Buying a Parking Lot for Business: What You Need to Know
As personal vehicles increase in cities, buying a parking lot for a business investment seems like a profitable venture. Parking lot businesses can have a low entry point with a superior yield. But to ensure the parking lot becomes a successful business opportunity and not a massive headache, you’ll want to read our guide to buying a parking lot for business.
We’ll prepare you for what a parking lot business entails and its common pitfalls and obstacles. By following our tips, you’ll know what decisions you’ll need to make to start a successful parking lot business.
Before You Buy a Parking Lot
There’s a few things you need to consider before you buy a lot.
Location, Location, Location
An old adage, but for a reason. Not all parking lots will be profitable. It’s important to factor in:
- What is the daily volume of traffic around the parking lot?
- Is there a lot of street parking near the lot?
- Is it near a downtown shopping center?
- Is it in a convenient location for downtown businesses and venues?
- Is the lot zoned for being a parking lot?
- How much does the lot cost?
- How much will you need to charge to recoup the costs of creating the parking lot?
If the lot you found is in a good location with excellent traffic, then you’ll need to decide what type of parking lot you want to construct.
Related Link: The Dos and Don’ts of Buying a Vacant Land
Type of Parking Lot
The lot you buy will affect the type of parking lot you want to run. And depending on zoning laws for the lot, this choice might already be made for you. Make sure you understand the lot’s construction limitations before you buy it.
Parking garages can offer more space and higher profit margins, but it will require a more significant investment. Parking garages require more management and will be a substantial construction project.
Traditional Parking Lot
Traditional parking lots are easier to maintain and construct, although they won’t hold as many cars. If the lot is in a high traffic area with little street parking, you could miss out on higher revenue that a garage can accommodate.
Not sure which type of lot you want to build? Talk to My Site Plan to get quotes on either parking lot construction plan.
Related Link: How to Create A Parking Lot Plan
Typical Costs of a Parking Lot Business
There are several costs associated with starting a parking lot business. You’ll need to make decisions about pavement, staffing, security, and monetization.
Construction and Pavement
Depending on the lot’s condition, you may have to do several construction projects to get the lot ready for paying customers and their cars. And where construction costs for parking structures have increased by 3.3%, you’ll want to crunch the numbers before you buy the lot.
If you decide to build a parking garage, you will need a construction plan. If you are demolishing an old building to build your lot, you’ll need to get permits and hire a demolition team.
Once the lot is ready, you’ll want to pave the lot with an asphalt surface. Before you pave, you’ll need to:
- Get any necessary construction permits.
- Create a construction plan with proper drainage and convenient entrances and exits.
My Site Plan can help you create a site plan for your parking lot construction project. My Sit Plan can quickly and efficiently layout an ideal schematic for your next building project.
Make sure to start the permit process as early as possible because it may take time to be approved. Paving a lot generally costs between $1.25 to $1.50 per square foot.
Security and Staffing
Parking lots need to have adequate security and staff to attract and retain customers.
Parking lots have several staffing requirements:
- Cashier: Person who collects payment for the cars to park.
- Custodian: Keeps the lot clean and free of hazards.
- Security guard: Whether you have them walking the lot or monitoring cameras, you’ll need someone to ensure your customers’ safety and their cars.
- Valet: Depending on the size of your lot, you may want to offer a valet service.
Aside from having a security guard, you’ll need to install:
- Security cameras
- Adequate lighting
These measures will discourage thieves and attackers—keeping your customers and their cars safe.
Determine How Will You Monetize The Parking Lot
There are three ways to collect money when running a parking lot:
- No gate: This system relies on customers to deposit money on their honor. This is the cheapest method but also the most unreliable. And customers worry about the safety of their car when no one is there.
- A gate with a cashier: This system requires a paid staff to collect money and resolve issues. While not as convenient as an electronic system, staff can problem solve and offer customer service.
- An electronic gate: This system is very efficient when it has an automated payment system. While installation can have a steeper cost upfront, it can be the most profitable.
Whatever system you choose, you’ll want it to be the most cost-effective. And you’ll want to make sure you charge enough to cover the costs of your staffing, maintenance, mortgage, and taxes.
Find out what other parking lots in the area are charging. This will largely determine what the market can bear in your area and decide whether it is a smart investment.
Parking Lots Can Be Profitable Businesses
If you do your homework and determine your costs before you buy a lot, you’ll be able to determine if the parking lot is a gold mine or a wasted investment.
But even if the parking lot will barely cover costs, it may be a wise investment if the property will become valuable long term. If so, a parking lot is a smart way to break even until the property becomes a cash cow.
My Site Plan has a team of experienced CAD designers who can create site plans for your parking lot construction project. Known for an excellent turnaround, My Site Plan can make a schematic that will work best for your parking lot project.
Do you need a site plan to obtain a construction permit? My Site Plan can create a plan for your project within 24 hours.
Related Link: My Site Plan Frequently Asked Questions
- Ryan Crownholm