March 29, 2021
Time to Ditch the Parking Spot!
We live in 2018… almost 2019, wow.
But with that said.. consumers now have more data to assist them in distinguishing value then ever before. Although, value much like beauty.. value lies in the eyes of the beholder.
I recently lost in multiple offers on a house in The Beaches due to the buyer’s associated value of having 3 car parking.
In my opinion, they over-payed.
But did they?
The new buyer NEEDED 3 car parking.. and it was likely another home with 3 car parking wouldn’t come to market for a few months after this one passed.. simply due to a shortage of inventory.
This was a unique scenario which I do not watch playout often anymore. This segways nicely into my thoughts on Toronto parking spots…
In the condo market, its a little more simple to distinguish a parking spots value.
Analyzing sold data, you can get a clear picture of the premium someone is paying for a 02 layout with parking, compared to not..
Most cases in the core, its $45,000.
As I write this though… I have MLS open and its displaying all of the parking spots available in the City of Toronto.
Driving factors of a parking spots value in a condominium building is much like a unit itself. Value is driven by inventory, demand and location.
Interestingly enough, both units are located in The Annex/Yorkville!
To prevent myself from deviating from the primary topic of this blog.. Im not going to explain the shock in the price tags on both parking spots..
So here is my question…. if you need a parking spot for your car.. and you only have a $700,000 budget… are you better off to purchase an 800 sq ft unit without parking… or a 725 sq ft unit with parking???
Keep in mind 75 sq ft is essentially a bedroom of 10 x 7.5 feet.
The answer depends..
Lets look at how the numbers break down….
$700,000 purchase with a floor size of 800 sq ft = $875 per sq ft.
$700,000 purchase with a floor size of 725 sq ft = $965 per sq ft.
The carrying costs would be identical for each property if we are using the same property tax and purchase price…
Lets look at how the monthly maintenance fees break down.
Market average for maintenance fees are approximately 70 cents per square foot. With this bit of information, you would imagine that the 800 sq ft unit would be more expensive on your monthlies…
800 sq ft x 70 cents per sq ft = $560 monthly
725 sq ft x 70 cents per sq ft = $507.50 monthly
It would look like there is a savings $ incentive according to your monthly maintenance fees to go with the 725 sq ft unit.
Most people dont know that it actually costs about $75.00 to maintain your parking spot, per month. This fee is lumped into your monthly maintenance fee payment and is broken down in detail in your units status certificate document.
So now your 725 sq ft units maintenance fee jumps from $507.50 to $582.50 which is actually $22.50 more than the 800 sq ft units monthlies. Based on the price per sq ft of the above noted examples… this building is located downtown in a relatively good building/neighbourhood which is accessible to public transit.
So now lets look at what it would cost to buy the 800 sq ft unit and then rent a parking spot… thats if you actually need it as Im watching more and more downtowners ditch the car everyday.
The 800 sq ft units monthly maintenance fee is $560.
Downtown parking space rentals average $175.
Bringing your combined monthly expenses to $735.
Compared to the unit with parking.. thats a surplus of an additional $152.50.
So for an extra $152.50 per month… you are getting and extra 75 sq ft of interior living space.
Now lets look at the flip side… you buy your 725 sq ft unit with parking for $700,000.
Parking is valued at $45,000.
$45,000 on a mortgage with 20% down equates to appx. $250 monthly with the current interest rates..
So you are effectively paying the $250 monthly on your mortagage, plus the $75 monthly which it costs to maintain your parking spot.. If you one day do not need parking and would like to rent out your parking spot for the market average of $175..
Costs for the parking spot are $250 mortgage + 75 maintenance fee then it costs you $325 to own the parking spot.. and you can only rent the spot out for $175!
Thats a loss of $150 monthly for simply owning your parking spot..
I get the question often… should I buy parking with my condo to add value?
If you’re buying a condo in Markham… then yes. Downtown… unless the units over 1000 sq ft (where these numbers become less relevant) then I dont quite see the attraction anymore.
With prices increasing.. the consumer is becoming more creative in the way they purchase Toronto real estate. Its my job to craft creative solutions to achieve more, with less.. this is one which has worked very well for my clients as recent and I implore you to contemplate