Want to get into property investing with just a few thousand pounds? Then try investing in garages to rent out for storage or car parking. You can get garage units for under £5,000 depending on where you live. They can be the start of your property portfolio. Here is our guide to investing in residential property – smalltime!
- How to make money out of garages
- Investing in Garages- Getting Started
- Be prepared
- How to buy a garage
If you have (or can raise) a relatively small amount of money to invest – but not enough to buy a flat or house – consider investing in garages. They may seem unglamorous but they are a great, low-hassle way of investing in property. Garage units are low maintenance – no boilers, leaks or noise issues – and they are relatively cheap to buy.
- To create free space elsewhere that you can use to make money.
- To rent for car storage
- To rent out for general storage
If you’ve decided to rent out a room or your whole house then you may have so much stuff to store that a commercial storage facility is too expensive.
Alternatively you may find a garage that is out of town where the demand for a garage is low and the price relatively cheap. You can rent this garage and fill it with stuff both from your garage and spare room then rent both of those out – assuming you live in an area where the demand for renting your garage and/or room will bring in more money than renting the garage itself.
Rent for car storage
This is the obvious one and requires patience as the return comes in over a few years. It’s basically buy-to-let, but with a garage rather than a home.
By buying a garage at say £25,000 or £10,000 and renting it out for £105/month or £42/month respectively you will be earning a pre-tax yield of 5%.
Assuming there were no changes in the market affecting your garage, recouping your investment would take 20 years. Thereafter it would be pure profit.
1. Know your market
So much for the theory but how do you actually go out and select the right garage and method of money making?
The answer is that you absolutely must without exception know your market. If you don’t you will lose money. This applies to most investment ideas!
By way of example we’ve looked at the buying to let aspect of garages. This requires the greatest amount of understanding and the principles can be applied to any other form of garage use.
2. Research local garages
Yawn… yes it can be boring, but it’s necessary. You’ll need to spend six weeks or so researching your patch – at a minimum. During this time you will have to study in detail your target area – it may be local, it may be somewhere that you feel offers an opportunity.
Local newspapers & property newspapers – You will read these in detail EVERY WEEK. This will allow you to get a general idea of what the numbers are for the different districts in your target area. It will help you zero in on the areas where there is sufficient demand to sustain what you are looking to do.
See for yourself – Go and see the garages that are available and how much is being asked for them – both to rent and to buy. Drive around the streets so that you are familiar with the area at first hand. Become well versed in where there is unsatisfied demand, what the condition of the garages tends to be, and how that affects the prices.
Local letting and estate agents – Visit them and find out where there is demand for parking facilities. They should know where there are residents who don’t have but would be prepared to pay for parking facilities.
Internet – Do several searches on the Internet to find out (i) what garages are for sale or rent and what the asking prices are; (ii) what competition you face from other people doing the same thing, as well as commercial organizations offering a similar solution (for example parking or car storage).
Newsletters – Sign up for every relevant newsletter going. The chances are that many of these are put together by people who are very commercially minded and have set their prices as high as the market will stand. But they still serve as another indicator of what the going rates are.
Council – Contact your local council and find out what garages they have that you might be able to buy or rent. There may be redundant space in fields or undeveloped land that you could consider for parking space.
After six weeks you will begin to understand:
- Where people need garage facilities
- How much they are prepared to pay for these facilities
- How much the market rate for garages is in different areas
- What the yield will be on investing in garages (for one or more garage)
It will also allow you to begin to understand what might look like a bargain on purely price terms but is, in fact, a disaster. For example the council may be about to build over that garage soon and a compulsory purchase order could follow. Alternatively there may be lots of new garages due for construction nearby that will dilute the demand.
What if my research shows that I can’t make money in the target area?
Give yourself an enormous pat on the back. You’ve just saved yourself endless frustration and hassle, not to mention a lot of money. You now understand what you are looking for so you can expand your geographic horizons and see if the profit margin can be found elsewhere.
3. Be prepared for the future
Once you’ve discovered what the market rate for buying and renting garages are, go to your council and find out what future developments are planned – transport, housing, amenities and anything else that might bring about a change in demand (for better or worse).
If you are ahead of the game and happen to know that a new railway station is being planned for an area then there will likely be commuters who will want to park near that station – but not pay exorbitant station parking fees.
By buying a garage in that area you are ready for that increase in demand (and will benefit from increased rental and sale rates of garages in the area).
3. Get a loan to buy the garage
The price of garages in your area will vary enormously. In central London they can go for up to £300,000 each , outside of London (and even in the more downtrodden parts of the city) they can just go for a few grand.
It is possible to get a mortgage for a really expensive garage if you are already pretty rich and you have a cast iron credit record but not, on the whole, for usual lock-up garages. Melanie Bien of Savills Private Finance says “mainstream lenders would say ‘no’. However a private bank might do it for the right person – say a high net worth type buying in prime central London.”
If you’re looking at a seriously expensive garage get in touch with the Moneymagpie mortgage comparison service powered by London & Country.
For a normal, low-priced garage you could get away with a low-cost loan. Make sure you do your calculations first, though. The loan rate needs to be genuinely low to make it worthwhile renting it out. You still need to be able to make a profit on the rental once you have paid the loan each month.
In fact, as the price of garages can be so low, you may even be able to buy one (or part of one) on a 0% credit card that offers 0% on purchases. There’s a decent number of those around as you can see in this article on 0% on purchases credit cards.
Advertising a garage is very simple and generally cheaper than advertising a flat or house for rent.
For a start you can put it on one of the car-parking websites for free.
- First go to Parkatmyhouse.com. You will need to register first (this is free) then upload details of your garage including its address, size, perhaps a photo and what sort of a renter you are looking for. Then upload details of when it is available (full-time if that is the case) and wait for enquiries.
- Then go to Parklet.co.uk. It’s the same deal. You register for free, upload the details of your garage and wait for people to contact you.
- You can also put an ad on your local version of Gumtree.com. Their space to rent (including rooms to rent and driveways to rent) sections are very popular. It may cost to put an ad there or it may not depending on where you live in the country.
- Put ads in your local paper or the magazine Exchange and Mart. This will cost but it could be worth it.
- Put postcard ads in your local newsagents, supermarkets, library and anywhere that will accept these kinds of ads.
- Moneymagpie mortgage comparison
- Moneymagpie loan comparison