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1 bed flat vs 1 bed flat with parking space - Does parking space make a difference?


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Hello Hubbers, 

Warm greetings.

I am looking to buy either flat A)1 bed flat with 4th floor views of the city for 115k  or  b) a 5th floor 1 bed flat in the same block that comes with allocated underground parking space for 125k

Both same spec, size and condition. The service charge is marginally higher on Flat B at £190 extra per year

Flat B also comes with a balcony facing views of the city.

Flat A can rent for £600 whilst Flat B could rent for £650. Both would need some light refurb to get it to that standard it would demand. Estimated refurb costing 5-7k

My question Hubbers - Do you think allocated parking adds significant value long term to the property value? and potentially who wants to rent?

Interested to hear your thoughts,

(im leaning towards flat b)

Thanks

 

Zub

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Hi Zub,

You dont mention the area you are purchasing in, but if it is a city then parking will be an added bonus for sure as well as the views. If it were me looking to buy there, then parking and a view would always be my preference. If you ever wanted to sell, yours would be snapped up much quicker, and time is money!;)

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Gross rental return: (A) = 6.26% (B) = 6.24% (if i have done my calcs accurately) suggesting (A) is better based on the info provided.  Also suggests that renters in your area don't value parking. 

Whether a parking space will increase a property's capital appreciation at a greater rate than one without, I think will be highly dependent on location and market, so difficult to say based on the information provide.  But if your apartment is right next to a public transport interchange and most of the apartments are owned by landlords, then the parking space isn't going to add too much value and may reduce value because of the lower gross rental returns (and higher service charges).

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hi Tracey, Andrew - thanks to both for your reply. 

The flats are both in city centre in the same block. 

I think writing the post ultimately it makes sense to go for flat B with the parking, as it will be valuable in the city centre in years to come. However not having a parking space either won’t get impact in demand for rent. (I think)

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This will very much depend on terms of the lease, however, there may be an opportunity to let the parking space our separately from the flat if it's close to offices etc. If that's allowed, work out the rate you'd get and add that to the no parking flat and see if it makes a difference. You could then advertise the flat with or without the space.

If not allowed, consider who you're targeting with the flat. If it's likely to be younger, single people who want to live in/near the centre for nights out etc, they probably won't pay much extra for the space, although you will get shorter voids as you can attract those who need one as well and if someone moves in with a car, they may struggle to find somewhere to move out to unless they move out of the city centre

If you can cover the additional service charge, I'd probably go for the one with the space - it's value will rise proportionally, it'll be easier to rent out and the rent will be a little higher. In addition, it's only costing you £2.5k + 3% SDLT, assuming you've got a mortgage, so less than £10pm in interest. Add on the service charge and it's probably costing you an extra £25-30 per month but you're making an extra £50, so less voids and more cashflow. 

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When i mentioned location, i was thinking about where it is in the country.  There are certain city centres, e.g. London, where it is very possible for people to live quite happily without a car.  Many do and it is an increasing number because of the congestion charging, low emission zone, high parking charges etc... I guess that yours are not in London because £115k / £125k is the price of a garage or a park bench in London, not an apartment. I guess that Manchester, Birmingham are also both livable without a car, but i dont know how far down the list you can go and keep saying this.

In terms of market, I think you need to be clearer about who you are going to rent the apartment to.  If i were a renter with a car, I would not rent a place without a car parking space.  Equally well, if i were a renter without a car, i wouldn't rent a place with a parking space, because this is just paying (alot) for something that i dont need. Do the majority of renters in your area have cars?

I think you also need to be clearer about who you are going to sell the apartment to (if that is part of your longer term plan). Owner occupiers possibly more likely to want a parking space, landlords possibly less so?   

Maybe you need to be clearer on your objectives?  Are you looking for capital gain or rental income?  Quite often the ugly capital gain duckling is the golden rental income goose.  Its sounds like you may be looking for a hybrid (is this a guck or doose? I dont know), which might be as rare as the proverbial unicorn. 

The ultimate question I would ask myself is whether i want to pay an additional £10k on a parking space or whether I want to put that towards the deposit for my next apartment (A)

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Its in Nottingham, and i've walked around Nottingham. It is pretty easy to get around the town without a car. I am going for the flat for the parking space. It allows me to be flexible on who i rent it to. Its a flat, and if you need a parking space its available. Having spoken to a few agents in the area, they think it would be a bonus for now and years to come. 

I do like the idea of potentially letting out the parking spot as a separate space. But for now will keep things simple.

My objective for this property is capital gain. So im looking initially for a good central location with good potential for capital gains, but i would like to make sure that the property has rental demand. 

@farmer andrewi hadnt even thought about the city location and how people do live without a car. Which is a very good point. However i think having the space even in Manchester/Birmingham/London would be a bonus for a owner than a renter.....

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Just to add to what others have said here:

I'm sure you've done your due-diligence, but if it was me I would want to look at how much the service charge has increased (or even decreased!) and then factor that in, as the impact to you will be greater and will increase at an exponential if you have the parking space.

It would also be worth asking what the state of the parking is, and if there's any planned works, and if the cost would be shared only by those who have a parking space e.g. If they're planning on re-laying the whole underground car parking, and splitting the cost only between those with parking spaces (which sounds fair!) how much of a lump sum cost and/or uptick in that 'extra £190' cost could you see?

Hope this helps!

Tommy | Trifecta Properties
Website: www.trifectaproperties.co.uk

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Hi tibbuuk - Yes certainly does help. 

Tbh  i didnt even think about the effect of the cost of car park upgrades (should it need it) and whether the impact is on all (with or without)

The service charge diligence is appreciated, although im fortunate my solicitor picks this up. - However i think i wouldnt have thought about that on my own. Good pointers - Thanks

 

and to ALL - i will revert back on my journey. So its useful for others thinking about Nottingham

Thanks

Zub 

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