Your Garage Is More Than Covered Storage
Let’s talk garages – yes what you use to store more than just your car. For those reading that can barely walk into your garage, do not worry – the value is still there. The Wall Street Journal recently published a great article discussing The Parking Premium associated with parking spaces. The analysis broke down the impact of an additional car space on list price. Here is a quick summary:
|# of Spaces||Premium Over a||Percentage of Total|
I want to draw your attention to two points:
- Only 2.5% of the homes had 4+ parking spaces
- The study did not factor in zero parking spaces
First, although this study is a national one, it is imperative for all buyers and sellers to understand how their individual market works. In the Bay Area, unlike many areas in the country, the underlying lot represents the lion’s share of the value. In addition, many of the homes on the Peninsula were built when most families rarely had two cars. So on your search for 10+ spaces, realize that most current owners use the land more efficiently
(and if they kept the parking you are going to pay for the land).
That being said, if you think about the square feet a typical 2-car garage takes up (~400-500 sq. ft.), many homebuyers prefer their dollars go toward an extra bedroom/bathroom. In comparison to a 2-car garage, an average bedroom is approximately 100-200 sq. ft.
There is also a positive correlation between the number of bedrooms and the list price (up to a certain point). Here are the last 6 months of sale prices in San Mateo County comparing 3bd/2bath vs. 4bd/2bath:
|3bd 2 bath||4bd 2 bath|
|Month||Avg. Sale Price||Avg. Sale Price||Difference|
It is not necessarily parking or bedrooms, but if you had to choose, land in the Bay Area is typically not in its highest and best use as a parking space.
Second, when thinking about a purchase, most buyers focus the majority of their attention on bedrooms, baths, kitchen, schools, etc. The unspoken expectation is that there is parking. For those in San Francisco (or other major cities), you might be more aware to ask the question. I bring it up to demonstrate that this study did not factor in the severe discount most buyers apply to any property without parking.
As a quick case study, let's look at covered parking in San Francisco:
1) Monthly fee of ~ $250-$400
2) Likely not connected to your dwelling or even across the street
3) Not allowed to use as storage (other than for an auto)
4) Rent expense is not deductible
So for each year you need to rent a space, you are spending upwards of $3,000 that is not financed or deductible. I should mention that you can offset the expense with street parking at $110/year. But, for those familiar with San Francisco, street parking is not for the faint of heart.
If you ever have any questions at all, please do not hesitate to reach out. At MinnGo, we realize that real estate is not something our clients think about everyday. Lucky for you, that is what we live and breath.
Until next time.