When you start investing in real estate, you may be worried about whether to own a condominium separately or a single apartment.

There are advantages and disadvantages to each type of investment property, but if you are thinking of investing in the first real estate,It is recommended to start with a second-hand apartment.

We will explain why it is better to start with a second-hand one-building apartment, examples of investment failures in one-building apartments that beginners tend to fall into, and what kind of property should be selected as the first property.

Difference between apartment investment and condominium investment

Difference between apartment investment and condominium investment

The difference between an apartment and a condominium is not really well defined.

The following classifications are made mainly from the structural aspect, but what I want to keep in mind when investing in real estate isDifferences in structure cause differences in tax savingsabout it.

Differences in structure between apartments and condominiums
  Apartment Apartment
Construction wooden
Light steel frame
Steel structure (S structure)
Reinforced concrete construction (RC construction)
Steel-framed reinforced concrete construction (SRC construction)
Rank 2-3 stories 3 stories or more

* It is not clearly decided that this structure is an apartment and this structure is an apartment.

Tax-saving effect that changes depending on the structure

Tax-saving effect that changes depending on the structure

You may have heard that real estate investment also saves taxes.

When purchasing a property, expenses are often higher than real estate income, and the negative salary income and real estate income are offset, resulting in tax savings.thisProfit and lossIs called.

Click here for a detailed explanation of tax savings.
https://column.richroad.co.jp/investment/200918-6/

Another big tax-saving effect is "Depreciation".

What is "depreciation"?

For items that have a large price and are used for many years, such as profitable properties, the idea is to divide the expenses into several years instead of recording them all at once.

This depreciation expense is an expense that does not actually make money, so if you use it well, you can generate a big tax saving effect while earning rent income.

The legal useful life is determined by the structure of the building.The shorter the statutory useful life, the greater the depreciation cost, which is the "expense that does not cost money".

Legal service life for each structure
Construction Legal useful life
wooden 22/
Light steel frame 27/
Heavy steel 34/
RC (reinforced concrete) 47/
SRC (steel reinforced concrete)

As shown in this table, RC (reinforced concrete), which is often used in condominium structures, has a long legal service life of 47 years, and wooden and lightweight steel frames, which are often used in apartment structures, have a short legal service life of 22 to 27 years.

People with high salary incomeThe apartment that can save the most taxI understand that.

Tax-saving effect of real estate investment

・ People with high salary income have a high tax-saving effect on real estate investment
・ Wooden and lightweight steel frames (apartments) can take a large amount of depreciation.

Difference in asset formation speed

Difference in asset formation speed

The greater the tax savings, the more cash you will have.

However, it is not recommended to buy a property in the red to save tax.It is true that real estate investment saves taxes, but to the lastThe purpose of real estate investment is asset formationDon't forget that.

No moneyUse the expense of depreciation to reduce salary income taxes while keeping money from rent income on handThis will lead to faster asset formation.

If you have a lot of cash on hand, you can use it for the repairs needed to run a profitable real estate or for the down payment for the second building.

One-building investment that can diversify vacancy risk

Which one should I buy, an apartment or a condominium, to reduce risk and promote asset formation?

In conclusion,A second-hand apartment is recommended.

If one room is vacant in a condominium, there is a risk of 1% vacancy rate.

In order to accelerate the speed of asset formation, it is advantageous to invest in a single building that can obtain land with high asset value and diversify vacancy risk.

However, the price of a single condominium is often around 1 to 3 million, and it is a fact that there is a great risk as a real estate investment in the first building.

Most of the used one-building apartments are priced up to around 1 million yen, which is attractive to those who want to reduce risk and build assets in the sense that they can obtain land with asset value while obtaining the tax-saving effect of depreciation. Real estate investment.

Unlike a one-building condominium, a one-building apartment is easy to get a loan in terms of price, which is a merit that cannot be overlooked.

Advantages and disadvantages of investing in a pre-owned one-building apartment

Advantages and disadvantages of investing in a pre-owned one-building apartment

I mentioned that second-hand single-family apartments are recommended for real estate investment, but there are also new constructions for apartment investment.

