Should I Buy A Chicago Garage Parking Space?
Condo buyers living and working in Chicago’s downtown neighborhoods often ask “Should I buy a Chicago garage parking space, even if I don’t have a car?”
The answer is almost always yes. Why?
Resale value and investment
Mostly because it will increase the resale value of the unit, but also because a parking space is a nice investment that can provide additional income that can offset the condo unit’s HOA fees.
Investors also look at purchasing parking spaces as a way to bring in steady and reliable income without the landlord hassles of dealing with renters in a condo or single-family home.
I own half a dozen parking spaces downtown and they are all consistently rented out. The maintenance is practically zero with the exception of sweeping out the space once a year and throwing out the odd broken clicker once in a great while.
It’s basically a $30,000 chunk of concrete with a couple of yellow stripes painted on it.
At that price, it’s true that parking spaces don’t provide as much cash flow as other types of income property, but the price of parking didn’t plummet during the last recession.
So as a method of diversifying your real estate portfolio, a Chicago parking space investment should be given consideration.
Parking space prices slowly and gradually increase, but the rental prices are edging up quickly as downtown Chicago grows and parking is becoming harder to find.
New high-rises are taking up previously vacant lots and, often, developers aren’t adding enough parking for all of their units. And most people would rather not park on the street unless they absolutely have to.
Heated garage is king
With our Chicago winter weather, the heated garage is king and commands both a premium price and premium rent. But it’s worth it.
Be sure to buy a parking space that you would park your own car in, though, because you may be parking in it yourself someday!
As with any investment property, the key to success is making the right purchase.
Open-air parking, covered parking, and heated garage parking will all have different price points and rentability.
People often sell their spaces to free up cash for other purchases and will let them go for below-market value.
Set up searches in the locations you like, research the current rental pricing and demand, and be ready to make offers on new listings that hit the market.
Many will be overpriced at first, but prices will soften if the spaces sit on the market and are not rented.
Keep in mind that you can’t get a mortgage on a parking space unless it is included in the purchase of other real property like a condominium.
A cash purchase is typical
A Chicago parking space investment usually needs to be made in cash, but you could also use a home equity line of credit or a personal loan to make the purchase. Have your buyer get that “proof of funds” letter ready well before you make an offer.
To note: condo building rules may prevent you from purchasing a space unless you own a condo in the building or they may only let you lease your space to other residents in the building.
A savvy real estate broker will know which buildings are open to investing and which locations will rent out the best.
Other things to consider for your Chicago parking space investment:
Ease of access, as well as ingress/egress
Pull your car into the space and check the turning radius. Is it easy to do or is it a struggle?
Really tight garages are the worst.
The space will have a lower value if it is difficult to park.
In multiple-level decks, spaces closest to the ground floor are generally best and get the highest rental price.
I own a first-floor garage parking space in a twelve-story deck. My rent is consistently $50-$75/month higher because it is a convenient space for renters.
Size of the garage parking space
Is it suitable for an SUV or just a Smart car? Bigger is better.
However, you can also purchase motorcycle parking spaces at a low price that often rent well.
Tandem spaces are great, but double-check the monthly assessments and taxes on those to make sure you will recoup enough in rent. Finally, ADA accessible parking spaces rarely come up for sale, but they could be a good buy.
Are there drainpipes, pillars, or other obstructions in the space?
These spaces are much less desirable and could be a liability if a tenant damages the building/property feature with their automobile.
Also, drips from above could cause damage to the tenant’s vehicle. I’d steer clear of any space with a tarp draped over it because the tenants will too.
Is the parking space equipped with a charging station or is there an electrical panel in close proximity?
If so, you will have Tesla owners ready to rent today!
Is it feasible to retro-fit a charging station if needed in the future?
I recently received a quote of $4,300 to run electricity to a parking space and that didn’t even include the charger.
ChargePoint and EverCharge are the biggest suppliers of chargers to multi-unit buildings. Their technology has the ability to use common area electrical supply and then bill the owners directly for the portion they use.
Self-driving cars will be next on the auto market
Check the cellular signal in the garage. I’m speculating that self-driving cars will need to communicate, so if the concrete or steel structure blocks out your cell signal, it could be an issue in the future.
Good luck and happy parking!
About the Author:
Licensed since 2005, Chuck Gullett is the managing broker at Best Chicago Properties in Chicago’s West Loop. He is consistently recognized as a Top Producer and has a true passion for real estate. Chuck is also the owner of ThreeSixtyChicago specializing in real estate photography. This article appears in the February 2020 edition of Real Producers Magazine. The original version of this article was published by Jeff Payne, Best Chicago Properties, LLC on November 8, 2017.
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