There are many people who acquire the first building, and once they have grasped the tricks of real estate investment, they increase the number of buildings to the second and third buildings.
Ideally, you should be able to gradually gain confidence in real estate investment by acquiring the knowledge and experience necessary for real estate investment from the first building, such as how to use the management company, how to deal with problems, and how to calculate cash flow.
However, the condition for buying the second building is that the cash flow (profit) of the first building is positive. It is no exaggeration to say that the process of expanding to the second and third buildings begins with the selection of the first building.
This time, I will tell you the timing of purchasing the second building, which is a strategy for expanding real estate investment.
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Advantages and precautions of purchasing a second building in real estate investment
Real estate investment is always accompanied by troubles such as vacancies, equipment repairs, and disasters.
If there is only one building, even if it is temporary, if there are many vacancies, there is a risk that you will have to pay the monthly loan repayment from your salary, but if you have a second building, you can compensate for the loss of the first building. You can spread the risk.
One thing to note is that due to the nature of real estate, no two properties are exactly the same, so you may not always get the same success as the first one.The combination of multiple factors, such as whether the location is easy to find tenants, whether the property is attractive, whether the rent is appropriate, etc., can make a big difference in the results even if the properties are similar.
Also, if you look at it as a risk hedge, you will need to choose something that is very different from the first building.You should choose a property that is built in a different age and area so that it will not be affected even if something happens to the first building.If you have been dealing with a lot by yourself until now, the same trouble will be doubled or tripled, so you may not be able to handle it eventually.It is also a means to consider using a management company before that happens.
Timing to purchase a second building in real estate investment
The most important point for purchasing with a loan is whether or not a bank or other financial institution can create a situation in which it will provide financing.
It is particularly important whether the property has been operating for 2 to 3 years and is fully occupied, whether it has knowledge of rental management and is capable of being a manager, and whether it has a down payment.You can make a loan without a down payment, but if the first building is profitable enough to make a down payment, the image of the financial institution will improve.
Also, having positive cash flow is essential.Having a surplus after deducting expenses, loan repayments, and interest from the rent income is proof that you have the ability as a business owner (investor).
In order to make a profit, it is necessary to reduce the amount that is withdrawn as much as possible, so one of the strategies is to keep the borrowing period as long as possible and reduce the monthly repayment amount from the first building.
Choose the first building in anticipation of purchasing the second building
I told you that the first step is to make the first building profitable and create a stable operating record.
Therefore, the key to success is to keep your eye on the purchase of the first and second buildings after taking into consideration several points to note.
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Financial Institutions Look at Track Record
Financial institutions cannot provide loans unless there is proof that the person will repay the loan in a well-planned manner.By looking at what kind of company you have worked for, how many years you have worked, what your annual income is, how much financial assets you have, and how much down payment you have made for real estate investment, you can determine whether or not you can manage real estate systematically. .
Until now, there was little cash in the passbook, but if it suddenly increased at the time of coming for consultation, it would be thought that stable management could not be done with temporary measures, or if the proportion of expenses was high, cost management was weak. can be seen.
Don't be too conscious of tax savings
If you increase your expenses, it will be a tax-saving measure, but it will not give a good impression from the financial institution's point of view.If there is a deficit after deducting expenses from rent income, you can receive a refund and save tax, but if it is seen that you are not operating well, it will of course give a bad impression.
Accumulate systematically
It is also a point to judge whether there is a plan, such as whether a part of the rent income is set aside every month as repair expenses in case of emergency.
Related article:What is an advantageous business plan to make a loan in real estate investment?From creation method to agency request
Choose a property with a proven track record
The first property should have a high occupancy rate and was managed stably by the previous owner.There are some owners who get a cheap property in bad condition at a low price and revive it to get a high profit margin, but it is a technique that veterans can do, so at first, choose a property with a stable track record without being confused by surface figures such as yields. .
Related article:[Yield of real estate investment] What is the standard?Thorough explanation of the calculation method!
Choose a management company that can quickly solve problems such as vacancies and rent arrears
It is a management company that will be associated with the second and third buildings for a long time.You should choose a real estate company that has been in business for a long time, has a lot of management achievements, and is comprehensively reliable. When you purchase your first building, choose a company that will give you a friendly consultation when you ask them if you want to increase the number of houses in the future.
Related article:How to choose a management company that is important for real estate investment?Points to identify a reliable contractor
Summary
The most important thing when investing in real estate is to make a profit.Tax saving is one of the advantages of real estate investment, but without being bound by it, we are always conscious of "making a profit with real estate" and carefully doing what we need to do for that purpose, naturally in 2 to 3 years You should be in a position where you can buy an eye.First of all, let's get a high-quality, convincing first building.
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.