What is the difference in real estate investment between new and pre-owned apartments?

Comparing new apartment investment and pre-owned apartment investment
  Newly built apartment Second-hand apartment
Merit
  • ・ Easy to get long-term loans
  • ・ The latest repair costs are low
  • ・ Because it is new, it is easy for residents to get in
  • ・ Initially, the rent can be high
  • ・ High yield
  • ・ Easy to save tax by depreciation
  • ・ In many cases, there are already residents
  • ・ Rent is hard to fall
Demerit
  • ・ Low yield
  • ・ Low tax savings
  • ・ Need to move in newly
  • ・ Risk of rent reduction
  • ・ Loans are difficult depending on the attributes
  • ・ Repair costs are higher than new construction
  • ・ Rent will be lower than new construction

The merits and demerits of a newly built apartment and a second-hand apartment are just a mess.

First, let's take a look at the benefits of a newly built apartment.

Comparison with new apartment investment

Investing in a new apartment has the following benefits:

  • ・ Easy to get long-term loans
  • ・ The latest repair costs are low
  • ・ Because it is new, it is easy for residents to get in
  • ・ Initially, the rent can be high

On the other hand, the disadvantages are the risk of price decline due to the new construction premium, the risk that the rent will drop at the peak at the beginning, and the need to move in a new apartment unlike the existing apartments that already have tenants.

Another disadvantage is that new construction has a longer useful life, so the tax-saving effect of depreciation is low.

Investing in a new one-building apartment may be risky for real estate beginners.

A solid real estate investment in how to choose a property is a pre-owned one-building apartment investment

Second-hand one-building apartments have disadvantages such as difficulty in financing depending on the attributes such as the purchaser's annual income and funds on hand, and the cost of repairs is higher than that of new construction.

Conversely, if the loan can be cleared and the property has been well repaired so far, it is easy to make a solid real estate investment.

Benefits of investing in a pre-owned one-building apartment

  • ・ Higher yield than newly built apartments and studio apartments
  • ・ Fast asset formation
  • ・ Vacancy risk can be dispersed
  • ・ The asset value of the land remains
  • ・ It is easy to keep the yield at the time of purchase (new construction is easy to fall)
  • ・ Easy to save tax by depreciation

Second-hand single-family apartments often have a building value close to zero, and in some cases you can buy a property at almost land value.

As long as you get a loanGet land while paying off your mortgage for rentIs a big advantage of a second-hand one-building apartment.

Renovation work is also possible, so change the floor plan, extension, etc.You can increase the value of the property by yourselfThat is also one of the attractions for real estate investors.

Those who are suitable for investing in pre-owned one-building apartments

Those who are suitable for investing in pre-owned one-building apartments

This is the kind of person who is suitable for investing in a pre-owned one-building apartment.

  • ・ People who want to invest in real estate with reduced risk (dispersion of vacancy risk)
  • ・ People who want to get a profitable property at a relatively low price (you can buy a property at almost the land price)
  • ・ Persons with an annual income of 1,000 million yen or more (tax saving effect by depreciation)

In addition, if you have your own funds of 2,000 million yen or more, it will be easier to get a loan, so even those who have some financial assets are suitable for investing in a second-hand apartment.

Failure examples that beginners are likely to fall into

Failure examples that beginners are likely to fall into

Investing in a pre-owned one-building apartment is recommended for those who want to invest with less risk, but there are risks depending on the property you choose, so it is important to choose what kind of property.

Here are some typical mistakes that beginners in real estate investment often make, so be sure to avoid risks and choose a property.

1. Choose a property with a single yield

Second-hand single-family apartments tend to have high yields, but it is dangerous to choose a property based on yield alone.

Properties in rural areas and suburbs with low land prices have high yields because the property prices are low.

However, it is necessary to carefully consider "Does the vacancy really fill up with that yield?" And "Does the new resident move in at that rent?"

No matter how high the yield is, it is meaningless if the expected yield when the room is full is "painted rice cake".

