Most real estate investments require a loan.How much would you appreciate it if you could get a property with a mortgage loan that is more advantageous than a real estate investment loan and get the owner's own residence and rental income at the same time?In many cases, you can cover the loan payment for the property with the rental income from the rental space, so you can get your own home for free!Some realtors explain that.
But if it's that good, everything seems to be a rental housing, but it's actually not.This time, I will tell you about the advantages and disadvantages of rental housing that seems to be profitable and less risky, and the tips for real estate investment that you can convince without failure.
table of contents
- 1 What is rental combined housing?
- 2 Why is rental housing attracting attention?
- 3 The biggest benefits of rental housing, mortgages and tax savings
- 4 Disadvantages of rental housing that is not all good
- 5 Summary
What is rental combined housing?
Rental housing refers to a property where part of the house is a rental space, but in most cases, the condition is that the floor area of the home part is 50% or more.The reason for this is that many of the conditions for mortgage loans at banks are 50% or more of the floor area of the house.In the case of a whole apartment, it is necessary to devise ways to make the floor area of the home part more than 50%, such as making the first floor part of the house whole.
Why is rental housing attracting attention?
1. You can build a house with rental income
If you can make a plan that allows you to repay the loan with the rental income, you can get a home with a light burden.You don't have to pay your own rent, so it's a big attraction that it can also be a source of income after retirement.
2. There are tax relief measures
Income tax deductions, mortgage deductions, and blue return special deductions can be received by filing a final tax return.
If deducting expenses such as depreciation, property tax, interest, and management costs is less than the rent, it will be deducted from employment income, leading to a reduction in income tax.If you file a blue return, you can receive a blue return deduction, so you can receive a deduction of 65 yen for double-entry bookkeeping and 10 yen for simple bookkeeping.
It also helps reduce property taxes.For residential use, you can receive an exception for the small-scale residential land appraisal value, which is reduced to 200/1 up to 6 m200 per unit, and 1/3 for the portion exceeding 1 m6.By making it a rental housing, the number of units increases, and the area that is reduced to XNUMX/XNUMX can be expanded.
And if you think about inheriting to the next generation, you can't miss the tax savings of inheritance tax.Inheritance tax is reduced for rental housing rather than for residential use, so from the perspective of inheritance tax, it is more tax effective to build as a rental housing.
3.Elimination of future anxiety such as nursing care
Even if you are healthy and strong now, you may need to take care of your family in a few decades.In such a case, the burden on the child can be reduced by diverting the rental space that is operated as a rental housing to the child's home.You can turn it into a safe property for both parents and children.
4. Empty space can be used effectively, such as when the child is independent or the inherited parent's house is too large.
Even if a child becomes independent and has a surplus room, it is difficult to easily rent out the space to others, and the same is true when inheriting an oversized parent's house.By rebuilding into rental housing, there is an advantage that you can earn income at the same time while living in a familiar land for many years.
The biggest benefits of rental housing, mortgages and tax savings
First of all, there is a merit that many people pay attention to, low interest rate and long term mortgage can be used.Interest rates for real estate investment loans range from 2% to 5%, but in the case of housing loans, the interest rate is often around 1%. will be displayed).
You can also receive mortgage deductions according to the area ratio of your home.Home loan deduction is a system in which a portion of the tax paid is refunded by filing a tax return (in principle, one month from February 2 to March 16), and the repayment period is 3 years or more and a certain amount. If the conditions are met, 15% of the mortgage balance at the end of the year will be refunded from taxes paid as a maximum deduction.
*The upper limit of the loan balance is 4,000 million yen (5,000 million yen for certified long-term excellent housing and certified low-carbon housing), and a maximum of 1 yen (40 yen) can be deducted per year.
Then there is the tax saving aspect.I told you that you can receive income tax deductions, mortgage deductions, and blue return special deductions by filing a final tax return, which will lead to tax savings on property tax and inheritance tax.
