure about it, advertise the leasing in a busy way, write down the details of the interested parties and call them if your tenant terminates.

It’s best not to buy it from your neighbor Good Lender, who gave the garage to her nephew after her husband died, but from someone who also bought it. This is good because if a competent person has already risked his or her own money, you can do it with more courage.

Why does an investor sell a rented property? You may have bought twenty at a time, at wholesale, without a tenant, and selling it like this will turn your money around faster than renting it for 10 years.

Plus, if you buy it like that, you can buy 10 of a larger portfolio at once, in 3-4 different locations, and diversify your portfolio and a lawyer’s cost. If you are lucky and the seller already has a person to handle the rest of your real estate, you can give him the treatment.

If you have already rented a couple of rented garages, too or a couple of tenant shifts, you see the cost, then you can try to hunt for occasional purchases, you already know a bit about the market, and you only risk a couple of millions instead of 10.