In the Tokyo metropolitan area, including the 23 wards of Tokyo, yields are relatively low due to high land prices.

Yields may not seem attractive at first glance, but they are also easy to fill vacant rooms and secure solid rent income. It is important to select a property from the perspective of "does the property actually lead to asset formation?"

2. I buy a property that costs repair costs

If you buy a property that requires a lot of repair costs, it will be difficult for you to have cash on hand.

For example, if you buy a property that has a problem such as a leak, the repair cost will increase and the profit will be squeezed.

It is difficult to check the repair status by yourself, so it is recommended to check with the sales staff of the company that introduces the property.Let's actually visit the property you are interested in with your own eyes.

No matter what kind of property you buy, repair costs are an integral part of real estate investment.

In addition to repairs, it is one of the real pleasures of real estate investment that the value of the property can be improved by renovation work.

Successful investors often invest in real estate while enjoying repairs.

3. I buy a property that the second building cannot buy

It is also one of the common mistakes to be unable to buy the second and subsequent properties.

If you buy a property in an area where rental demand is low, it will continue to be difficult to fill the vacancies.

If the vacancy rate is high and the deficit continues, the collateral evaluation when buying the next property will be low, and the first property will become a burden, making it difficult to obtain a loan for the second building.

If you buy a property that is easy to get cash out of, you will not get a down payment to buy the second building, and even if you decide to sell it, you may not be able to sell it at the desired price.

The first property to purchase is in the three prefectures of Tokyo (inside the Musashino Line) where rental demand is strong, and if you can purchase the property at a price close to the land price, it will be easier to draw an exit strategy.

The results of the first building will be credited, and it will be easier to get the evaluation of banks and financial institutions, and you can also make a purchase plan for the second building while leaving cash at hand.Depending on the market environment, it may be easier to take the option of selling.

The first building is the most important.What kind of property should I choose?

The first building is the most important.What kind of property should I choose?

To start investing in real estate, first look for a property.

It is easier for beginners to find a property on a portal site specializing in real estate investment such as Rakumachi and Kenmie.Not all good properties are listed on the portal site.

In many cases, really good properties are privately introduced only to members of real estate agents.

If you can get a sense of the market price of the property on the portal site,It is a good way to get a good property by registering as a member on the official website of a real estate agent that seems to be reliable..

Click here for the points to choose a reliable supplier.Find a reliable company that you can work with for a long time.

Points to choose a reliable supplier

  • ・ Long business history (10 years or more)
  • ・ Many repeaters (you can buy the second building)
  • ・ Has transactions with many financial institutions (strong in lending)
  • ・ We have an office in a high-grade building (the occupancy examination is strict)
  • ・ We carry out everything from moving in to property management (one-stop service is available).

Why it's important to have multiple properties

The first thing I would like to convey to those who are thinking about real estate investment isIt is important to have multiple properties for real estate investmentThat is to say.

Managing real estate investment in only one building concentrates real estate investment risk only on that property.

"Don't put all the eggs in one basket"However, in stock investment, it is natural to diversify and invest in multiple companies.The idea is the same for real estate investment.

Can diversify investment risk

Just as you can diversify the risk of a single-building investment rather than a segmented investment where the risk of vacancy is concentrated in one room, you can diversify the risk related to real estate investment by having multiple properties themselves.

For example, if you have two properties with different ages, you can stagger the timing of large-scale repairs, and you will be able to cover the expenditure of one property with the profit of the other property.

Efficient real estate management

It doesn't take twice as much time because I have one and two profitable properties.

By utilizing the knowledge and experience cultivated in the properties you already own and the relationships with external contractors, you can manage the real estate efficiently from the second building onward.

Easy to draw an exit strategy

When considering the final exit strategy, if you own only one property, you have only two choices, "sell" or "not sell", but if you have multiple properties, you only have one building while looking at the income and expenditure situation and the market environment. It makes it easier to take multiple options, such as selling.

Benefits of seller property

In order to have multiple properties, what kind of property you have in the first building is important.

