Rena is not an investment adviser. Nothing in this forum is investment, legal, or tax advice.

Forum
Passive
Parking Lots / Garages

12 spaces behind a downtown strip, $88k, tell me what's wrong with these numbers

⋯

Small one. Striped lot, 12 spaces, sits behind a row of five storefronts in a town of about 30,000. Seller is one of the storefront owners and he's leaving town.

Current: nine spaces rented to the other storefront owners and their employees at $95 a month on handshake terms, three empty. $855 a month gross, $10,260 a year. Taxes $1,320. Insurance he says is $640. Snow he does himself with a plow on his truck, so that line is $0 and it will not be $0 for me, I've been quoted $2,100 seasonal. No other expenses listed.

At $88k with real snow I get NOI around $6,200, so 7% on ask. That's the best cap I've seen in this room. Which means I've left something out.

What I think I'm missing: the surface, and the fact that nine handshake tenants who were friendly with the seller may not be friendly with a stranger who wants a written agreement and $110.

1 reply

3mitchell_ray4 Get yoursPRO6

⋯

The surface is exactly what you're missing, and $88k for 12 spaces means the surface is priced into it whether you know it or not. Walk it and look for alligator cracking, edges crumbling into the gravel shoulder, and any spot where water stands after rain. Cracks that have gone to a web pattern mean the base is done and sealcoat is lipstick. A mill and overlay on 12 spaces is not a small number relative to $6,200 a year of NOI, and full depth on a failed base is worse. Get a paving contractor to walk it with you before you go firm and ask him for years of remaining life in writing, then set your own reserve off that instead of the seller's zero. The handshake tenants are the other real risk and I'd want to meet all nine before closing, not after.