“Should I buy a parking spot?”… ah, the dilemma that may not actually be much of a dilemma when it comes to investing in a pre-construction condo. This question gets the answer that nobody likes: “it depends.” A lot of context is required to answer this question because securing a parking spot in the first place is not the easiest task either. Allow me to explain…
The Scarcity Effect – Depending on where and which pre-construction condo project you go with, you may not even get the opportunity to buy a parking spot. This is especially true if you are buying closer to the subway line or in the downtown core.
In order to buy a parking spot anywhere in the downtown core, you must buy one of the largest units to be “eligible” to add parking to your unit. Yes, eligible is in quotation marks because if you invest in one of the smallest units available, frankly there will be no real option to buy a parking spot. You’ll be “wait-listed”, which means you are given the option to buy only if someone who bought a unit more expensive than you doesn’t want a parking spot AND if you are next in line on that wait list.
Furthermore, a lot of buildings don’t even have parking for you to buy. Car shares are becoming more and more popular in the downtown core because digging underground is super expensive. On one of the last projects that we sold, parking was only allocated to a little over 10% of the units in the building. This means that for every 10 units, there is only 1 parking spot available.
Rephrasing the Dilemma – So given this context, the question in the headline should really be re-phrased to read, “If I CAN buy a parking spot, should I?”
Personal Use Parking – Well first off, if it’s for personal use and you need it, the answer is yes. You should buy the parking spot if you can afford it. Buying a parking spot with your unit in the downtown core is somewhere in the range of $75K to $100K right now. Those are not typos; it’s super expensive to own a parking spot downtown! As comparatives, parking spots for buildings around Yonge & Eglinton is about $50K, while the remainder of the GTA averages approximately $40K for a parking spot.
Investment Purpose Parking – On the other hand, if your purchase is for investment purposes and you’re buying in the downtown core or in a subway-adjacent building, then I wouldn’t recommend adding on a parking spot to your investment. It’s simply crazy expensive. For you to make the parking spot cash flow, the parking spot rental income needs to be higher than the carrying cost (i.e., you would need $270 to $350 per month, as per the below breakdown analysis for a $75K parking spot vs $100K). That’s a lot of money for a parking spot! On a relative basis, you can buy a Tesla for approximately $75K!
Now when you factor in the maintenance fee for the parking spot, which is usually around $120 per month, that puts your carrying cost for the parking spot at $390 to $470 per month. There will definitely be no cash flow generated from that parking spot for sure.
All the Rage – That said, if you are buying a resale property, a parking spot with a smaller unit is all the rage right now with multiple offers (for all of the reasons above). If you need a parking spot with a 1-bedroom unit, then you are out of luck in new pre-construction buildings because builders are highly unlikely going to sell these types of units anymore. It’s like trying to buy a discontinued product!
905 Transit Considerations – Now, let’s take a look at the other situation. Should you buy a parking spot if you are investing in a condo in Mississauga, Markham, Richmond Hill, and/or Vaughan? The answer in my mind is absolutely, YES. Although the parking spot is still expensive in these areas (around $40K), you are likely going to need a car in the 905. A lot of people even ask to buy 2 parking spots now. The units in the 905 with parking included will most definitely be easier to rent out and will also be a better resale product (most people drive in the 905). At a carrying cost of $143 per month plus maintenance fee, it is definitely worth it (see breakdown analysis below).
The only exception to the above that I would perhaps make is if you buy near the Vaughan Metropolitan Centre (VMC)’s TTC Subway Station because this area will have access to Toronto via subway.
Transit City 4, 0 minute Subway Access – We are preparing for the launch of Transit City 4 right now that will be 0 minutes from the VMC subway station. You won’t need parking for the investment to profit. Prices are starting in the mid 300’s and you won’t be able to buy condos at this price anymore connected to the subway station. So if you are interested and you’re still reading this, call Zhen at 416-436-9436 to get all of your questions answered and to reserve your unit now!
The Wrap – Until our main form of public transit (TTC) reaches the areas that are farther out (could take another 20 years at this rate), expect subway access to be one of the most highly sought after amenities. So if you are buying in the cities that surround Toronto with no access to subway, then it is in your best interest to have a parking spot with your investment. I hope that has been helpful in shedding some light on the parking dilemma. Do reach out to our team if you need further advice pertaining to your particular investment.