Why car parks make great investments

The demand for car parking at UK airports is increasing as passenger numbers rise to record levels.

airport-parkingAnd investors looking to boost their retirement income are increasingly eyeing opportunities to put their money into purpose-built car parks close to a major airport.

This form of investment can be included in Self-Invested Personal Pensions (SIPPs) as it is immovable commercial property that has no residential aspect to it.

And following confirmation from the HMRC that car parks fall within its definition of a SIPP, those who make this form of investment receive their own title deed from the Land Registry.

SIPPs are already acquiring a huge number of UK parking spaces and this is likely to continue to grow in the future. But car park investments are not just popular with pensioners.

Parking at airports such as Gatwick or Glasgow can be purchased from £25,000 per space but it is common for people to purchase more than one space with the average investment sitting around £60,000.

However only one title deed is required if purchasing more than one parking space, which means completion costs are kept down on large property portfolios.

Returns are guaranteed by the six-year leaseback agreement. This means that there is a guaranteed rental income for two years, delivering a yield of 8% per year which is expected to rise to 10% during years 3 and 4 and then increase further to 12%.

There is commonly and easy-out resale strategy that comes with a predicted 25% profit on the initial investment.

The owner can resell the parking space at any time at the request of the investor but there is a resale fee for this. The owner will have to advertise the parking space at a price that is 25% higher than what they paid originally.

It is possible for the investor to purchase back the parking space after five years and the owner will have to pay the investor the same amount that was paid initially. The idea behind this is that it forms a safety net for certain circumstances such as death or financial problems.