Single Family, Fix and Flip, Multi-Family… Parking Lots?
Regulatory changes open up more investment opportunities in parking lots. Real estate investors seem to be enamored by the latest trend. It’s essentially a game of buy low, sell high—and what‘s everyone else doing? You may have a REIT in your portfolio, or you may be hands-on with your properties. But, you probably don’t have a parking facility generating income for you. In fact, most people don’t. For the longest time these structures have only been available for pensions and hedge funds. Why the New Interest in Parking Lots? Thanks to changes in investment laws and provisions, more “retail” investors can get a piece of the action. That doesn’t mean there is anything wrong with the real estate that’s currently under your management. That fix and flip deal is probably great once you get it back off the market. And, single-family will also accrue in value while someone else pays the mortgage on it. The multi-family opportunity? It lets you live for free while you can save a little more money for your next investment. But parking lots? You know—the ones with paint on the pavement? And fencing to keep the deer out? With the little hut that holds all the keys to your vehicle? Yes, those. Those are sexy. What has always been available to investors with enough money to own a large lot is now available to any accredited investors under Regulation D 506(c) through the issuance of shares. What does that mean in layman’s terms? The recent changes allow SEC-compliant private equity funds to broadcast the sale of shares for a project. These changes happened last year, which is why many haven’t heard of ways to get more involved. Parking Lot Advantages To be frank, parking is boring. There are no sledgehammers piercing walls. There’s none of the drama and chaos that comes when marital issues prevent the rent from being paid. There are no phone calls to slow down your day. It’s parking. There’s a lot. And there are cars. As an investor, your parking investment is pretty “dummy proof” in various senses. Typically, parking lots avoid many of the potentially catastrophic issues that plague multifamily buildings, office buildings and other tenant-dependent models. Issues like nonpaying tenants, large upfront costs for fashionable improvements and businesses and agents who impose countless fees can be very costly. There are four key reasons for considering parking lots as a commercial real estate investment. Land Appreciation. You want a parking lot in a high-trafficked area to hedge your real estate play. Such a location helps to ensure the land will keep and appreciate in value over time. Inflation Resistance. Parking payments when leaving your car in a lot are flexible. When the price of milk increases, you can bet your bottom dollar that the pricing in your parking lots and meters will be just as happy to raise as well. Low Overhead, High Margin. What is there to maintain with parking lots? There’s a couple of attendants in a hut. You may have to repave the lot every so often. You may even have to charter a driver to bring everyone to the front door if you have an off-campus lot from the selected venue. Overall, the overhead is low. Cash Flow. Not every business has the ability to be paid upfront for the year or to take in money each day. With parking lots, customers can’t pull their car out of the lot until the invoice is paid. This is a real beauty, and it’s why funds love parking lots. They always have cash on hand. If you’re a hands-off investor who would rather sit back and let your money work for you, an investment in a parking lot might be the right choice for you. If you don’t enjoy the drama of chasing people for rent, a parking lot investment might look attractive. With parking lot investments structured through shares of the company, your investment can be both hands off and income generating. The big take away here is this: If you can combine these four items with any real estate investment, you can achieve unbeatable consistent returns when compared to almost any other investment class. What’s even better is that you don’t need to look very hard. Parking lots have been in front of you the whole time. By Justin Benfaida Suggested Posts
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