Real estate investment includes many options, such as condominium and apartment investment, single-family home investment, and parking lot management. When owners want to make productive use of idle land where buildings are difficult to construct, more of them consider parking lot management. Parking lot management has attracted attention as a form of real estate investment that can be started with lower initial costs. In this article, we explain in detail everything from how parking lot management works to the points that lead to success.
How does parking lot management work?
Parking lot management is an investment method in which you create a parking lot on idle land and earn income from the fees paid by users. Compared with apartment or condominium management, the initial cost can be kept lower, which is why it is known for being relatively easy to start.
Parking lot management can be broadly divided into three operating models.
- Self-management: A method in which you handle all management yourself
- Management outsourcing model: A method in which the landowner completes the development and outsources management to a company
- Master lease model (sublease): A method in which you lease your idle land to a parking lot operator and have them run the business
If this is your first real estate investment, including parking lot management, the management outsourcing model or master lease model can offer greater peace of mind.
What types of parking lot management are there?
There are two types of parking lot management: monthly parking and coin parking, and each has different characteristics.
Monthly parking
Monthly parking is a type of parking lot rented out on a monthly basis.It tends to generate stable monthly income, but vacancies have a direct impact on earnings. It can be operated through self-management, a management outsourcing model, or a master lease model.
Coin parking
Coin parking can be operated without staff by installing a payment machine and lock plates.Because equipment installation is required, outsourcing to a specialized company is common. There are two models, self-management and land lease, and while the land lease model can provide stable monthly income, returns are lower than with self-management.
What level of returns can parking lot management generate?
As a general guide, expected returns for parking lot management are around 5% to 15% for monthly parking and 15% to 30% for coin parking.Coin parking has faster turnover and can offer higher returns. Near commercial facilities or tourist destinations, stable earnings may be expected. Careful research into the surrounding environment is important.
How much are the running costs for parking lot management?
Before starting parking lot management, you need to understand the running costs involved.
For monthly parking
Management and operating expenses (collection fees, on-site cleaning costs, electricity, and insurance premiums) as well as taxes (fixed asset tax, city planning tax, income tax, etc.) are required.If you outsource management to a company, a separate management fee (typically around 10%) is also necessary.
For coin parking
Land preparation costs, sign installation costs, and equipment installation costs are required.You will need to pay for equipment such as payment machines, lock plates, and security cameras.
How do you get started with parking lot management?
To start parking lot management, proceed in the following order.
Prepare the land
First, prepare the idle land.For monthly parking, gravel paving may be sufficient, but for coin parking, asphalt or concrete paving improves durability.
Install the necessary equipment
Monthly parking can begin with parking space markings and wheel stops. Coin parking also requires equipment such as payment machines and lock plates. For small-scale operations, a lock-type system is recommended, while for 20 spaces or more, a gate-type system is advisable.
Set the pricing
If you check the surrounding market rates before setting your fees, it becomes easier to secure users.Coin parking allows detailed settings such as 30-minute increments and maximum daily charges, offering more flexibility than monthly parking.
Attract customers
In addition to putting up signs and distributing flyers, listing information on a website is also effective for attracting customers.If attracting customers on your own is difficult, consider outsourcing to a real estate company.
Manage operations
Tasks such as collecting parking fees, repairing equipment, and regular cleaning will arise. If you cannot manage these tasks yourself, we recommend outsourcing to a management company.
What are the advantages of parking lot investment?
Parking lot investment offers the following four advantages.
Lower initial costs
The greatest benefit is that the initial cost is significantly lower than for condominium or apartment management. For monthly parking, asphalt paving typically costs 5,000 yen per square meter, while gravel paving is around 1,500 yen per square meter.
A short lead time before launch
A monthly parking lot can open in about one week, and even coin parking can begin operating in two to three weeks.Compared with condominium or apartment management, which can take several months to a year, the ability to generate income quickly is attractive.
