Buying garages to rent out

[Ikke]

I have been looking at buying a garage box to add more "passive" income. And to put my savings to work. I have seen I garage box that seems alright. It's priced at €12500. Registration fees are around €600-700 but I'll calculate with €1000 in case I have overseen anything.


I roughly estimate rental income would be between €75 and €95 a month.


Taxes will be 0.2% a year on the property value, or 1.4% on the property value when I have above X amount of money and/or property. So for now taxes will be 0.2% a year.


I very roughly estimate that maintenance and insurance will be about €200 a year. And vacancy will be 15% which is 1.8 month a year.


This gives a worst case scenario income of €565 a year (75*12*0.85 -200). Which is a 4.2% ROI or 4.0% after taxes.
The best case scenario gives an income of €769 a year (95*12*0.85 -200). Which is a 5.7% ROI or 5.5% after taxes.


The property will need a monthly inspection to make sure no illegal activities take place.


To be honest I find this quite a low ROI especially with the risks renting out property comes with.


Does anyone have any experience with renting out garages? Is the ROI I calculated normal?

 

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[H. Palmer]

Ikke, my estimate is that renting out garages is a typical Dutch thing.

And I'm not sure North Americans know how you can rent out a garage. If they have a garage, it's attached to their homes.

 

[Runum]

I have heard of it in America. Problem here is liability issues when a home mechanic has a car fall off the lift and kill him. America is a litigious society.

Not sure of your rental rates in your area. Are you just renting out space or is equipment included?

 

[H. Palmer]

Ikke, 2 years ago I did a lot of research into garage boxes and parking lots.

My conclusions were that the average ROI was somewhere between 5 and 9 percent.
This included local property tax (WOZ), some maintenance and insurance. Insurance will not be high because of the low price.

Best ROI found was on a single parking lot in a parking garage in Alphen aan de Rijn.
Parking lots don't require insurance.

My calculations excluded vacancy because of lack of experience. No track record.
So vacancy is a bit of a wildcard, because with parking facilities, it's quite easy to do marketing yourself (ad in the local newspaper or put up some ads in the supermarket or local targeting on the internet). But no idea if they will bite.

So ROI is iffy.
My main problem with parking facilities is that it's not very scalable, unless you start out big. Bank won't lend for these types of small sums, so you can't use leverage.

Eventually I shifted my attention to Germany to rent out German houses. I am in the process of writing a how-to book about that and will put up a website explaining it all.

 

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[Ikke]

@Runum: it would be a single car garage with a storage and parking function and nothing else, so bassicly just a space. It's basically just a brik shelter for a car. 18 square meter or roughly 198 square foot large.

@Amschel: scaling would not be a matter because it would just be a long term investment for extra cashflow instead of depreciating savings. I have my business for scaling.
The vacancy rate is a number I just made up which seemed like a reasonable worst case.

Excuse me for the short reply and any spelling mistakes, I'm not used to replying on my phone.

 

[Runum]

@Runum: it would be a single car garage with a storage and parking function and nothing else, so bassicly just a space. It's basically just a brik shelter for a car. 18 square meter or roughly 198 square foot large.

@Amschel: scaling would not be a matter because it would just be a long term investment for extra cashflow instead of depreciating savings. I have my business for scaling.
The vacancy rate is a number I just made up which seemed like a reasonable worst case.

Excuse me for the short reply and any spelling mistakes, I'm not used to replying on my phone.

Ahh, OK. That will be a play in the large inner cities. Not my field of expertise. I live in a rural area with indoor parking for 5 cars and 2 other covered spaces.