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Investing in car parks: a good vehicle for income seekers?

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01/02/2015
As the search for income continues, many investors are turning to alternatives, with car parks becoming increasingly popular.

If you could find an investment guaranteeing 8% and based on ‘hard’ assets would you be interested?

With interest rates relentlessly hovering around zero, you probably would, but you might not immediately think of car parks as the place to look.

A growing number of disillusioned savers are choosing to put ‘non-traditional’ investments into their Self-Invested Personal Pension (SIPPs) and car park spaces are among the more left-field examples.

The rationale behind the idea is that as the number of cars increases – motor organisations say there will be 39 million more vehicles on British roads alone by 2030 – demand for parking will soar. However, as there is only a finite amount of space in urban areas for car parks, demand is expected to handsomely outstrip supply.

Investors can take advantage of this trend by purchasing an individual parking space and leasing it out to a tenant for a period of time. Often this tenant is a management company which then sub-leases it to customers on an annual basis.

Car park spaces can typically be purchased with a minimum investment of £25,000 for a six year lease and most offer a guaranteed rental yield of 8% for the first two years.

These investments are being pitched as a low entry level way of investing in commercial property and are marketed as ‘tax efficient’ and ‘purchasable through SIPPs’.

Like any property investment, selecting the right location for your space is crucial. Places where demand for parking is at a premium because of weather conditions have proved popular in the past. For example, hot Dubai or rainy Manchester.

Property investment company, Platinum Knight, says investors can earn on average 9% per year by investing in a car park project in Dubai. It promises returns paid direct every six months which rise in each of the first five years.

Intelligent Investment offers parking spaces in central Manchester and, according to its website, guarantees a minimum rental return of 8%, which is projected to increase to 12% from year 5.

With eye-catching rates, investing in parking spaces may seem appealing but those interested should proceed with caution.

Importantly, while promoters of car park spaces claim they are ‘SIPP-approved’, investors shouldn’t automatically assume their SIPP provider will accept them.

Car park spaces may be eligible to be held within a SIPP under HMRC rules – as long as they are used for commercial purposes only – but providers can chose to reject them for a number of reasons.

AJ Bell, one of the major players in the UK SIPP provider space, says it has received a few enquiries regarding these schemes but has chosen not to permit them.

Technical resources manager, Gareth James, says: “In the examples we’ve seen the leases offered upon investment have been fairly short term and within that term there has been an even shorter period during which income is guaranteed.

“We’ve also not been satisfied that the investments are sufficiently liquid in the event that the SIPP has to sell them, or that the investment can easily be valued on an ongoing basis.”

Dentons, another SIPP provider, would also not permit them.

Director of technical services, Martin Tilley, says: “These are unregulated investments so you should treat marketing literature as being fake until it can be verified independently it is accurate.”

Taking a trip to Dubai to make sure the parking space actually exists, for example, would be way beyond most investors.

Tilley continues: “I’d also be concerned about what happens after the guaranteed income period runs out as well as the administrative costs.”

By contrast, provider James Hay would in principle accept them, although the firm has yet to do so.

Head of technical support, Neil MacGillivray, says: “Car park spaces are like any piece of land so should be SIPP-able.”

Problems arise if the space is near the investor’s own home because if it were used for non-commercial use, it would be taxable within a SIPP.

MacGillivray adds: “We would consider it as long as it were in a commercial car park. But it would be on a case by case basis.”

Des O’Hara of alternative investment advisory firm, Everett James, has recommended car parks to his clients in the past. He calls them a “reasonably safe” way of diversifying and spreading out risk in a portfolio.

When it comes to consent from SIPPs, he has had mixed experiences.

“They [providers] are constantly changing what they will and will not accept. There doesn’t appear much uniformity; one provider may accept a product this week that they never last week whilst another SIPP may now refuse that very same product.

“Challenging I guess would be the best description but we simply manage that process. If a client has a broad, diverse spread we must ensure their particular SIPP provider accepts every product or it’s back to the drawing board really.”

There are 20 Comment(s)

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  • YourParkingSpace

    For an idea of rental prices you can search on our site: https://www.yourparkingspace.co.uk

  • Mario Miniaci

    Any comments from people who have invested in this kind of vehicle? I get the impression there’s an element of ‘too good to be true’ from many possible investors.

    • Digby

      The Store First model is that you get a guaranteed income for the first 2 years, with the same projected rises. However they sublet back from you and I have friends who’ve just had the lease terminated at the end of the 2nd year, so good bye to the guaranteed income. Plus the guaranteed buy back is at the company’s discretion so read the small print carefully. My friend now owns a 175 year lease on storage units that he can’t sell and is dependent on the company letting out on his behalf.

  • We have had real positive responses from those that have invested through http://www.carparkinvestments.co.uk

    • Randal Gossip

      This just an offer of investment no real comments from investors .!

