I am Horiuchi, a man who is passionate about share houses.
This time, however, it is not a share house.
This article is about trying to simulate real estate investment through the introduction of a 4.8 million yen property for sale.
Anyway, we are heading to a property near Ginkakuji Temple. GO EAST!
(North Shirakawa is almost out of the Sichuan Crossing)
(The path of philosophy where Kitaro Nishida and others strolled.)
(Do not go to the Ginkakuji temple, but go into the alley)
Heading to the right from here is the property site, but a fence had been placed.
The day of the photo shoot was a holiday, and the neighbors were having a barbecue.
Excuse me, I’m a real estate agent. ……
We reach the site with the families behind us.
It is at the back here.
Playground equipment and bicycles are placed there, but that’s the charm.
It looks like a place for close interaction with the neighborhood.
This is an old wooden house, which is common in Kyoto.
They are called “terrace houses” and are row houses.
Today is a super introduction to real estate investing.
This is the theme of this issue, but properties such as this that do not face a road may be “not re-buildable”.
In fact, this property is also not re-buildable.
It is not possible to rebuild a house in a non-reconstructible property, and it is also difficult to take out a loan.
Therefore, let’s simulate the situation assuming that you purchase this property without borrowing and with cash only.
The price of this property is 4.8 million yen, and the land area is 46.34 square meters (about 14 tsubo), so the unit price per tsubo is about 344,000 yen.
According to land cost data, the average public land price in Sakyo-ku, Kyoto is approximately 960,000 yen per tsubo, so it is fair to say that the price is considerably lower than the average.
Non-reconstructible properties tend to be relatively low-priced due to such problems as the inability to reconstruct the house.
Taking advantage of this, we will introduce a technique to obtain a high yield by purchasing a non-reconstructible property at a low price, remodeling it, and managing it as a rental property.
This property has a total floor area of 42.63m2 and a 4K layout.
According to SUUMO data, as of June 1, 2023, the market rent for a 2LDK/3K/3DK in Sakyo-ku, Kyoto is 80,000 yen.
This is only a rough estimate, but if one were to purchase this property and rent it at 60,000 yen per month, the rent income would be 720,000 yen per year.
Since the sales price is 4.8 million yen, 720,000 yen is 15% of that amount (72 ÷ 480 = 0.15).
This 15% is called the surface yield.
However, as the name implies, this is superficial.
In reality, the real yield will be much lower, since you need to take into account the cost of maintaining the building, taxes on the land and building, various expenses for purchasing the property, recruiting costs when renting it out, vacancy rates, and so on.
Instead, the land and building you purchase can eventually be sold by you, so not only the rental income but also the income from the eventual sale of the property will be taken into account.
Roughly, the above is the whole picture of real estate investment!
As you can imagine, it has gotten long, so let’s save the detailed profit-and-loss calculations for last.
Please take a look at the property first!
We will attack inside from the secluded entrance.
See the first floor in 3D scan.
It is a little dark because not much electricity was installed, but there are two rooms plus the water area.
Let’s start with the rooms.
When you enter the entrance and turn to the right, you will see a hallway, a room, and a kitchen.
The room is 4.5 tatami in size and has a wooden floor.
Let’s take a look at the 5.5-mat Japanese-style room next door.
The height does not change, but there is a space like an alcove.
In these Japanese-style rooms, there is usually a storage space under the stairs, but it doesn’t look like much storage.
Next, let’s take a look at the water area!
The water area has been remodeled in December 2022!
It is a 3 burner stove.
Cooking seems to be in progress.
The washbasin, bath, and toilet are clean.
Next is the second floor.
(Behold the stable Scaniverse. It’s a 3-mat room and a 6-mat room at a glance)
Please see this simple Japanese-style room in succession.
This is the end of the property introduction!
You have plenty of storage space!
Fortunately, the water system has already been remodeled, but to be frank, the walls, tatami mats, and fusuma are quite damaged.
To this point, it will be necessary to replace the flooring, cloths, and fusuma, and tatami mats.
Assuming that there are no problems with the roof or pillars, I would like to run a simulation with a renovation cost of 1,000,000 yen!
