We continue this week with the next line item in our apartment budget: Parking Income.
Parking Income Defined
Parking is an interesting subject. Interesting in the sense that one could posit that it should come included in the rent. While the other camp would suggest that it is an ancillary income and thus should be accounted for on a separate line item.
To define it simply – it is income derived from renting the right to use space in your parking lot or parking garage. That space could be reserved for exclusive use or the right to at very least have access to a space.
If you have a stabilized operation this is pretty simple. Look back at your twelve months of trailing history, consider rate increases and straight line it. Or, ebb and flow it with occupancy.
If you are in lease up – the work is a little more difficult and starts with a full market survey. Not unlike we do competitive surveys for assistance in pricing apartments – we do this to get a sense for pricing parking spaces. Now – no matter if you have a surface lot or a garage, I think it important to understand the pricing for both. And, I think it important to get a sense for what the barriers are.
I define barriers as the 3 block, 5 block and 10 block radius. I also lump in nearby walkable attractions be it football or baseball stadiums, museums or vibrant cityscapes. It all matters in your pricing and budgeting strategy. It really boils down to proximity with a bit of supply and demand layered over the top.
Once you have your market survey complete – you have to consider how quickly the spaces will get absorbed. If you have a plethora of spaces this is not an issue. But, if you have a dearth this is a big deal. You don’t want to sell out too soon. Neither do you want to get to the end and have left over inventory albeit I would prefer this to selling out to soon.
The key is paying close attention to what the market is telling you, be nimble and don’t be afraid to increase rates along the way.
Why Don’t We Include Parking in the Rent
I have asked this question no less than a dozen times and still to this day don’t know that I have a clear reason.
The top two reasons that I can recall off the top of my head are, 1. Tracking 2. Financing/valuation.
Would love to hear your feedback on the subject – until then…
Your apartment budgeting multifamily maniac,