How to Make a Carport Pay for Itself

Question

I came across some tenant survey results suggesting covered parking was a major on-site perk.

I don't have carports at my eightplex and nearly every rental applicant asks to see my parking lot. So - I know firsthand that off street parking is good, but covered parking is better.

Please help me brainstorm. How can I afford covered parking? How do I make it pay for itself?

Al Williamson · Answer

Thanks everyone for your input. Here's a picture of my parking lot at 2pm PST. My bldg casts a big shadow over the lot so I'm not a good candidate for solar panels.

My goal, as always, is to create a new income stream by installing carports AND ideally the income stream would be independent of my tenants.

@Brian Burke thanks for that analysis framework reminder. Yes, I agree, if I can't get rent traction, this would be a good move to make just before I sold. However, my plan is to hold for a while longer. The cash flow is too good and the headaches are very seldom.

So, I'm chewing on everyone's input.  Thanks so much.

Michele Fischer · Answer

Al, we recently rented a SFR, and the resounding attribute that everyone raved about what the garage, even though it isn't a fantastically usable one.

We also have duplexes with carports, and they are not viewed as a marketable feature.  People won't park in them, they park on our lawn (arg!) or street spaces instead.  I think part of it is the actual or perceived crime associated with having a place to graffiti or break in without being seen.

Just food for thought, since I know you are also in the lower income niche.

Brian Burke · Answer

Simple. Charge extra for it, calculate the increase in property value based on prevailing cap rate and compare the increase to the cost of construction.  For example, if you can get $50/mo per space times 8 spaces =$400/mo.  $400/mo = $4,800/year which at an 8% cap rate = $60,000 in additional property value (assuming the carports don't add to your expenses).  If you can build the carports for less than $60K it might be a good investment depending on the lost opportunity cost of tying up the money.  Your ROI might be best if you put them in a year before you sell...

Robert Leonard · Answer

Great post @Al Williamson! You just gave my reason for thinking that enclosing a carport or garage for added living area is always a negative for SFRs.

But back to your point.  I would get quotes to find out what it would cost and analyze how much of an increase in rent would make it financially viable.  As far as executing the rent increases, I would enact the new rates at turnover for new tenants and incrementally on existing tenants as they renew their leases.  That's all considering your analysis of if the numbers work?

There's an excellent analysis strategy that I know you could apply to this situation, that I just can't completely recall right now.  I've racked my brain and searched all through BP to try to remind myself of it and I can't find it.  I think it was discussed in one of the podcasts?  It was a good way of clearly applying simple math to the decision.  It was a way of determining if the cost of an upgrade created enough return to make it worthwhile. It's not one of the commonly mentioned rules of thumb.

I hope somebody will chime in with what the heck I'm trying to find here?  I can't believe I didn't write that down.  I'm going to have to go back through the podcasts and listen for it, I didn't find it in the show notes either.

William Donaldson · Answer

I would think it may be difficult/annoying to police the covered parking spaces at an eightplex, assuming you charge an extra monthly fee to a tenant who wants access to a covered carport.  It may be easier and more cost-efficient to build a multi-housing carport like the ones here and adjust the rent accordingly.

Having a carport could decrease vacancies and potentially improve the quality of tenant you attract.  If it's not in a well-lit area, you could look into adding security lighting around/inside the carport to further compound the value of the carport to your tenants.

Jerry W. · Answer

@Al Williamson I am in agreement with @James Wise try finding a sheltered spot and put up a car covering.  Make it a reserved spot with a no parking except by permit, and build a carport.  Offer it to your best tenant for $25 to $50 per month and go from there.  If others express interest then offer to build more for the same price.  price and demand versus your cost should drive the deal.  You will need to modify your lease to cover the rent.  Also make sure it is very sturdy.  We had a bad snow that took down a preexisting carport that damaged the tenants car.

James Wise · Answer

Charge a mo/fee to rent each parking spot