It goes without saying that the most terrifying aspect of real estate investment is the risk of vacancies.If there are no tenants, it will be difficult to repay the loan, and the property you have obtained may become a burden.However, even if we are able to manage with full occupancy, there are cases where the earnings are not as expected.I was able to choose a property with a high occupancy rate, but why is my income going down?This time, I will tell you the points of real estate investment success that cannot be understood only by the occupancy rate.
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[Real estate investment] Yield depends on expenditure
There are two types of yield in real estate investment: nominal yield and real yield.
- Gross rate of return = (annual rental income / property price) x 100
- Real Yield = {(Annual Rent Income - Annual Expenditure) / Property Price} x 100
Expenditures (expenses, loan repayment principal, etc.) are difficult to calculate, so advertisements are stated in terms of nominal yield.However, in order to actually operate, you have to think about the real yield.If the property price is low and the rent is high, the yield will increase. not.Even if the property price is low and the rent is high, if the maintenance cost increases, the yield will decrease.
Related article:[Yield of real estate investment] What is the standard?Thorough explanation of the calculation method!
[Real estate investment] If there is a lot of spending, the balance will deteriorate even if the rooms are fully booked
There is nothing better than filling the apartment.Maintaining a high occupancy rate is an absolute prerequisite for successful real estate investment.So what are the factors behind the declining earnings?Let's look at it from a spending perspective.
advertising costs
Tenants will not enter without doing anything.If there is a vacant room, you have to appeal the existence of the property.Currently, tenants often use the Internet to search for rental properties, so it is necessary to conduct advertising activities such as posting properties on real estate portal sites such as SUMMO and HOMES.This is done by asking a real estate company, but as a market price, one month's rent is often charged for one month's advertisement.Also, if the conditions are bad and it is difficult to decide, or in a fiercely competitive area where there is a lot of competition, the price will be even higher. If there is a vacancy for a month, the rent income for the month will decrease, and there will be an advertisement expense for the month.
advertising costs
Tenants will not enter without doing anything.If there is a vacant room, you have to appeal the existence of the property.Currently, tenants often use the Internet to search for rental properties, so it is necessary to conduct advertising activities such as posting properties on real estate portal sites such as SUMMO and HOMES.This is done by asking a real estate company, but as a market price, one month's rent is often charged for one month's advertisement.Also, if the conditions are bad and it is difficult to decide, or in a fiercely competitive area where there is a lot of competition, the price will be even higher. If there is a vacancy for a month, the rent income for the month will decrease, and there will be an advertisement expense for the month.
Restoration cost
In the case of a studio, the cost of restoring the property to its original state is about 10 to 20 yen.The definition of the obligation to restore the original state is "Among the decrease in building value caused by the lessor's (tenant's) residence and use, the lessee's intentional or negligence, violation of the duty of care of a prudent manager, and other uses that exceed normal use. It is said that it will restore the wear and tear caused by
Reupholstery of tatami mats, waxing of flooring, reupholstery of screen doors, discoloration of cloth, dents on furniture and refrigerators, electric burns, etc. cannot be claimed.Residents are responsible for things such as stains on drinks, oil stains on the kitchen and ventilation fans, cigarette smells, nail holes, etc.It is difficult to draw a line of burden, and depending on the case, it can be covered by the security deposit, but the portion beyond that may be an expense.
Real estate investment loan repayment cost
In many cases, you start with a real estate investment loan from a financial institution, and in that case, the principal and interest will be charged on your monthly expenses.The repayment amount varies depending on the interest rate difference.
Increase resident satisfaction and reduce spending
It is also important to pay attention to the satisfaction of the tenants when making a purchase.In order to prevent evictions as much as possible, the property is equipped with popular facilities such as an intercom with a monitor and a bathroom with a TV. It is important to choose.Also, if there is no management system that can quickly solve tenant troubles, even if you collect them, they will move out immediately.And if the satisfaction of the tenants improves and the occupancy rate rises, it is easy to be evaluated by financial institutions and there is a possibility that it will be possible to refinance to a loan with a low interest rate.
In this way, it was found that even if the occupancy rate is high, the income and expenditure will deteriorate if the expenditure is large.For that reason, it is important to reduce unnecessary expenses, and by increasing the satisfaction of tenants, it is possible to prevent them from moving out.Research the situation in the surrounding area carefully and manage it well while making a precise balance calculation to see how much equipment improvement is necessary for your apartment.
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.
