The most scary vacancy risk in real estate investment.What are the measures and characteristics of properties that tend to be vacant?

Naturally, real estate investment cannot earn income unless there are tenants in the property, and it will not be possible to repay the real estate loan.Therefore, vacancies are the most scary thing for investors.Even if you can endure a little, the more vacant rooms you have, the greater the risk.Then, what kind of risk countermeasures can be considered to suppress the increase in vacancies, which is an important problem in real estate investment?We will also explain the characteristics of properties that are likely to have vacancies.

Real estate investment risk countermeasures start from the initial property selection

When choosing a property, it will be a big risk countermeasure if you suppress the points to be careful.The first is the surrounding environment of the property.

Important factors for increasing the number of tenants are the distance from the station, the presence of commercial facilities, and the presence of educational facilities such as universities.In order to know the surrounding environment, it is necessary to investigate and understand how the development of the area is done by yourself.Even if there is nothing that stands out now, it is expected that many people will gather in the future if they can get information that a new station or commercial facility will be built soon.Therefore, it is an effective strategy to purchase properties in areas where development is progressing in the future from an early stage.

On the other hand, it is also possible that the environment is gradually deteriorating.It is very common to hear stories of people having a hard time attracting tenants if they buy a property in a rural area just because it is cheap and has a good yield.Therefore, when starting real estate investment, it is currently considered best to purchase in the Tokyo metropolitan area where the population is increasing year by year.Ministry of Land, Infrastructure, Transport and Tourism announced “"Long-term prospects for national land" Interim summary summary” estimates that the population will decline in most areas other than the Tokyo metropolitan area as a population change situation in 2005 when 100 is set to 2050. It is said that population density will decrease and regional uneven distribution will progress at the same time. If you are not an experienced veteran, buying real estate in a difficult rural area can be dangerous.

In addition, in the Tokyo metropolitan area, where there are many applicants, the risk of falling rents can be reduced.Looking at the trend of decline, it is said that in many cases, rents in the Tokyo metropolitan area have fallen by 20%, compared to areas where rents have fallen by as much as XNUMX% after XNUMX years of construction.

Related article:What are the location conditions that real estate investment companies check?Five points for stable operation

Characteristics of properties that are likely to become vacant in real estate investment

Properties with aging buildings

No matter how strong a building is, it will eventually become dilapidated.If the exterior walls, roofs, common areas, and other conspicuous parts of the building, as well as the sashes and fixtures, are showing signs of aging, residents will feel uneasy and will not be able to live comfortably.If you leave the dilapidated building as it is, it will not only be difficult to acquire new tenants, but it will also cause long-term tenants to move out.In addition, there are cases where you have to review the rent because the value as real estate will also decline.Regarding the maintenance of the building, there is a method of leaving everything to the management company, but if possible, it is important for the investor to visit the property regularly and check the condition of the building.

Related article:[Real estate investment] Risk of property aging.Regular checks and renovations are important to keep the value

Property with lots of troubles with neighbors

Neighbor troubles between residents cannot be overlooked as one of the reasons why residents are not stable.There are many sources of trouble, such as noise, unfair occupation of shared spaces, and garbage disposal, and there are many cases in which excellent residents are forced to move out.In most cases, troublemakers tend to stay in the property, so if a bad rumor is created about the property, it will be difficult to attract new tenants to the vacant rooms.Therefore, it is very important to avoid tenants who are likely to cause trouble in advance.It is also necessary to listen carefully to consultations about troubles with neighbors of residents, and to understand whether there are any problems with neighbors in rooms that tend to become vacant.

In fact, rural areas have a high vacancy risk

The increase in vacancies nationwide is due to the following housing circumstances.

• The population is shrinking due to an increase in the number of elderly people and a decrease in the number of children.
• The number of newly built properties has increased, and the balance between supply and demand has not been established.
• The number of vacancies is increasing due to the aging of landlords, etc.

Another major cause of vacancies is the fact that the number of newly built properties has increased despite the declining population, and old properties that no longer meet the needs of modern people are being left behind. If possible, avoid properties built before May 1981, 5 that comply with the old earthquake resistance standards, as loans will not be accepted.In addition, vacancies are not increasing in all properties, and vacancies are particularly high in properties where vacancy measures have not been taken, properties that are old and have not been renovated, and properties that have not been able to respond to the generational change of tenants. It tends to stand out, so you need to be especially careful when purchasing to see how well the previous owner handled it.

The number of vacancies varies from region to region.Comparing the metropolitan area and rural areas, vacancies rose to 11.4% in rural areas, while vacancy was 14.9% in the Kanto area.Furthermore, even in Tokyo, Koto Ward, Sumida Ward, and Nakano Ward seem to have low vacancy rates of less than 10%.In other words, the risk of vacancies in the Tokyo metropolitan area is lower than in rural areas, and there are areas in Tokyo where vacancies are difficult to come by.

In addition, Japan's population is expected to continue to decline in the future, and it is estimated that by 2040, the rate of population decline will reach 7% in 20% of the regions.Furthermore, the percentage of people aged 65 and over exceeds 36%, and in some regions even exceeds 30%.The rate of decrease is particularly high in Aomori, Kochi, Fukushima, and Iwate prefectures.Rural areas tend to have a large number of elderly people, and in many areas the figure rises to around 40%.In areas where the number of young people does not increase, population decline will accelerate in the future.

