Parking spaces as investments

An unidentified buyer yesterday paid $300,000 for a private parking space in the Back Bay, making it the most expensive parking space in Boston, according to Listing Information Network, which tracks the city’s real estate market... The price is more than what many people pay for a house, but Sordillo said prime parking spaces near the Public Garden are in short supply.

To those of us who live in Suburbia or rural America, the story above seems incredible, especially for an outdoor, uncovered parking space. But if you view the transaction as an investment rather than an "expense," the price becomes more understandable.

The "cost" of the space depends on what return the investor will have in the future. If he/she is able to resell the space next year for what he/she paid for it (300K), then the only money lost is the "opportunity cost" of tying up the funds for that period of time. Short-term interest rates are near historic lows now; if current returns of money market funds are 1.0% for a year, then the "cost" will have been $3000 for a year's worth of parking.

Of course, when the space is resold, there could be a gain to make the net cost lower or even profitable - or there could be a loss. It's a complex investment decision.

Via Neatorama.