[Real estate investment] Explain the points of sale!time to fail

Real estate investment is popular because you can get regular and stable income, but not only rental management but also sale is one of the investment strategies.
The value of properties declines year by year due to aging and declining occupancy rates.As an investor, you should consider getting a profit on sale (capital gain) when the sale price exceeds the sum of the purchase price and the profit during the period.And you can also make a strategy such as buying a new property with the profit from the sale.What is the best timing for exiting real estate investment and selling an entire apartment?

Things to consider before selling a real estate investment apartment

・What is the operating rate?
Buyers also avoid properties with high vacancy rates as long as they are for investment purposes.Ideally, it should be full, but as long as the occupancy rate is high, that's fine.

・Are there any defects?
Since there are many cases where trouble occurs after selling, let's not hide it or repair it if possible.Whether there are any visible leaks, whether there are structural durability problems, whether there are any problems with the foundations, columns, beams, walls, etc., whether the exterior walls are damaged, or whether the elevators are inspected as required by law. There are many events that fall under liability for non-conformity.Of course, even if you are not thinking of selling, you should regularly check the status of the property.It is the owner who will be held responsible if the veranda collapses or an elevator accident occurs if you leave it unattended just because it costs money.

・Do you want to buy the apartment yourself?
By the time you start thinking about selling, you should be a seasoned veteran with some experience.If you see the property from your own eyes and think that "this price is not worth it", it can be said that the property is not attractive to other people.When you think that the next buyer is also the same real estate investor, you need to appeal that ``the property has a high possibility of earning profits in the future based on past performance'' so that they will buy it.

What is capital gain in real estate investment?

Capital gains are profits that exceed the purchase price at the time of sale due to an increase in the value of the assets held.In real estate investment, there are few sharp declines in value, so you will need to pay attention to changes in land prices and property conditions.Especially in terms of the condition of the property, it is possible to maintain the condition at the time of purchase by properly managing and operating the property, and by increasing the occupancy rate, it is possible to prevent the value from declining even a little.
For example, it's a simple calculation, but let's say you bought a second-hand apartment for 8000 million yen and earned an income by the time you sold it after deducting expenses.This difference is 3000 million yen, so if you can sell it for 4000 million yen, you can get a profit of 1000 million yen.
On the other hand, earning stable income from holding assets is called investment profit (income gain).In other words, real estate investment can be said to be an investment that can obtain both investment profit and sale profit.

Flow up to sale of real estate investment

1.price appraisal
First, find out the value of your property.It is common to ask a real estate company that specializes in investment properties.If you are satisfied, we will conclude an intermediary contract with the real estate company.

2.Brokerage contract
There are three types of contracts: a general brokerage contract that allows you to request brokerage from multiple real estate companies, an exclusive brokerage contract that asks only one company, and an exclusive brokerage contract that has a higher contract than a full-time brokerage contract.

3.sales activity
A real estate company conducts promotional activities.At first glance, it seems that you can recruit widely if it is a general mediation contract.Since there is a risk of being decided by other companies, there is a high possibility that you will not be able to take the initiative in sales activities. It can be said that the possibility is high.

4. Explanation of important matters
You will receive an explanation of important matters stipulated by the Building Lots and Buildings Transaction Business Act.It is important to receive explanations such as defect liability, city planning restrictions, private road burden, information on nearby properties to be built, loan special agreements, etc., as a final confirmation of purchase intent.

Five.Conclusion of sales contract
Exchange a sales contract.Based on the register, confirm whether there are any errors in the indication of the property to be sold in the contract, confirm the amount of the purchase price, deposit, etc. and the payment date of the buyer ), actual measurement of the land and settlement of the land price,
Confirm the timing of ownership transfer and handover, take over incidental facilities, etc., confirm whether the property to be sold can be handed over with complete ownership, settle taxes and public dues such as property tax and city planning tax (between the seller and the buyer) is the main contract content.

6.procedure, transfer
Ownership transfer and handover are carried out in exchange for the payment of the price, and at that time the documents necessary for the registration of the ownership transfer are handed over to the buyer.

7.tax return
The final tax return is for business activity days from January 1st to December 1st of the year, and the expenses, profits, depreciation, etc. must be submitted to the tax office by March 12st of the following year.

[Real estate investment] About depreciation to keep in mind when selling

In the case of real estate investment, the property purchase price cannot be recorded as a lump sum expense, and once purchased, it is held for a long time, so the asset value is said to last for a long time.When recording real estate purchase costs as expenses, depreciation expenses are calculated based on the service life determined according to the structure of the property, based on the idea that the value decreases as the building ages.Land is not included in depreciation as it does not deteriorate.Knowledge of depreciation is necessary not only for setting the price of the property, but also for tax saving when filing tax returns after the sale (if depreciation is not recorded as an expense, the income will increase and the tax amount will increase).

[Calculation formula for depreciation]　
Depreciation cost = building purchase price x 0.9 x depreciation rate x elapsed years
・Building price calculation formula
Building price = purchase price x (property tax assessed value of building / property tax assessed value of property)
・Depreciation rate
　Depreciation rate table for depreciable assets | National Tax Agency
https://www.nta.go.jp/law/joho-zeikaishaku/shotoku/shinkoku/070412/pdf/3.pdf
Please note that the depreciation rate differs depending on whether the acquisition date is after April 19, 4 or before March 1, 19.