In recent years, don't you feel that the number of rental properties with nursing care services for the elderly has increased?

While the need for facilities for the elderly is increasing, there is a possibility that vacancies will increase in areas where the percentage of young people does not increase.

Elderly people feel that rural areas are inconvenient for shopping and hospitals, and urban areas with developed trains and buses are more comfortable to live in.

What are the countermeasures against vacancy risk in real estate investment?

Nowadays, it is said that vacancies are increasing steadily due to the declining population.Whether or not real estate investment can be successful with that in mind depends on how much the investor himself/herself can handle the risk.If you don't do anything, you may be overtaken by surrounding properties and your earnings may drop.It is not easy to continue to make profits over the long term unless you can differentiate yourself from other properties.So, what kind of space measures can be considered concretely?

Enhanced options for each room

In properties where women are expected to move in, it will be appreciated if you provide security and an indoor clothesline.If the passage is dark, it is also recommended to add lighting and introduce home security such as double locks on the entrance door.You don't have to add these from the beginning, and it's a good idea to appeal to them so that they can better meet your needs.You don't have to make all the rooms the same, but try to highlight the benefits of each room.

Specialize in aging properties

In the future, there are many areas where the elderly will increase, so it is effective as a unique strategy to renovate to real estate investment housing that is easier for the elderly to live in.Barrier-free measures such as installing handrails in the toilets and bathrooms and installing slopes next to the stairs are not large-scale renovations, so I think they are easy to handle.In addition, since the elderly spend a lot of time indoors, they are happy to improve the insulation performance.Moreover, these reforms may be expected to be subsidized by the government, so it is recommended to check in advance and take measures while the cost can be reduced.

Use the housing safety net system

Low-income earners, victims of disasters, the elderly, people with disabilities, and households raising children are considered to secure housing, and investors tend to avoid rent delinquency due to the high risk of rent delinquency, but the Ministry of Land, Infrastructure, Transport and Tourism promotesHousing safety net systemmay also be a good strategy in some cases.The housing safety net is a mechanism that allows you to receive various subsidies by registering housing that does not refuse to move in for those who are considering securing housing.There are two main types: subsidies for refurbishment of registered homes and reduction of burden on residents. This is a subsidy for the reduction of rent and rent debt guarantee fees.

Assistance for renovation of registered housing

• Refurbishment, floor plan change, seismic retrofitting, and barrier-free refurbishment work to change the use of the residence to a joint residence
• Construction that is recognized as the minimum necessary for residence
• Renovation work deemed necessary by the Housing Support Council (including fire prevention and fire extinguishing work (excluding some councils))

* The survey design plan (including inspection) related to the above construction is also subject to subsidy subsidy rate / subsidy limit

Government expense limit: 50 yen/unit *100 yen/unit for refurbishment, floor plan change, or earthquake resistance repair work for joint use.
*Eligible tenants, rent, and other requirements Ministry of Land, Infrastructure, Transport and Tourism About the new housing safety net system Refer to outline of subsidies for renovation expenses
https://www.mlit.go.jp/common/001267462.pdf

Reduced burden on residents

We will subsidize the costs related to the reduction of rent and rent liability guarantee fees for exclusive housing for those who need special consideration for securing housing.
It is a system that subsidizes rent for households with a monthly income of 15.8 yen (25% of income) or less.

Owners will receive 1/2 national + 1/2 local government support (maximum amount of government expenses: 2 yen/house/month), which may help alleviate their anxiety.
*Refer to Ministry of Land, Infrastructure, Transport and Tourism About the new housing safety net system Outline of subsidies for lowering rent and rent debt guarantee fees
https://www.mlit.go.jp/common/001267463.pdf

lower rent than market

If the rent is lower than the market price, the occupancy rate will naturally improve.However, if you lower the rent, it is more likely that there will be more tenants who do not have enough funds, and it may cause rent arrears, so consider it as a last resort.If the rent is lowered, the environment may worsen as the elderly, public supporters, and students who cannot expect to live for a long time will become the main people who will only receive pension income.Instead of simply thinking of lowering rent as a measure for real estate investment, it is better in the future to continue operating to acquire people who will live stably by enhancing capital investment while bearing the cost. is.

How to choose a management company to reduce vacancy risk in real estate investment

The choice of management company is also important for continuous operation.A management company that not only manages properties but also recruits tenants, but each company has different methods of attracting customers and sales skills.This is not something that can be understood on the Internet, so when you actually meet the employees, you can see with your own eyes whether they have a track record and ability, whether their responses are polite and sincere, and whether it is a company that you can trust with your own eyes. Confirmation required.If you leave it to a management company with high responsiveness, the investor's burden will be greatly reduced, so it is just as important as choosing a property.

Related article:How to choose a management company that is important for real estate investment?Points to identify a reliable contractor

Related article:When you want to change the management company that entrusts real estate investment, the flow of change procedures and points to note

Summary

• Risk countermeasures start from the first property selection! Thoroughly investigate the surrounding environment of the property
• The risk is particularly high for properties with frequent vacancies, where the building is aging and where there are many troubles with neighbors.
• Vacancy risk is high in rural areas due to population decline
• Measures against vacancy risk include strengthening options for each room, specializing in aging properties, using the housing safety net system, and lowering rents below market rates as a last resort.
• In order to reduce the risk of vacancies, the best way to choose a management company is to actually meet the employees

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