Two Parking Spots in San Francisco or One 3-Bedroom Home in Chicago?

CNBC just reported on the sale of a single parking spot for $82,000 in San Francisco.  For the cost of two parking spots in San Francisco, you could buy one turnkey single family, 3-bedroom home in Chicago located at 406 E 87th Place for $159,266 being sold by EquityBuild, a real estate investment firm.  

You do the math.

Actually, here is the math that will demonstrate how taking a passive approach to long term investing in Chicago is a superior way to profit in the real estate market.  In the CNBC story about the sale of the parking spot, it was stated that, "While it may seem like a lot of money, real estate agents said parking could be a good investment in densely packed San Francisco, where vehicle spaces go for a premium.  They can add as much as $100,000 to the purchase price of a property or be rented out at rates of $400 to $450 a month-the going rate in South Beach."

The house at 406 E 87th Place in Chicago should rent for far more than the combined investment income from two of the parking spots, even though it would cost more than $4000 less.

Turnkey properties such as that are a very savvy investment for individuals.  Passive investing with the long term approach is the best way to profit in real estate, or any asset class for that matter.  It allows for the owner to prosper from the forces of time.

As an example, if the house at 406 E 87th Place were to rent for $1500 a month, based on the historic 5% rise in rental income in the United States, it would be going for more than $3000 a month by year 15.  If there were a 15-year mortgage on the property, about $40,000 a year would be received in free cash flow in perpetuity.

There will always be more upside to a single family home is a nice area like Chicago than a single parking spot.  The parking sport has a single use: rent to the owner of a motor vehicle.  The single family home can be rented out, the property flipped, or held as a long term investment.  

In addition, the tax code favors owning residential real estate, not parking spots.  Improvements to rental real estate are tax deductible.  It is tough to improve a parking spot, other than slapping on a fresh coat of paint over the lines.  The improvements to the single family house also make it more valuable.

Although not quantifiable, there is also the community spirit and giving back factors when investing in real estate.  The community certainly does not gain from the sale of a parking spot.  There is not greater good being accomplished that improves a community, a city, and a country.  But that does happen when vacant houses are fixed up and then rented out to become someone's home.

Turnkey properties in Chicago are very compelling investments.  Passive investors can profit from the worked of seasoned professionals such as Jerry Cohen, President and Founder of EquityBuild.  Since 1984, he has participated in more than 2000 real estate transactions as a principal.  That dedication has done far more to revitalize neighborhoods in Chicago and other areas than painting new yellow lines on a parking spot!