Income tax deduction
Necessary expenses for rental space can be deducted from rental income for calculating real estate income.Specifically, fixed asset tax, city planning tax, depreciation, interest on loans, insurance premiums, consignment costs to management companies, management costs, repair costs, etc.
- Tax amount of property tax ⇒ Tax base x 1.4%
- Tax amount of city planning tax ⇒ tax base × 0.3%
- Depreciation expense ⇒ In the case of purchasing real estate, the amount obtained by dividing the cost incurred by the statutory useful life
- Interest on the loan ⇒ Note that only the interest on the cost of acquiring the building can be recorded as an expense, and the interest on the cost related to the land acquisition cannot be recorded as an expense.
- Insurance fee ⇒ Fire insurance, earthquake insurance, etc.
- Consignment fee to management company ⇒ Cleaning of common areas, maintenance and inspection of various facilities, etc.
- Repair costs ⇒ Room renovation costs, equipment replacement costs, etc.
These expenses can be deducted from employment income as necessary expenses, resulting in a reduction in income tax.
Mortgage deduction
Officially, it is called a housing loan special deduction, and it is a system that reduces taxes when you purchase your own residential property with a housing loan.As mentioned above, this system cannot be used for investment one-room apartments because most banks and financial institutions require that the floor area of the home be more than 50%.
※reference:National Tax Agency When acquiring a second-hand house (special deduction for housing loans, etc.)
The following documents are required to file a homestead exemption tax return.Inquire in advance with each municipality, place of work, financial institution such as the bank you borrowed from, and the real estate company.
- Final tax return, statement of calculation for special deductions such as housing loans (specific extension or renovation, etc.) ⇒ To the tax office
- Identity verification documents with My Number listed ⇒ Go to the municipal office
- Tax withholding slip ⇒ To work place
- Mortgage balance certificate ⇒ To the financial institution where you borrowed
- Certificate of registered matters of housing ⇒ Legal Affairs Bureau
- A copy of the housing construction contract or real estate sales contract (contract contract), (in the case of a pre-owned house that meets certain earthquake resistance standards) a copy of an earthquake resistance standard conformity certificate or housing performance evaluation, (certified long-term excellent housing / In the case of certified low-carbon housing) A copy of the certification notification, a copy of the residential building certificate, or a building certificate ⇒ to the real estate company
It is necessary to attach the above to the final tax return and submit it to the district director of the district tax office where the tax is to be paid (in principle, the place of residence).
You can apply for refund of housing loan deduction from January 1st of the following year after moving in.At first, it is difficult to collect a lot of documents, but once you have done it, you can apply for the deduction during the year-end tax adjustment the following year.
For salaried workers, from the second year onwards, at the time of the year-end adjustment, submit a "home loan balance certificate" and a "special deduction certificate for housing loans, etc. for year-end adjustment" to the employer. A final tax return is required from the second year onwards.
Blue tax return special deduction
Corporations and sole proprietors must file a final tax return and pay income tax every year.There are blue returns and white returns, but only those who choose the blue return and sole proprietors can receive the blue return special deduction.By using the blue return special deduction, you can receive an income deduction of 65 yen or 10 yen, which is a significant tax saving.
Income tax is levied according to the amount of taxable income, and is calculated using the following formula.
Taxable income = Income - Expenses - Income deduction
If you are able to receive a blue return special deduction, you can calculate by subtracting the income deduction amount of 65 yen or 10 yen from the amount of income.
Conditions for receiving a blue tax return (in the case of 65 yen)
・There is either real estate income or business income
Since it is necessary to be recognized as a business, it is a guideline if you have 10 or more rental apartments or condominiums, or 5 or more detached houses.
・Recording of transactions based on the principles of formal bookkeeping
There are "single-entry bookkeeping" and "double-entry bookkeeping" in bookkeeping, and single-entry bookkeeping is a method of recording receipts and payments by limiting transactions to one item called cash.Double-entry bookkeeping is a method of recording transactions in multiple accounts. Double-entry bookkeeping is required to receive the 1 yen deduction.