Here’s a revenue simulation, starting here
As I mentioned earlier, if the purchase price is 4.8 million yen and the rent is 60,000 yen per month, the surface yield is 15%, which is excellent as a surface yield.
(In addition, you should check the surrounding market in more detail to see if you can actually find a tenant for 60,000 yen per month in that area.)
However, it is necessary to calculate the actual cost at the time of acquisition, as well as the cost of renovation and taxes while the property is in the possession of the owner.
First, let’s calculate the cost at the time of acquisition.
Since the property price is 4.8 million yen, the brokerage fee can be calculated as (3% + 60,000 yen) + tax (approx. 220,000 yen).
Judicial scrivener’s fee will be charged for the purchase of the property. This will be calculated at 100,000 yen.
The renovation cost is calculated at 1,000,000 yen this time.
And taxes. Registration and license tax and real estate acquisition tax will be charged. The detailed formulas are omitted here, but we have estimated that 238,000 yen will be required.
If we add the above to the purchase price of 4,800,000 yen, the total cost at the time of acquisition would be 6,358,000 yen.
Next, let’s move on.
Income and Expenses
In addition to rent, key money and renewal fee can be taken from the tenant.
Assuming that Kyoto University students will live in the apartment since it is in the vicinity of Ginkakuji Temple, the term of residence is 2 years, key money is 60,000 yen, and no renewal is required. Let’s assume that the average vacancy period is 3 months.
Although the building is already quite old, it will continue to deteriorate, so let’s assume that the rent will decrease by 0.5% per year.
This means that the annual income will be 663,000 yen, and the rent will decrease by 0.36 million yen per year.
Next, let us look at expenditures. We will omit the detailed calculations, but please see the table below for an estimate of the various expenses per year.
Fortunately, there is no repayment of loans, so this need not be taken into account, but the owner will be responsible for the cost of aging, and the cost of replacing air conditioners, water heaters, and major repairs should be taken into account in the calculations.
In addition, if you do not manage the property yourself, you will pay the management company for collection agency services and various expenses for changing tenants.
In addition, you will also have to pay property tax, city planning tax (commonly known as solid city tax), and insurance premiums.
Adding up the amounts in the table above, the annual expenses are approximately 284,000 yen.
With income of 663,000 yen (-decline in rent) and expenses of 284,000 yen, it is calculated that you will earn about 340,000-380,000 yen per year.
How much should I sell it for?
This is a very long shot, but let’s assume that the above calculation is based on a 15-year lease.
Income of about 360,000 yen x 15 years will yield an income of about 5.4 million yen. This is called “income gain.
Even so, the total cost at the time of acquisition was about 6.4 million yen, so you are still in the red.
In real estate investment, the final exit is to sell the property.
The profit from the sale is called “capital gain,” but it is not always possible for a building that is even older to sell again for 4.8 million yen.
Nevertheless, the current deficit is about 1 million yen, so if the property is sold for 3 million yen (plus brokerage fee), a 2 million yen profit is expected.
If you are interested in investing in real estate, but not sure about borrowing money, please contact us at …….
How about trying to invest in old houses or non-renovable properties such as this one for cash?
In this area, we can support you from remodeling to attracting customers.
Property Summary.
Used Terrace House
Year built: March 1967
Location：Jodo-ji Minamida-cho, Sakyo-ku, Kyoto-shi, Kyoto
Land area: 46.34 m2 (public offering)
Total floor area：42.63m2
Floor plan: 4K
Structure: 2-story wooden structure
Nearest bus stop: 9 min. walk from Kyoto City Bus “Ginkakuji” stop
Price (total): 4.8 million yen
Access road: 4m (non-road) facing east
Zoning: Type 1 exclusive district for low-rise residential buildings
Building-to-land ratio: 50
Floor-area ratio: 80
Transaction mode: Brokerage
Parking space is available in the back of the building.
Rebuilding is not allowed.
Reporting items
Money calculations, leave it to us.
Please contact ShuJu Real Estate for more information.
The official LINE account is【hier】