Vacancy is an important consideration when investing in real estate.At that time, many investors may feel that they would rather lower the rent than keep the room vacant.There is a risk that tenants will leave the property due to the deterioration of the property over time.In order to maintain the rent, capital investment costs money, but is there a way to prevent price cuts while keeping costs down as much as possible?
table of contents
- 1 The trend of falling rents in real estate investment
- 2 Once the rent is lowered, it is difficult to raise it.When considering selling, I want to avoid rent reductions as much as possible
- 3 Is there a property whose rent is less likely to fall?
- 4 Regular maintenance prevents deterioration and reduces rent decline.
- 5 Summary
The trend of falling rents in real estate investment
Even if you buy a new property, the rent will fall due to deterioration over time.Please keep in mind that you can't just stay that way forever.The range of decline is about 1% per year on average, and the rate of decline varies depending on the age of the building.The rate of decline is the highest from new construction to 10 years, and the reason is that it is easy to compete with other newly built properties. From 1 to 11, it can be said that the property is still relatively new, but after 20 years, the rate of decrease in rent decreases.After 11 years of construction, the rate of decline becomes even more gradual.Because it is often down to the minimum standard in the region, there is no need to lower it further.
Also, even if there are factors that seem to be good at first glance, you may have to consider rent reduction.If a large-scale commercial facility is built nearby, the area around it will develop, but at the cost of attracting tenants, the number of rental properties will also increase, resulting in competition and the price per property may drop.Negative factors include properties more than 1 minutes from the station, areas with poor access to terminal stations, and areas without supermarkets and other commercial facilities necessary for daily life nearby.Especially in rural areas, the price competition is remarkable, so if you are not particularly familiar with the area, you should avoid it.
Related article:What are the location conditions that real estate investment companies check?Five points for stable operation
Once the rent is lowered, it is difficult to raise it.When considering selling, I want to avoid rent reductions as much as possible
If you own real estate in more rural areas than in central Tokyo, you will need to be especially careful.In the city center, there are still 1K rents with a market price of close to 10 yen, but in rural areas, there are properties that cost less than 3 yen.Due to the imbalance between demand and supply, there are many areas that fall into a battle to cut rents.Another thing to keep in mind is that the rate of decrease in rent is reflected in the sale price.For example, if the original rent was 2 yen, a 2 yen discount would result in a 10% decrease.The ratio is easily reflected when selling, so the rent reduction can also lower the value of the property itself.
It is difficult to raise the rent once it is lowered, and depending on the region, there are areas where there is no demand even if the rent is lowered because there are no people in the first place.When choosing a property, be sure to consider the price reduction risk.So how do you choose a property that is hard to fall in the first place?
Related article:The most scary vacancy risk in real estate investment.What are the measures and characteristics of properties that tend to be vacant?
Is there a property whose rent is less likely to fall?
Properties where the rent does not easily fall are convenient, easily differentiated from competing properties, and well managed.
People who are thinking about commuting to work or school gather here if it is a 10-minute walk from the terminal station and the transportation is good.In recent years, not only young people are looking for properties close to train stations, but also elderly people are increasing who want to live in the city center where there are conveniences such as hospitals and shopping.Even among the elderly, the number of people living alone is increasing, so it seems that it is easier to live if there are services that are essential for living nearby.
Not only is it in a convenient area, but if the floor plan is a popular type, it will be less likely to compete with other properties.Fewer properties meet specific needs than simple, easy-to-use properties that fit everyone.If you stick to the floor plan for single women and the structure for the elderly, it will be easier for you to appeal to a specific person, and the renter will also feel the benefits.
The floor plan that makes it easy for tenants to decide will also change depending on the degree of equipment availability.The toilet and bath are installed separately, the flooring is not tatami mats, and the high storage capacity such as closets and walk-in closets. Properties with automatic lockers and parcel delivery lockers are preferred by those living alone.
Real estate prices have been polarizing in recent years.In the past, land prices were rising all at once due to the rising economy, but now there is a situation where some properties go up and some properties go down.Urban areas are more likely to rise, while rural areas are more likely to fall.Furthermore, even within the same region, the rate of decline varies due to differences in profitability.For example, a building with no tenants will receive a low evaluation, and a building with a high occupancy rate will receive a high evaluation.You can see how properties are trending by looking at the information released by J-REITs (real estate investment trusts). Looking at the rising and falling rankings of real estate held by J-REITs makes it easier to understand what kind of properties are seeing changes.
In order to get a property whose asset value will rise in the future, it is necessary to know that the value of property is different in urban areas and rural areas.Since the amount of initial investment tends to be high in urban areas, there are many people who start in rural areas where the yield seems to be good.Even in that case, it is necessary to investigate in advance how the real estate value will change in the future, and to maintain the asset with appropriate management even after acquiring it.
Regular maintenance prevents deterioration and reduces rent decline.
Aging of buildings is unavoidable, but it is possible to quickly discover damage to buildings through regular inspections and management.
If you overlook a small repair, you may end up needing a large-scale repair by the time you realize that there are many hidden repairs.It is clear that such a property will be less attractive than when it was purchased, and it will be difficult to recruit tenants.
If you don't lower the rent, you can prevent the rent from dropping by performing regular maintenance before the tenants can't keep up and making small repairs before the deterioration progresses.As for the repair of the building, you should think about it when several years have passed since the new building, so let's set aside the repair costs by then.Large-scale repairs will be required at some point, so we recommend that you prepare at least for the cost of large-scale repairs.In particular, if the water supply and drainage equipment breaks down, there is a risk that you will not be able to move in, so if it is outdated, you will need to prepare even just for the cost.If you choose a cheap property such as a second-hand property when purchasing a property, the deterioration will come sooner and the scale of repair will increase.Don't get caught up in the short-term cheapness, look at the long term and make a plan for repairs.
Properties where the rent is unlikely to fall are "properties that tenants feel attractive to want to live in".
Related article:[Real estate investment] Risk of property aging.Regular checks and renovations are important to keep the value
Summary
- Even if you buy a newly built property, the rent will eventually fall due to deterioration over time.
- From new construction to 10 years, the rate of decrease is the highest, and after 1 years, the rate of decrease in rent decreases.
- It is difficult to raise the rent once it is lowered, so when considering selling, I would like to avoid lowering the rent as much as possible.
- Properties where the rent does not easily fall are convenient, easily differentiated from competing properties, and well managed.
- Regular maintenance prevents deterioration and prevents rent from falling.
- Properties where the rent is unlikely to fall are properties that tenants want to live in.
At Rich Road Co., Ltd., we will consistently support all aspects of investment real estate, from complete beginners to experienced people, from a wide range of real estate selection, loan consultations, post-purchase management, and renovations.
