The benefits of investing in Whole Apartment Buildings

More Income

Apartments tend to be expensive to rent, so another advantage is that the amount of income can be high.
In Tokyo, the rent for a one-room apartment can be as high as 110,000 yen, so the more people you rent to, the larger your income will be.
If you use a single building, even if there are vacancies, if 10 rooms are filled, the rental income will be 110,000 x 10 rooms x 12 months = 13.2 million yen.
As much as 13.2 million yen will come in as income in one year, which shows the scale of investment in a single whole building

They are also valued in loans

Even if you are unable to purchase a condominium with only your own funds and have to take out a loan, purchasing a single condominium is highly valued in financing.
When you invest in a single building, you will also own the land at the same time, so the collateral value of the asset will be evaluated higher.
The reason for this is that land is not only unlikely to decrease in asset value compared to buildings, but it is also possible that it may increase.

Greater flexibility

The advantage of renovation and remodeling is that it is easy to maintain and improve the asset value of the building since the owner can basically decide what to do.
If there is a buyer who wishes to purchase a whole condominium, you can get a large amount of money by selling it as-is, with a change of ownership.
Another advantage is the ability to respond flexibly to the needs of tenants and the trends of the times.
For example, the demand for home delivery boxes is increasing as people shop online more frequently.
In the case of unit ownership, even if you want to increase the number of shared facilities, it may be difficult or impossible to do so because the decision is made by others.

Little risk that you run out of income

One of the concerns with real estate investment is that if a room becomes vacant, there will be no income for that period of time and there will be a risk of losing money.
It is true that if you are investing in a separate unit, you will lose rental income as soon as the room becomes vacant.
If you own an entire building, you can avoid the risk of losing income because even if one room becomes vacant, you will not lose rental income from the other rooms.
Nevertheless, you should be aware that you may end up with a deficit if there are few tenants due to maintenance costs and other factors.

Much money is needed

When purchasing a single condominium, both the building and the land must be purchased, and a large amount of original capital is required.
In some cases, about 100 million yen is needed for a condominium, so it is a disadvantage to assume that you will receive financing as well as your own funds.
Basically, it is ideal to be able to pay about 20% to 30% as down payment with your own funds.

Risk of failure

Difficult to find buyers

Most people who buy a whole building condominiums are those who are serious real estate investors.
Even though the asset value has fallen at the time of sale, it takes a large amount of money to purchase a single condominium.
The higher the price at which it is sold, the more limited the number of prospective buyers will be, so it will take a certain amount of time to reach a contract.
Thus, the disadvantage of a whole building condominium is the low liquidity of its assets, so if you want to turn it into cash immediately, you need to compare it with competing properties and set up attractive conditions.

Repair and Maintenance fees are high

The owner has to manage the entire building, which is not only time-consuming, but also very expensive.
The more rooms you have, the more it costs, so if you are not conscious of your running costs, it will be difficult to earn enough profit.
You have to manage not only the rooms but also the common areas of the apartment.
In addition, property insurance premiums, property taxes, and city planning taxes are also more expensive than for compartmentalized investments.
However, it is possible to reduce costs and increase profits by deciding which parts of the property you will manage yourself and outsourcing some of the management.

Consider when to invest

It is important to note that the success rate of an investment can vary greatly depending on the timing.
There are favorable times to invest in real estate.
Check every now and then to see if the value of real estate in the area you are considering is rising or falling rapidly, and know which areas are good times to invest now.
Also, when investing in a single apartment building, you will generally receive a loan from a financial institution.
Therefore, when the interest rates for loans are low, it is also a good time to start investing.

Check past occupancy rates and yields

It is also important to understand the occupancy rate of the property you are considering and how much it has yielded in the past in terms of real yield.
Even if the occupancy rate is high or the real yield is good, it is important to consider why the track record is good rather than immediately deciding to go for it.
By considering whether the convenience store or station nearby is convenient or whether there are other factors, you will be able to predict to some extent whether you will be able to secure a yield on other properties as well.
Of course, it also depends on timing and local characteristics, so make a calm decision under all conditions.

Check for repairs and renovations

Check when the most recent major repairs have been made.
If major repairs are needed after you have purchased the property, the cost after investment will be higher, so it is important to carefully consider the future potential of the property before purchasing.