Why You Need to Consider the "Time to Sale" When Buying Real Estate for Investment

In real estate investment, people tend to focus on
how much it will sell for.
However, another important perspective is

how long it will take to sell.

The asking price and the closing price are different. For example, even if you list a property for 100 million yen, it does not guarantee that a buyer will appear immediately at that price.
If there are few inquiries, you may need to take actions such as
lowering the price,
changing the conditions,
or requesting another brokerage firm.
Even if you eventually sell it for a high price, if it takes more than a year to sell, you must also consider the costs incurred during that time.

Costs are incurred even while waiting for a sale.
Even during the sales process, expenses such as loan repayments,
fixed asset taxes,
management fees,
insurance premiums,
and repair costs
continue to accrue.
If the property is vacant, there is also a possibility that you will not receive rent during that period.
Therefore, you need to calculate not only the sale price but also the holding costs that occur until the sale is completed.

Especially important for buy-to-resell projects.
For example, even if you plan to buy for 50 million yen and sell for 60 million yen, the capital efficiency will differ significantly depending on whether it sells in 3 months
or 1 year.
If funds are tied up in one property for a long period, you may not be able to purchase another property during that time.
It is important to look not only at the profit amount but also at

how long it will take to realize that profit.

There is a reason why some properties are easier to sell.

Ease of sale is influenced by factors such as location, price range,
ease of obtaining financing,
the condition of the land or building,
and the size of the potential buyer pool.
While special properties may offer the potential for large profits, if there are few people who can purchase them, it may take a long time to sell.

There are ways to shorten the sales period.

To speed up the sale, it is also important to focus on
appropriate pricing, comprehensive property documentation, improving the building's appearance,
and organizing any issues in advance.
If you set the price too high because you want a high return, it may result in a longer holding period, which can squeeze your profits.

Two perspectives: Wadaemon and Mr. Toriyama.

From Wadaemon's practical perspective, it is important to acquire properties by considering not just the expected sale price, but also who the buyer will be and how long it will take to sell.
From Mr. Toriyama's tax and accounting perspective, it is necessary to calculate profit over the entire holding period, including interest, taxes, and management fees incurred until the sale.
Sale price, holding costs, and time to sale.
By considering these three factors together, you can make more realistic investment decisions.

Not just profit margin, but "time" is also part of the investment.

Whether you earn a 5 million yen profit in one year
or earn the same 5 million yen in three months,
the capital efficiency is different even if the profit amount is the same. In real estate investment, it is important to consider investment efficiency by including time,
not just how much you will earn, but when you can recover your capital.



Related VideosWadaemon Channel

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