Thinking about how to have constant rates of income, a parking lot investment might be a good idea. It is one of the property investments since more people need this space to store their vehicles safely. Thus, this business is profitable, especially in a big city where parking fee is expensive.
Should you plan to have this investment, it can be an excellent business with high R.O.I. There are some benefits, pros, cons, and how to develop this business well that need your understanding before establishing this business. Check more information about this investment here.
The Benefits of Parking Lot Investment
1. Less intensive in maintenance
Maintaining a parking lot is easy since it needs low maintenance. Either indoors or outdoors, a parking lot doesn’t require a lot of repairs. Unlike other properties, the space is just there. Low-level management of this investment will create more profit.
The problem that you may face with the tenants is when they refuse to pay for your service. Since it is only a parking lot rental, you don’t need to bring the case to court. It is as simple as letting the car out for the space, and the problem has been solved.
2. High return
A parking lot investment has a high return because you don’t spend much on maintenance. Thus, the land value will still rocket in the future. Instead of abandoning the space you have, creating it as a parking lot adds value of the empty space itself.
Although the maintenance is not intensive, you still have to manage this business properly to grow your long-term investment. You have to make the parking lot become a huge asset by making it active. It needs a good management plan and a good location to make it happen.
3. Fewer regulations
This investment doesn’t have a lot of regulations as other properties investment. It makes a good return and profit because it is a simple space, especially if you make the parking lot outdoors. It is far different from residential and commercial buildings.
You can use the smart parking system and the government doesn’t regulate this system strictly. As long as you create a safe space with excellent tools for the parking space, you can immediately manage this business. It is way more modern and has less budget for operations.
4. Simple operation
Even if the size of the parking lot is large, you don’t need a lot of labor to operate this business. You might just need 2-3 people to be active as a supervisor for 24 hours straight. You don’t need a lot of security as well when your parking lot business uses high controls.
Since not many people are involved to maintain this business, the operational budget can be lower than you expected compared to other properties businesses. The entry cost is very low all year even though this business is established in a real-estate residential.
5. A good option for passive income
Thinking of how to earn money with a good return, then parking lot investment is the answer. You don’t need to make it your main job. You can ask other people to manage this business, yet it doesn’t need a lot of people involved.
6. Many people need it
Many people who live in a big city don’t have space to park their own vehicles at home, simply because they don’t have a garage. Thus, they might have a problem such as parking more than one vehicle. A parking lot is something they need to protect their car safely. Surely, this business is profitable.
How to start Parking Lot Investment
1. Plan your business
The first step to starting a parking lot investment is preparing some plans. It may be complicated at first because you have to figure out your target market. Plus, this step needs some consideration about the business location. What do you have to do with the parking lot business plan?
Find the right location. This is the most important plan you must note because the city area is more competitive than the urban area. Meanwhile, in urban areas, you might not get as many customers as a parking lot in cities. The large scale of the parking lot is essential as well, especially for cars.
After that, you have to create a license under the government that will allow you to open this business as an investment. It means your parking lot investment will be legal and you can prove to your customers that your parking lot area is safe and trusted for them. Without this plan, you won’t have many customers.
Then plan your target market. It is impossible to establish this business without knowing the right target market. If you start in the city, then people might put their expensive cars in your parking lot. Then the control should be very strict because the risk is also higher than the people’s cars in the urban areas.
2. Figure out the starting cost
It is essential to figure out the cost to start this business. A parking lot with good security needs a lot of money because a good system costs a lot. It also depends on whether you rent the space or you have owned it in the first place.
Buying equipment for the parking space is quite expensive. Good quality equipment is such a good investment in the future because it doesn’t need repairs a lot. Thus, you need a pro to install that equipment as well as the gate system for the parking space.
3. Figure out the operational cost
Operational costs can be unpredictable because you will never know the case what might happen to the parking space. However, there are some basic calculations that you should note such as snow and ice removal, plumbing, employee salary, maintenance of the equipment, and electricity.
After you know how much you will spend on those factors, you can determine how much money you will charge to the customers. Since the parking low will start as a new business, you might need some budget for advertisement, promotion, and other things to attract more customers.
4. Setting parking fee
Setting the parking fee for the customers is a very hard decision because you shouldn’t think about huge profit at first. It is always how to attract their trust first to park in your space. After that, you have to see the competition in this business around you.
In some city areas, a parking fee for an hour is about $20. It can be cheaper if you invest in urban areas and more expensive in city areas. You can start with the lowest price in the area. Evaluate the result monthly and compare it with the operational cost that you spend in the same period.
The Challenge of Parking Lot Investment
1. Regulation in the area
The regulation in the area will be the biggest challenge once you plan a parking lot business. Different areas will apply different regulations, so it may limit the profit that you can have in the future. It is important to check all regulations including the restrictions in the area.
Some areas might have restrictions on parking lot ownership. For example, they won’t allow you to have an X square meter area to build a parking space. This will decrease the value of the parking lot business itself since you cannot fulfill the demand from the customers.
2. It is hard to sell
The liquidity of parking lot investment is limited. Once you find out that this investment is not working as well as you thought, it is hard to look for buyers. A parking lot space is the least on the list of real estate investments. For you who want capital from this, it is a huge disadvantage.
3. It needs huge capital
Starting this investment can be a disadvantage because the land is very expensive in the cities and urban areas. Purchasing a parking space for those who have limited capital is a next-level challenge. Thus, you still need a lot of money to build a security system for the parking lot.
4. Technology Adoption
Adopting technology for the parking space is another challenge. You should be familiar with technological advancements in this business. Some people now are just sharing rides to reduce their transportation costs. This point is already reducing the potential of parking lot business.
The enhancement in technology in the parking lot system needs a high cost to apply. Though the value is for a long-time plan, you should be careful when it comes to this decision. Especially when the business is still uncertain because the number of customers is still lower than expected.
Is The Parking Lot Investment Profitable?
By looking at the challenges and benefits, you can consider the best location to establish this business. The right location with nonstrict regulation is two factors to develop this business. Charging the customers with the right fee will attract more people to park their vehicles.
A parking lot investment is a good option among real estate investment types. It is less expensive, but it has a good return. This business can be a good investment in your portfolio, but you still have to consider some challenges and plan this investment wisely.
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