Lets be honest, they are not the most appealing of properties – you can’t get excited about the views, character features, versatile accommodation or homeliness of a 3m x 6m box – but lock up garages are BIG business in the rental property sector.
They find their way into the auction rooms on a fairly regular basis and whilst they don’t necessarily get the design juices running (and can make my job of presenting the story about them in an interesting way a bit tricky!), they are ideal property investment fodder.
Most recently I covered a story of some investors who had purchased a plot of land which had planning permission for the creation of six standard size and four large size garages. The lot sold for £38,000 with estimated build costs to be a maximum of £45,000 (the estate agent selling the plot had suggested more like £20,000), so for a total outlay of £83,000 plus purchase costs, these investors had secured 10 nice little rental units.
So what is the appeal of lock up garages to a property investor?
Well, firstly, they are probably the lowest maintenance properties that you’ll come across. So, from the point of view of a landlord, they are easy pickings. There’s no requirement to redecorate or modernise (apart from maybe a few cosmetic repairs and a lick of paint to the door) and you’re not going to have tenants ringing you (or your managing agent) at the most inopportune times to say that the boiler has broken!!
Although it is advisable to have a formal, written Tenancy Agreement in place to cover what your tenant can and can’t do with the garage, these properties will not fall under the Assured Shorthold Tenancy (AST) rules and your responsibilities as a landlord are minimal.
What is the market for lock up garages?
Aside from the obvious use of a garage to store a motor vehicle, the demand for secure garages stems from lots of different needs such as:
- Storage of classic cars or cars which aren’t in everyday usage
- Storage of motorcycles (often shared with other motorcycle users)
- General storage of household goods (it can work out cheaper and less restrictive to rent a garage space for a while than to put furniture and household items into conventional storage units).
- Storage of boats and water sports equipment
If the garage is in a city centre or very close to transport links to employment centres, then:
- Daytime or nightime parking of the tenants main vehicle
What can I expect to pay to buy a lock up garage?
The asking price for garages can vary considerable across the country with sites in prime inner city areas fetching tens of thousands of pounds. At the other end of the scale, you can pick them up for just a few grand.
Since the price will be below the Stamp Duty threshold of £175,000, there will be no Stamp Duty to pay (at least until the end of 2009) and so purchase costs are also much less than with other types of property.
As with any rental investment however, it’s not just the purchase price that should be considered, but the eventual yield if the property is going to be rented out. This is where things can get really interesting…
What sort of yields can I expect to see from renting lock up garages?
Once again, the level of rent that you can charge on a garage will vary with location, with individual units commanding anything from £50 to £300 per calendar month. The desirability of the location and demand for parking or storage space like this in an area will dictate what rent can be achieved.
In the case of our contributors who had bought the plot to build their 10 garages, they were expecting to receive somewhere in the region of £60 per calendar month for each of the 6 standard garages and £80 per calendar month for the 4 larger ones – making a total of £680 per month or £8160 per year. When you divide this by the purchase and build price, it equates to a gross yield of close to 10%. Not bad for a low maintenance, hassle free investment.
That said, I’ve also witnessed yields over and above 20% per annum for lock up garages in sought after locations – so they really are profitable.
Where can I find garages to buy?
Because of their low value and specific nature, you won’t always find garages that are for sale listed with the usual property agents, so you might have to search around to locate them. That said it is worth searching the property portal sites.
And as you might expect, many garages get sold via auction so keep an eye on the auction catalogues and lots in your area of interest.
Some investors who are looking to buy lock up garages will place ‘wanted’ adverts and carry out marketing campaigns in there area of interest to attract people who have garages which are unused and which they could buy from them.
If you have a garage and want to rent it out…
There are various websites that you can list your garage (or parking space actually) for rent – with some claiming to have a waiting list of would-be tenants lined up ready to snap up the next available garage in a particular location. A couple to check out are: