Wrong example of real estate investment in Japan
They say as below
Selling price 550,000 yen.
Prospective annual rental fee : 432,000 yen.
Prospective Yield on investment : 78.54%
( 432,000 yen / 550,000 yen )
Monthly rental fee : 36000 yen.
distance from the Nearest station : 44 minutes on foot.
Room area : 33.66m²
Monthly Apartment management fee and reserved funds for repair : 11,000 yen.
Built in 1974
There is not a renter.
I do not recommend you to purchase this kind of apartment.
Actually, if you can find renter, it will be good.
But, it will be very difficult.
And even if you find renter, there is wide gap between gross yield and net yield on investment.
In the cases the amount of monthly rental fee is cheap ( Mostly, in such cases, the amount of purchase price is also cheap. ), monthly Apartment management fee and reserved fund for repair will set off most of your income from your renter.
Gross yield on investment : 36000 yen × 12 months / 550,000 yen × 100 = 78 %.
Net yield on investment : ( 36000 yen – 10,000 ) × 12 months / ( 550,000 yen + 90,000 yen ( fee for realtor ) + 100,000 yen ( fee for judicial scrivener and registration tax )) × 100 = 42 %.
And in the case you purchase cheap apartment with cheap rental fee, if you need to spend some money to repair air conditioner, wall paper, floor, kitchen, bathroom, it may wipe out your annual income from your renter.
So, when you purchase a cheap apartment, you need to purchase it at very low price. ( = you need to purchase the apartment at very high gross yield rate. )
Or it will be better for you to purchase a higher selling price apartment ( It will be located in suitable area, or with wider room area. ) with higher rental income.
If you do not have enough cash to purchase such one, you can purchase it with your relative, or friend.
Some of potential investors order me to find very high yield rate property.
But please remember that if a property has high yield on investment, there may be some problems.
If current owner can receive enough rental fee to sustain his investment, why is he going to sell the property ?
So, if you demand high yield on investment, you need to confront some problems.
But, in the case of this 550,000 yen apartment, you can not solve the problem.
Because, you can not change the location of this apartment.