Reference: Service life of buildings
Structure/Use: Wooden/synthetic resin construction/Details: For stores/residential use/Durability: 22 years
Structure/Use: Timber frame mortar construction/Details: For shops/residential use/Durable life: 20 years
Structure/Use: Steel-framed reinforced concrete construction, reinforced concrete construction/Details: For housing/Durable life: 47 years
Structure/Use: Brick, stone, block/Details: For shops, houses, restaurants/Service life: 38 years
Structure/Application: Metal Construction/Details: For Stores and Residential Use (Over 4 mm)/Durable Life: 34 Years
Structure/Use: Metal construction/Details: For shops and houses (those exceeding 3 mm and 4 mm or less)/Durable life: 27 years
Structure/Application: Metal/Details: For shops and houses (3 mm or less)/Service life: 19 years

Depreciation is of course beneficial to the buyer.After the statutory useful life has passed, the seller can no longer depreciate the asset, but when the asset is sold, the buyer can depreciate it by multiplying the legal useful life by 20%.In the case of wooden structures, the legal useful life is 22 years, so the depreciation will be 4 years, so there is a tax saving effect for the buyer, and it is attractive even if the building is old.In addition, if it is less than the statutory useful life, the useful life will be (useful life - elapsed years) + elapsed years x 20%, and in any case there is a tax saving effect for the buyer.

When is the right time to sell a real estate investment apartment?

The right time is when you know that the sale price is likely to exceed the purchase price and the profit after deducting expenses.
What is the best timing?Below are the points.
・It is best when the rooms are full.
・When the land price rises for some reason (Let's check the official land price and standard land price regularly)
・When the application period for depreciation has passed (because it can no longer be recorded as a necessary expense, the tax saving effect will diminish)

What are the costs involved in selling an investment property?

Profit is the amount after deducting expenses from the sale price, but what are expenses?
・Brokerage fee
The following is the upper limit of the commission to the real estate company.The real estate company makes a contract within this range.
If the property price is 200 million yen or less, the maximum fee is 5% of the transaction amount.
If the property price is 201 yen or more and 400 yen or less, the maximum fee is 4% or less of the transaction amount.
If the property price is 401 million yen or less, the maximum fee is 4% of the transaction amount.
*If it exceeds 400 million yen, it will be uniformly "property amount x 3% + 6 yen + consumption tax"

・Judicial scrivener fee
The cost of requesting a judicial scrivener for registration procedures includes registration and license tax, pre-investigation costs, and the cost of obtaining a copy after the fact, in addition to the judicial scrivener's fees.In many cases, the market price is around 100,000 yen to 150,000 yen.

・Surveying cost
In many cases, this work is required because the buyer requires a boundary confirmation document, and it is called a land boundary confirmation survey.Specifically, it will be the cost of surveying the boundary between the land to be sold and the other land facing it, confirming it, and making a survey map. The market price is around 40 yen, but if it faces municipal or national land, it may go up to 70 yen due to the need for public and private participation.
In addition, this work is not necessary in the case of public transaction (listed in the land registry).

・Revenue stamp tax
A tax liability arises when you create a taxable document.Therefore, revenue stamps will be charged for the preparation of the sales contract.The revenue stamp fee varies according to the sales contract fee. *If two or more people jointly create one tax document, they will be liable for tax payment for the jointly created document.
500 yen for more than 1,000 million yen and 10,000 million yen or less *5,000 yen for mitigation measures
1,000 yen for more than 5,000 million yen and 15,000 million yen or less *10,000 yen for mitigation measures
5,000 yen for more than 45,000 million yen and 30,000 million yen or less *XNUMX yen for mitigation measures
80,000 yen for more than 60,000 million yen and XNUMX million yen or less *XNUMX yen for mitigation measures
*The stamp tax created by March 32, 3 has been reduced due to mitigation measures.

・Seal certificate issuance fee
The fee varies depending on the municipality, and in the case of Minato-ku, Tokyo, the fee per copy is 1 yen.

・Cancellation of mortgage
Registration license tax, judicial scrivener fee + documents of financial institution are required to register cancellation of mortgage.If there is a mortgage as security for loan payment, even if you register the transfer, it may be auctioned, so let's cancel the registration.

・Tax-related
Real estate transfer income tax, inhabitant tax
If you make a profit from the sale, you need to report the capital gains and the capital gains are taxed.If the difference between the selling price and the cost to date is positive, it is considered profit and recorded as income.Transfer income is taxed on "income tax" and "inhabitant tax", and the tax rate changes depending on the holding period.
a formula:
Transfer income = sale price - (purchase price + purchase cost + sale cost)
Ownership period tax rate:
5% income tax, 15% inhabitant tax if the holding period is 5 years or more
5% income tax, 30% inhabitant tax if ownership period is 9 years or less
You can do it yourself, but there are a lot of required documents, so if you ask a tax accountant, it will cost about 10 to several hundred thousand yen, depending on the amount of transfer income.

[Real estate investment] There are deductions and exceptions at the time of sale

If you make a profit on the sale, you will be taxed, but if you make a loss, it will be deducted.In addition, when you replace real estate, you can use the replacement special exemption for specific business assets to reduce the burden, so you can postpone the tax on capital gains up to 80%.Using this, you can take strategies such as selling properties that have finished depreciating and switching to new properties that can use depreciation.
Related article: Tax saving is one of the attractions of real estate investment.Let's learn about taxes that can be saved.docx

Summary

In this way, it is necessary to know whether it is time to sell now, know various procedures, and have a technique to avoid losing as much as possible with knowledge of the tax that will be applied.It is quite difficult for the first time, so the key to success is to get help from an expert.

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