Bought a fenced lot for my trucks, and the surplus 16 spaces cover the mortgage

After five years running a service business, the thing that finally moved my balance sheet wasn't the business. It was solving a parking problem badly enough that I had to buy dirt.

We had eight vehicles overnighting in a rented yard 20 minutes the wrong way, $1,350 a month, no security, two catalytic converters gone in a year. I started looking for a fenced parcel closer in and ended up with a 0.4 acre chain-link lot about a mile from the core, asphalt in fair shape, seller was an estate that wanted a fast close. $210k, put $52k down, financed the rest through a small local bank on a 20-year amortization with a 5-year balloon. Getting that loan was harder than getting the property. Two lenders wouldn't look at a lot at all because there's no building to appraise.

Seller's listing said 24 spaces. Our layout got 26, and it nearly fell apart along the way. The survey turned up a utility easement running diagonally across what would have been four spaces, and the city's minimum drive aisle width for a two-way lot meant the seller's implied layout was never legal. With a straight-in layout we could fit 19 usable spaces, which after our 8 trucks left 11 to rent, and 11 didn't cover anything. A striping contractor suggested angled stalls one-way with the aisle narrowed to the code minimum, and that got us to 26, with the easement stalls used as short-term visitor spots we don't sell. So 18 to rent.

Rented 16 of the 18 at $135 a month, mostly to residents of two apartment buildings within a three minute walk where the buildings only supply one space per unit. $2,160 a month, $25,920 a year gross. Costs: taxes $3,900, insurance $2,050, snow $4,200 the first winter which was ugly, lighting and electric $980, restripe reserve $900. Debt service on the $158k is about $12,500 a year. Nets out slightly positive, and I killed the $16,200 a year yard rent entirely.

What I'd keep: paying for the survey before removing the inspection contingency. What I'd change: I signed all 16 permits month to month in the same week, so my entire tenancy can turn over at once.

9 replies

2gregpowell66AG4BPRO8

Fair asphalt on a lot with 26 cars sitting on it isn't the same as fair asphalt on a lot with 26 service trucks and trailers sitting on it. Loaded axles on a section designed for passenger cars is how you get rutting in the drive aisle and pumping at the entrance apron. If your eight vehicles are pickups you're probably fine. If any of them are over 10,000 pounds loaded, get a core done and find out what your base depth actually is, because that's a five-figure surprise waiting on a lot with your margins.

3ryanmck27SC2C

Question because I'm working through licensing right now. Does renting individual spaces to the public put you in a different category than parking your own trucks, in terms of city registration or a business license? I'd assume it varies by state and city, and I'd want to know before I had 16 permit holders.

1bmoreno23AB1B

The part I didn't expect is that apartment buildings supply one space per unit and people just live with that. Did you go door to door or did the building managers hand out your flyer? I'm starting from zero and this is the first deal shape in this room I can picture myself understanding.

1mikeoconnell7SP2APRO6

@ember the building manager angle is the interesting bit. If a building is short on parking, the manager fields that complaint constantly, and a lot a three minute walk away is a solution he can offer for free. @thatch did you have to give anything up to get referrals from them, or were they just happy to have the problem go away?

0angela_burkeServicePRO6

Nice on the yard rent, and the converter thefts alone probably justify it. What did you do about the fence and lighting? Chain link and a padlock reads as secure until the first time someone cuts it, and once you have 16 paying strangers with a gate code, your own truck security and their access are the same door. I run a small crew too and that's the part I'd have gotten wrong.

1carlos_nunezActive

You'll get an abandoned car. Everyone with a lot gets an abandoned car. Find out now what your state and city require before you can move a vehicle off private property, because there's usually a notice period and a specific process, and the first time it happens you'll be reading the ordinance at 7am with a dead sedan in stall 14.

1luis_carrera Get yours

@sextant asked the version of my question so I'll ask the next one. @thatch what happens at the balloon in five years? You're roughly flat on the parking line with the yard savings doing the work, which is fine while you own the business. If the balloon comes due in a soft year and the bank wants to see the lot's own income support the refinance, 16 month to month permits and no building is a thin file. Did the bank tell you what they'd want at renewal?

1sonia_alvarez Get yoursPRO6

The financing detail is the most useful part of this post and it's the part everyone skipped. Two lenders declining because there's no building to appraise is normal, and the ones who will look at bare lots often want more equity down and shorter terms. Your 25% down and a 5-year balloon on 20-year amortization is a fairly typical small commercial structure, and terms differ by bank and by year, so anyone reading this should get their own quotes in writing rather than assuming yours. @thatch did the bank underwrite the loan against the parking income at all, or against your business as the occupant and guarantor?

Bought a fenced lot for my trucks, and the surplus 16 spaces cover the mortgage

9 replies