  • Six car parks at Glasgow and three car parks at Gatwick airports have been launched over the last few years. FJP Investment is experienced enough to ensure a smooth process is made when clients purchase into this airport car parking investment https://www.fjpinvestment.co.uk/car-parking-investment/

  • Claire

    Has anyone come into year 3 of their car park investment when the guarantee is no longer applicable?
    I have to spots at Glasgow and they’ve been ok, but it’s early days, only had them a year. I’m thinking of buying more but not sure as it’s early days.
    Any comments thanks

    • RosiesMum

      Hi Claire, I’ve inherited 3 of these car park spaces after the passing of my dad. Year 2 rental is now 7 months overdue. It’s obviously a slightly more sophisticated Ponzi scheme whereby the rent is coming from other investors money. I’ve got a solicitor looking into this for me and he’s asked me to find as many other investors as I can because as a collective we can do something about it. I’m presuming you haven’t received Year 2 rental and realise it isn’t the investment you thought it was. If you want to discuss further please email me on gmehigan@hotmail.co.uk
      Gillian

  • PeterP

    I have bought some spaces at Gatwick from an agent company called Direct Parking Investment. I understand the purchase money goes to a company called Group First.Same scheme offers as above, 8%, then 10%, then 12% and 175 year lease. I was thinking of purchasing more but I am rethinking the whole thing now after reading this article. I also searched the fca.org.uk/register but I could not find the companies names. Anyone know anything about these companies?

    • ken

      Please beware you will lose your money not worth the risk I was a broker selling these

    • RosiesMum

      Hi Peter, I’ve inherited 3 of these car park spaces after my father passed away last year. I’ve currently got a solicitor looking into it for me because it’s really just a sophisticated Ponzi scheme. My solicitor has advised me to gather as many other investors as I can because as a collective we will have more clout. Could you please email me on gmehigan@hotmail.co.uk and we can talk further
      Gillian

  • bongedtwo

    My question is not so much about the rent.

    I leased a parking space in a secured area of a former NCP car park in Feltham near Heathrow for 1000 years (lol). I paid 3.5k around 8 years ago for it.

    I’m in need of money for it now but I don’t know how to value it. I’m on the doorstep of Feltham mainline station into London Waterloo.

    Does anybody have advice on how to proceed?

    Rgrds

  • Randal Gossip

    I invested and received the 8% as promised for the 2 years . The money is paid however from those who are investing not rental . This rental is paid every 3 months so I expect some payment soon . What I can say is that they are slow ,after 2 years I still have not got the Land Registry details. I get e mails that the office manager is on vacation when she is not etc . I expect if you want to sell it can years if ever I begin to wonder ?

    • RosiesMum

      Hi Randal,
      I have inherited 2 of these spaces after my father passed away recently. I’m shocked that he would invest in something like this because he preferred “safe” investments. He purchased through Park First, is that who you bought from too? Did they call you out of the blue?

      • Randal Gossip

        I bought 1 space through a broker FJP Investments and it was not a cold call .The rent is supposed to be paid every 3 months . I have not been paid any rent after 4 months at this stage . I am interested to know the position of those who have invested earlier .

        • RosiesMum

          Hi Randall,
          Thanks for replying. My dad bought the spaces July last year. He seemed to be under the impression that he owned the land they were on too, not sure how it was sold to him as he never discussed it with the family. I received the title deeds recently, have you got yours yet?
          I’m still waiting for year 2 rental to be paid but they say this will be paid once they have sight of probate so we will see in a couple of weeks.
          I read the contracts through and it seems there is no guarantee that they will buy them back at year 5 as they stress in their brochure – it’s at their discretion and they “need not act reasonably”!! As you said earlier the rental comes from other investors. It’s basically a Ponzi scheme isn’t it? But much more sophisticated. Doubt they have any re-sale value

        • Every single client of ours that owns the car parks, even those in year 3 HAVE received and are receiving their rental incomes. I strongly URGE you to call us on Monday and we will look into this for you. There is no case of any clients of FJP that have been calling or emailing us over missing rental payments, not a single client.

          I am not convinced that you are a client of FJP. Surely if your rent had not been paid for 4 months, you would have sent us a message or given us a call in order for us to check?

          I say this because, I have no pending issues with any clients awaiting rental payments. In fact, even clients in year 3 are receiving more than 10% ROI, which is why I am so shocked you are saying this.

          None the less, if you genuinely are missing any rental income, call us on Monday and we will help get it sorted.

        • ken

          Do not purchase this investment my father did and he has received no income after year 2.

          Looks like a scam ponzi scheme

          • RosiesMum

            Hi Ken, I’m trying to get hold of anyone who has invested in these car park schemes. I’ve currently got a solicitor looking into it for me as I’ve inherited 3 that my father bought, he passed away last year. I agree it’s basically a Ponzi scheme, albeit a very sophisticated one. Could you email me on gmehigan@hotmail.co.uk
            Gillian

          • RosiesMum

            Dear Ken,
            Please email me on gmehigan@hotmail.co.uk
            I inherited 3 spaces after my dad passed away last year. I have serous concerns and would like to discuss more
            Gillian

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