An alternative investment

Getting into the property market is a tough prospect these days. However, if you can afford a small instalment on a bond each month, you could invest in a parking space in the inner city, which will give you good returns without any of the hassles of conventional property ownership or tenant headaches.

Invest in parking?

Are people actually buying parking spaces as an investment? The answer is 'yes'.

Ivo Nestel from Baker Street Properties, who specialises in commercial leasing and investment sales in inner city Cape Town, says, "people are definitely buying parking spaces, either from the developer or owner of sectional title schemes.

"We get enquiries from time to time to buy parking bays as well as buildings which can be converted in parking garages," says Nestel.

Why buy a parking space?

Why would one buy parking space, you might ask? Nestel says you find people buying parking space "either as company requirement — as a company might need additional parking bays — or if they have a residential flat in the CBD. On the other hand one might just want to invest further."

For instance, it makes sense for a company to buy the bays they would be paying for each month as an investment, rather than just forking out R700 per bay each month — especially if the company plans to remain in the same commercial space for a good period of time.

Similarly with residential bays, it makes more sense to invest in parking rather paying out the money each month.

If you just want to invest, Nestel says, "if you can find sectional title parking, it's a good way to get into the market with the least risk."

Where to buy?

When it comes to where to buy, "you can’t go wrong in the inner city", says Nestel. There is always a demand for parking as more and more people move into the inner city, as well as the ever-increasing need for parking for those who work in the CBD.

What does it cost?

A parking bay in Cape Town's inner city could cost you anywhere between R60 000 and R100 000. "You can expect to lease bays in the R60 000 to R100 000 price range for between R650 to R1000 per month excluding tax, while you can expect to pay approximately R150 per month for levies per bay," says Nestel.

"With the recent conversions of office space to residential space in the inner city, there is more and more demand for parking, thus resulting in greater returns."

At the same time, there is lower risk and less unforeseen costs as opposed to residential or commercial property.

What about financing?

When it comes to financing, it works much the same as any commercial transaction, where bonds or mortgages largely depend on the financial status and standing of the purchaser, while the rule of thumb is that a maximum loan of 70 percent of the market value of the property would normally be granted.

Article by: Thamar Houliston - www.iafrica.com