・Attach the balance sheet and profit and loss statement at the time of tax return
As necessary documents at the time of closing, attach a balance sheet that shows the financial situation of the company and a profit and loss statement that shows the profit and loss for one year of the accounting period at the time of final tax return.
The deadline for submitting final tax returns is March 3 each year.Please note that it will not be accepted after the deadline.
Conditions for receiving a blue tax return (in the case of 10 yen)
If the condition is not met at 65 yen, it will be 10 yen.If you are not confident, you may want to consider having an expert such as a tax accountant take a look at it.
inheritance tax
Due to the revision of the tax system, the basic exemption for inheritance tax has been reduced, and the rental portion is assessed at a lower value than the home portion (for the site of a rental combined housing, the rental portion is assessed approximately 2% lower than the residential portion). can lower the value of inherited property.
Basic deduction = 3,000 million yen + (600 million yen x number of legal heirs)
*Because the inheritance amount exceeds the “basic exemption amount”, you can reduce the inheritance tax by lowering the assessed value of the real estate.
In addition, if special provisions for the valuation of small-scale residential land, etc. can be applied to the total inheritance tax, the valuation can be significantly reduced.
About exceptions for the appraisal value of small-scale residential land, etc.
When the use classification of residential land, etc. is residential land for lending business, etc.
1. Specific family company business residential land, etc. ⇒ 400% reduction rate with a maximum area of 80 mXNUMX
2. Residential land, etc. that falls under residential land for lending business, etc. ⇒ Maximum area of 200 m50, reduction rate of XNUMX%
Building land, etc. used for residence of the decedent, etc.
3. Residential land, etc. that falls under the category of specific residential land, etc. ⇒ The maximum area is 330m80, and the reduction rate is XNUMX%.
*Calculation formula for applicable ceiling area
If there is no residential land for lending business ⇒ 1.+3.≦730㎡
If there is residential land for lending business, etc. ⇒ 1.×200÷400+3.×200÷330+2.≦200㎡
In the case of the building, the rental portion will be assessed 3% lower than the home portion, as the rental portion will be deducted from the “tenancy rate”. *Rental rights are subject to inheritance as assets, and the percentage of the rented house is the percentage of the building's leased rights.The rent ratio is set at 3% by the property evaluation basic notification announced by the National Tax Agency.
Disadvantages of rental housing that is not all good
The main disadvantages of rental housing are:
- Increased loan amount
- The ratio of vacancy risk is higher than that of whole apartments
- low profitability
- It becomes difficult to obtain financing for the purchase of the second and subsequent buildings.
- There is a possibility of getting involved in tenant trouble
Home loans can be borrowed up to about 8 times the annual income, but rental houses are often specially designed and may exceed 1 million yen in Tokyo.In the case of rental housing, the monthly repayment amount is higher than in a home, and if there is a vacancy, you have to cover it with your own salary. It can be a big risk.Considering that 50 million yen properties can withstand vacancies, an annual household income of 1 to 1 million yen is required, so it can be said that the hurdles to entry and risks are higher than those of ordinary single-building apartment management.In terms of profitability, more than 1000% of the residential area is used as a home, so the yield is about half, which is considered to be disadvantageous when selling.
Also, even if you think about trying to build a second building, from the perspective of a bank or other financial institution, in the case of a 2 million yen rental house, you will have loans for both a 1 million yen house and a 5000 million yen low-yield rental property. is considered to beTherefore, if you are evaluated as an investor, there is a high possibility that it will be difficult to pass the examination.
And if by any chance you hit a bad tenant and get into trouble, you may be directly affected if you live nearby.
In the case of a whole apartment, you can leave everything to the management company because it is far away, but if the tenants are right below you, there is a disadvantage that troubles will be familiar.
Summary
As mentioned above, there are both advantages and disadvantages to rental housing.I hope it goes well, but in order to avoid risk even a little, it is most important to make a detailed business plan at the beginning.Also, finding a reliable real estate company so that you can get advice at any time without worrying alone will also reduce risk.
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.
