Diversification – is renting out garages a good alternative to residential?

Diversification – is renting out garages a good alternative to residential?

0:04 AM, 3rd January 2024, About 4 months ago 7

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Hello, We have been residential landlords for over twenty years now and it has gone well. We now want to make a further investment – through an SPV limited company – and are a bit concerned by the increasing uncertainty and proliferating regulations surrounding ASTs.

An agent has suggested that we look at the possibilities of buying a block of garages to rent out. The yield looks good and the sector is much less regulated than residential, but we don’t know if the capital gain would be as good in the long term.

Are there any problems getting finance for this type of investment? Or any other pitfalls that we should be aware of?

We realise that we would need to pick the area carefully and get a carefully worded lease in place (and a good agent).

If anyone has done this, we’d be grateful for advice.

Thank you,

Jane


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Comments

Mark Porter

13:56 PM, 3rd January 2024, About 4 months ago

Hi there, I only have 1 garage which I rent out seperately to the house that it is associated with. It's in a block approx 50 meteres from the property.
There has always been a demand for it and out of the 3 tenants over the last 4 years:
1 was evicted due to late payment
1 rented it for approx 4 years with no payment issues. I increased the rent once in this period with no issues.
The other has only just 'moved in but payment has been made promptly so far.

I haven't ever taken a deposit for this, I do inspections, the contract I use gives both the tenant and myself 1 weeks notice to move out / take possession.

I can send the contract to you if you give me your contact details.It does go into detail regarding tenant/ landlord responsibilities, inspections, maintenance, use etc.

I would suggest that choice of investment area is important and is possibly one of the reasons I haven't had many issues to date (even the eviction was simple as he was ultimately a decent guy (for reasons I won't go into) - just a disorganised payer!)

The rent for garages in my area has increased from about £60 per month to £100 now. I charge £95 and there is no electric supply.

Talking to people in the area, there seems to be a lack of supply but high demand.

I've never sought finance to purchase just a garage so cannot comment on this part of your post, sorry.

David Nichols

18:38 PM, 4th January 2024, About 4 months ago

Renting garages can be a good way of diversification. I have near 50 garages in 5 blocks as well as some B2L.
For capital gain, focus on complete freehold blocks that could potentially convert to building plots. That will secure the land value long-term as building plots in towns and cities get rarer to find. Also focus on location as most garage blocks are ex council so areas can be rough and encourage loitering and vandalism.
Ask yourself if the area and garage is suitable to store a £10k classic car.
With good location, consider improvements to roof and door and ensure presented well then can attract endless long term tenants at a good return near 8-10% yield.
Leveraging is not easy, and ideally suits semi retired happy to manage the paperwork and the site.
The picture on this post shows neglected garages and won't attract good tenants or rent as competing with council garages.
Tenancies are monthly licence agreements and subject to more simple contract law. Deposits will reduce rent payment risks and minimise the big clean at tenancy changeover.
Managed well it can be a great alternative to B2L for landlords wishing to be hands on without all the regulations.
Hope this helps from my experience.

john thompson

15:16 PM, 6th January 2024, About 4 months ago

This is something I've been thinking of trying and land with storage/shipping units.
Its all looks much less work, regulations and stress.

Lack of knowledge, sutible areas, availability, land prices and higher commercial mortgage deposits are stumbling blocks, along with what seems much slower property price increases over time.

As I noticed so many landlords are looking to get out of the volatile house rental sector with the poor returns and high stress.
So i think we could all do with more focus and info on the commercial side on here now...just a suggestion?

Michael Booth

11:29 AM, 7th January 2024, About 4 months ago

Plenty of garages for sale in North east England.

john thompson

18:27 PM, 7th January 2024, About 4 months ago

Reply to the comment left by Michael Booth at 07/01/2024 - 11:29
Is it worth the investment?

I am in the North West would prefer to invest in an area i know like my home town, but not committed if the right opertunterty and low investment arises.

Jane B

18:41 PM, 11th January 2024, About 4 months ago

Reply to the comment left by Mark Porter at 03/01/2024 - 13:56
Hi Mark,

I'd love a copy of your contract, please.

I can't contact you - I think you'll need to enable the contact form in your profile.

Thanks, Jane

David Sandford

18:47 PM, 23rd March 2024, About a month ago

Hi Jane,

Not sure which area you are in but we are just about to submit an application for a new block of garages in Hertfordshire. We would be looking to sell some of them, ideally to one person/company.

This is a new venture for us too, due to restrictive site so appreciate the advise posted by landlords with garage experience.

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