Many types of land can be utilized
If you have enough space for one standard passenger vehicle (length 6.0 m × width 2.5 m = 15 square meters), the land can be utilized.Even narrow or irregularly shaped land can be used. There is also the option of operating a motorcycle-only parking lot.
Easy to repurpose
Asphalt removal costs are relatively low at around 1,000 yen per square meter. This makes it a recommended investment approach even for land that may be repurposed in the future.
What are the disadvantages of parking lot investment?
At the same time, it is important to understand the following disadvantages as well.
Fewer preferential measures than other uses
A parking lot without buildings is treated the same as vacant land, so it does not qualify for preferential treatment on fixed asset tax or inheritance tax.Please note that there are virtually no tax advantages.
Limited upside in profitability
A surface parking lot can only use a single ground-level layer, so operating efficiency is lower than with apartment or condominium management.It is difficult to achieve high profits in a short period of time.
Location selection is difficult
It is important that even larger vehicles can park with confidence and that the site is clearly visible from the road.There is also a risk that demand will decrease if a lower-priced parking lot or a multistory parking facility opens nearby.
What are the key points for success in parking lot management?
Be particular about location
Coin parking tends to be in higher demand near office districts, hospitals, entertainment areas, and tourist destinations, while monthly parking tends to be in higher demand near large apartment complexes and densely populated residential areas. Choosing the operating model that fits the location is the key to success.
Research the surrounding environment carefully
It is reassuring to investigate in advance whether competing parking lots exist and how heavily they are being used. It is also worth seeking advice from a real estate company familiar with local conditions.
What are the common troubles in parking lot management?
Fee-related disputes, unauthorized parking, accidents, and complaints from nearby residents or users are typical examples. To help prevent problems, check the following four points when selecting a management company.
- Whether cleaning is consistently carried out
- Whether lighting and security cameras are installed
- Whether there is a 24-hour call center
- Whether there are measures in place to prevent trouble
What lessons can be learned from common failures in parking lot management?
There were too few users
It is important to set appropriate pricing based on the surrounding environment and user needs.Even where there is underlying demand, users will not gather if the site is difficult to park in or if the pricing does not align with the market.
Rent payments were not made
Unpaid rent causes not only lost income but also the time and cost of reminders and negotiation.It is important to make payment methods simple and to clarify contract rules.
Taxes were higher than expected
Fixed asset tax is not eligible for reduction measures and may be several times higher than when there is a building on the land.Please understand that parking lot management is a means of earning income and is not well suited to tax-saving strategies.
The management company operated carelessly
It is important to evaluate the management company you entrust with care.Visit parking lots managed by the candidate company in person and confirm their management standards.
Competitors were located nearby
It is important to understand nearby competition and differentiate through ease of use and pricing that matches local needs.
Summary
Parking lot management is a form of real estate investment with many advantages, including lower initial costs and a short preparation period. On the other hand, it also has disadvantages, such as limited tax incentives and the difficulty of selecting the right location. Compare the advantages and disadvantages carefully, and consider it only after conducting sufficient research into the location and surrounding environment.
Frequently Asked Questions (FAQ)
How much does it cost to start parking lot management?
For monthly parking, you can start from around 1,500 yen per square meter with gravel paving. For coin parking, installation costs for a payment machine (from about 450,000 yen) and lock plates (from about 90,000 yen) are required separately.
Which is more profitable, monthly parking or coin parking?
Coin parking tends to offer higher returns (15% to 30%), but this varies depending on location and demand. Monthly parking is suitable for densely populated residential areas, while coin parking is better suited to areas around commercial facilities.
Do I need any qualifications to run parking lot management?
No special qualifications are required for parking lot management. However, by using a management outsourcing model or a master lease model, you can get started even without specialized knowledge.
What taxes apply to parking lot management?
Taxes include fixed asset tax, city planning tax, income tax, resident tax, and sole proprietorship tax. Because there is no building, fixed asset tax reduction measures do not apply, so please note that the same tax rate as vacant land applies.