Why the first property is important

  • ・ Whether the second building can be held depends on the operation results of the first building.
  • ・ Affects the making of down payment for the second building

Therefore, it is recommended as the first investment property with an eye on the second building while suppressing risk."Seller property".

A seller's property is a property that the real estate agent owns and sells directly without an intermediary company.

There is no brokerage fee, so you can leave cash at hand

Since the property is purchased directly from the seller, there is no brokerage fee.

A property of 1 million yen usually costs a brokerage fee of 300 million yen or more, so it is the appeal of the seller's property that this initial cost is not incurred.

Although the price includes the seller's profit instead of the brokerage fee, the loan is provided by the property amount, so unlike the brokerage fee, it is possible to cover the cost with the loan.

Expenses such as brokerage fees basically need to be paid from the funds on hand. Whether or not you have more than 300 million yen in cash will make a big difference in terms of preparing for the purchase of the second building and future repairs.

It is easy to leave cash at handIs the merit of the seller's property.

2 year contract nonconformity liability

The biggest merit of the seller's property isThe seller's property has a two-year contract nonconformity liability (*)

Generally, in the case of mediation, if the seller is an individual, the liability for nonconformity with the contract is often about 3 months, and even if a defect is found in the property after that, there is no guarantee.

On the other hand, if a real estate company becomes the seller and sells a used property, it is obliged to guarantee it for 2 years.

If you select a property based only on the immediate yield, it is possible that the real estate that should become an "asset" becomes a "debt" when there is a hidden defect or trouble.In that case, it is not the second building.

Since the seller's property has a two-year warranty obligation, the real estate company on the seller's side will also introduce it to the customer after properly investigating the risks of the property.

Because the real estate company that is the seller is familiar with the property,There is a lot of information such as building repair status and rental status, and there are few uncertainties.This is also one of the merits of the seller's property.

Buying a seller's property has many benefits for real estate investment beginners who want to reduce risk and buy the first building.

* This is the liability for defect warranty before April 2020.

Rich Road for solid real estate investment

Rich Road for solid real estate investment

We, Rich Road, are a long-established real estate investment company with more than 2000 years of business history, which was founded on February 2, 4.

We have been focusing on introducing properties on the Internet since our founding, and thanks to you, we now have more than 18,000 members.

The properties we handle areA pre-owned one-building apartment specializing in one of the three prefectures with low vacancy rate (centered in the inner area of ​​the Musashino Line)It is characterized by beingMore than 80% of the properties purchased by customers are our seller's propertiesIt will be.

◆ Over 20 years of business experience

It has been 20 years since we have been dealing with customers honestly and sincerely.Since we have a proven track record, we have many relationships with financial institutions, and we will introduce loans tailored to our customers.

◆ Many used single-family apartments in the Tokyo metropolitan area

Specializing in one of the three prefectures with low vacancy rates (centered on the inner area of ​​the Musashino Line).We propose solid asset formation with reduced risk.

◆ Many private properties

We give priority to members to introduce private properties that are not available on the real estate investment portal site.

◆ More than 80% of the properties purchased by customers are our seller's properties

Since we are a seller, we have a lot of information on repairs and rental status, so we can keep cash on hand while suppressing investment risk.

◆ One-stop service that can be entrusted with management

You can also take care of property management and occupancy after purchase.We are introducing properties that are easy to move in with a low vacancy rate by doing one-stop management.

◆ Customer repeat rate 77%

It is also a feature that there are many repeat customers on Rich Road, which explains the advantages and disadvantages of the property firmly and does not "keep selling".There are many people who can increase the number of properties such as the second and third buildings.

Asset formation with reduced risk

Real estate investment is not possible without tenants.Location is very important to reduce the risk as much as possible.

By avoiding the mistakes that beginners tend to make when investing in a pre-owned one-building apartment, it is possible to build assets while reducing risk.It is also ideal for tax-saving measures.

Many private properties that are not listed on the portal site are also introduced on the official website and e-mail newsletter for members.

For solid real estate investment, leave it to Rich Road.

Register as a free member and view private properties