Parking Lot ROI:
Financial Analysis Framework

Typical range 12–25% depending on location and market. Below 12% suggests oversupply. Above 25% indicates exceptional location or acquisition discount.

Standard 25% equity, 75% loan (75% LTV). Higher equity reduces leverage but also reduces return. Lower equity increases return but increases risk and debt service.

Demand risk (occupancy decline). Interest rate and operational expense risks are secondary. Autonomous vehicles present long-term demand uncertainty.

Parking rates historically inflate with CPI (2–3%/year). Occupancy can improve or decline with competition. Assume conservative 2–3% annual revenue growth.

10–15 years optimal. Shorter holds may not realize full appreciation. Longer holds expose to autonomous vehicle risk. Evaluate exit when return thesis is realized.

Because asset value equals net operating income divided by cap rate, the exit cap rate you assume at sale often swings the internal rate of return more than any other input. Assuming the lot sells at a lower cap rate than you bought it (cap-rate compression) flatters the IRR on paper but bets on market conditions you do not control. Model the exit at the same cap rate as entry, or slightly higher to be conservative, and treat any compression as upside — that is the sensitivity a lender or partner will test.