How To Buy A Parking Lot: Everything You Need To Start A Parking Lot Business
As the number of personal vehicles in cities increases, buying a parking lot as a business investment could be a profitable venture. A parking lot business can have a low entry point with a superior yield. So, to help you make the most of the opportunity, we’ve put together a guide on how to buy a parking lot for business and the common pitfalls and obstacles faced when starting out. Let’s dive in!
Table of content
How to buy a parking lot
There are a few things you need to consider before you invest in a parking lot business.
Choose the right location
Location, location, location — it’s an old adage, but for a reason. Not all parking lots will be profitable. It’s important to consider:
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The daily volume of traffic around the parking lot
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The amount of street parking near the lot
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Whether it’s near a downtown shopping center
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If it’s a convenient location for downtown businesses and venues
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If the lot is zoned for being a parking lot
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How much the lot cost
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How much 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.
Decide what type of parking lot to build
The lot you buy will affect the type of parking lot you want to run — this could either be a parking garage or a traditional parking lot. However, 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.
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Parking garage: Parking garages can offer more space and higher profit margins, but require a more significant investment, as they need more management and will incur a substantial construction project.
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Traditional parking lot: Traditional parking lots are easier to maintain and construct, although they won’t hold as many cars as a parking garage. 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.
How much does a parking lot cost?
Determining the final cost will help you assess whether you want to buy a parking lot, you need to consider the cost of purchasing the land, building and paving the parking lot, installing security measures, and paying staff to run it.
Construction costs
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. According to WGI, the median construction cost for a new parking structure is $29,000 per space or $86.73 per square foot. And considering construction costs for parking structures have increased by 3.9% since 2022, you’ll want to crunch the numbers before you buy the lot.
Paving costs
Once the lot is ready, you’ll want to pave the lot with an asphalt surface. According to HomeAdvisor, this costs between $2.50 and $4.50 per square foot. For reference, concrete lots cost $4 to $7 per square foot.
Permit and construction plan costs
Before you pave your lot though, you’ll need to get the necessary construction permits. Be sure to start the permit process as early as possible because it may take a while to be approved. You also need to develop a construction plan with proper drainage and convenient entrances and exits.
My Site Plan can help you create a site plan before you buy a parking lot, quickly and efficiently laying out an ideal schematic for your next building project. Request a quote today.
Staffing costs
A parking lot business won’t run itself. You need helpful and friendly staff to keep it going. This includes a:
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Cashier: The person who collects payment for the cars to park.
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Custodian: Their role is to keep the lot clean and free of hazards.
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Security guard: Whether you have them walking the lot or monitoring cameras, you’ll need someone to ensure your customers’ safety and their cars.
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Valet: Depending on the size of your lot, you may want to offer a valet service.
Security costs
If you buy a parking lot, you’ll want to attract and retain customers. To do this, you need to make them feel safe. Aside from having a security guard, you’ll need to install security cameras and adequate lighting. These measures will discourage thieves and attackers, keeping your customers and their cars safe.
How to run a parking lot business
There are three ways to collect money when running a parking lot:
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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.
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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.
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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 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.
Are parking lots profitable?
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.
How to start a parking lot business
The first step in starting a parking lot business is to create a site plan. Luckily, My Site Plan has a team of experienced CAD designers who can create site plans for your parking lot construction project to help you obtain a permit. Known for an excellent turnaround, My Site Plan can make a schematic that will work best for your parking lot project, within just 24 hours.
FAQs: Before you buy a parking lot
How much does it cost to build a parking lot?
According to WGI, the median construction cost for a new parking structure is $29,000 per space or $86.73 per square foot. However, this varies between states.
Building a parking lot in Houston is your cheapest option, with a median cost of $74.93 per square foot, while building one in San Francisco costs the most, averaging $108.93 per square foot.
How much does it cost to pave a parking lot?
Paving an asphalt parking lot for the first time costs between $2.50 and $4.50 per square foot. It’s worth noting that an asphalt parking lot needs to be repaved every 15 to 20 years and this will cost between $0.90 and $2.50 per square foot, unless repairs are needed or there are gaps and cracks to fill. Then, these costs might be higher.
Do parking lots have cameras?
Not all parking lots have cameras, but having them makes customers feel safe and trust that their car is in good hands.
Are parking lots private property?
If an individual, business, or corporation buys a parking lot, then that lot is considered private property. The owner then has the right of regulate parking and enforce rules on the premises.
| FAQ | Answer |
|---|---|
| What are the typical operational challenges of running a parking lot business? | Running a parking lot business involves several operational challenges such as managing cash flow, dealing with unexpected maintenance issues, and ensuring customer satisfaction through effective security and service. These challenges require proactive management and regular assessment of business strategies. |
| How can technology improve the efficiency of a parking lot business? | Technology can greatly improve the efficiency of a parking lot business through the use of automated payment systems, license plate recognition for quicker entry and exit, and real-time space availability updates. These technologies can reduce labor costs, enhance customer experience, and increase the overall turnover of parking spaces. |
| What legal considerations should be taken into account when opening a parking lot? | Legal considerations for opening a parking lot include zoning laws, compliance with the Americans with Disabilities Act (ADA), obtaining necessary permits for construction and operation, and ensuring all safety regulations are met. It's crucial to consult with legal experts to navigate these requirements effectively. |
| How does the location impact the insurance costs of a parking lot? | The location of a parking lot can significantly impact its insurance costs. Lots located in areas with high crime rates or prone to natural disasters may face higher premiums. Conversely, lots located in safer, well-lit areas might benefit from lower insurance costs due to reduced risk factors. |
| What are effective marketing strategies for a new parking lot business? | Effective marketing strategies for a parking lot business include offering introductory rates, partnering with nearby businesses for cross-promotions, implementing loyalty programs, and using digital marketing to target local customers. It's also beneficial to ensure the parking lot is well-signposted and visible. |
This article was originally published on 2020-10-29. It was updated on 2024-04-30 by Ryan Crownhold to reflect updated information.
- Ryan Crownholm
