A 7% cap rate on a small parking lot usually means something's been left out of the numbers

Take a small striped lot, 12 spaces, sitting behind a row of five storefronts in a town of about 30,000, with the seller one of the storefront owners leaving town. Say nine spaces are rented to the other storefront owners and their employees at $95 a month on handshake terms, with three empty. That's $855 a month gross, $10,260 a year. Taxes might run $1,320, insurance $640. If the seller does his own snow removal with a plow on his truck, that line shows as $0, but a real quote for seasonal snow service in a market like that often lands around $2,100. At an $88k ask with real snow costs factored in, NOI comes in around $6,200, or about 7% on ask, an unusually strong cap rate for this asset class. A number that good is usually a signal something's missing. Two things are worth checking closely before trusting it: the surface condition, since resurfacing costs can erase years of cash flow, and the durability of nine handshake tenancies. Tenants who were friendly with a departing seller may not stay friendly with a new owner who wants written agreements and a rent increase to $110.