What price range should you target for your first real estate investment?
★ You cannot buy real estate with input alone
Up until the last installment, I said that
once you decide to invest in real estate,
you should first save up your own capital.
And until you can secure that capital,
you should focus on input.
In other words, I talked about learning by reading books related to real estate investment
and attending seminars.
However, input alone
will not deepen your learning.
You must output the knowledge you have learned.
In other words, you need learning that involves applying that knowledge.
For that output,
the first thing you must do
is 'property hunting'.
'Isn't it pointless to look for properties
when I haven't even secured my own capital yet?'
You might think that.
However, this is also preparation.
It is preparation in the sense of trying out the knowledge you have learned.
If you compare it to school studies,
think of it as
'applied problems' or 'practical exercises'.
'Property hunting' is
a drill for applying the basic and fundamental knowledge
and skills you have learned.
By repeating these drills,
your knowledge and skills will become firmly established.
★ Real estate 'Tsume Shogi' (checkmate puzzles)
In real estate investment,
what I want you to do as that drill
is 'property hunting'.
It is the practice of searching for properties
on online portal sites
and deciding whether or not to purchase them.
Now, as for the first step of property hunting,
if you don't have the materials to make a judgment,
it's a non-starter.
You wouldn't make a simple decision like "this is a buy" just by looking at
the photos and floor plans posted online, would you?
So, what are the criteria for making a decision?
It is the
knowledge you have acquired regarding real estate investment.
Presumably, every book you read would have told you to
make a comprehensive judgment while considering factors such as
location, price range, and yield.
Therefore,
by utilizing the knowledge you have acquired,
you will cultivate the ability to evaluate and judge properties.
To use a shogi analogy,
it is like "tsume-shogi" (mate-in-one puzzles).
★Properties are now "yori-dori midori" (plentiful and available for the picking)
With that said,
this time, I will talk about how to improve your property evaluation skills
through "property hunting."
When I first started real estate investment,
I used newspaper ads and flyers,
and I would go around to
every single real estate agent
to gather information by pounding the pavement.
Honestly, it was tough.
Moreover, real estate agents
were quite cold to
beginners in real estate investment who didn't own a single property yet.
Therefore, I really struggled
when it came to purchasing my first property.
However, in the age of the internet,
you no longer have to worry about finding properties.
If you enter your criteria,
a staggering number of properties
that match those conditions will appear.
It is "plentiful and available for the picking."
If anything, you might be overwhelmed by the number,
and your problem might be not knowing which property to choose.
No matter what you do,
ultimately, it comes down to "getting used to it."
Finding properties also requires practice.
That is precisely why I want you to start as early as possible.
★What criteria should you use to choose?
Specifically, check real estate information portal sites for about 10 to 20 minutes every day.
check real estate information portal sites.
At first, you probably won't know what criteria to use for your search,
so I will touch upon those criteria.
so I will touch upon those criteria.
For example, in stock investment as well,
various indicators are used
for investment decisions.
PER (Price Earnings Ratio)
PBR (Price Book-value Ratio)
ROE (Return on Equity)
are some examples, and
stock investors also use methods such as concentrated investment in a certain field or
diversified investment.
In other words, they have multiple materials for making decisions.
In real estate investment as well,
as indicators for evaluating the profitability of a property,
"Gross Yield"
"Net Yield"
"Building Age"
"Accumulated Valuation"
and so on.
I personally focus on:
"Cash Flow"
"ROE (Return on Equity Cash Flow Yield)"
"Regional Population Dynamics"
"Potential for Rent Growth"
and so on are used as criteria for judgment.
There is no single correct answer to investment decisions,
so there is no such thing as
a 'royal road' or definitive path.
Whether it is your first building,
or you already own multiple buildings.
Whether you target urban areas,
or target regional or suburban areas.
Whether you target newly built properties
or older properties.
Large-scale properties or small-scale properties.
Your personal profile and financial strength
will also cause your judgment criteria to vary.
For now,
in this instance, let's assume that for your first real estate investment,
you have secured 10 million yen in personal funds.
Under such conditions,
I will explain in order
what kind of properties you should look for.
Of course, I assume you are a public school teacher,
or a civil servant.
This is based on the premise that the advantages of this profile are being utilized.
★What price range should you target?
First, let's think about what price range
you should target.
To begin with, if you have 10 million yen in personal funds
and are a civil servant,
I think you can likely expect a loan
of about five times that amount from a bank.
Even if you are a beginner.
In other words, in terms of property price,
you can consider yourself able to invest
around 60 million yen, including your personal funds.
There is a reason why I emphasized
'including various expenses' here.
For example, even if you shop at a supermarket
for 5,000 yen worth of goods excluding tax,
your payment is 5,500 yen, right?
Because it is added to the consumption tax.
Similarly, real estate prices
also incur hidden costs known as miscellaneous expenses.
I calculate
assuming miscellaneous expenses are 7%.
If we assume the bank will provide a loan of 50 million yen,
and your own capital is 10 million yen,
including the 7% in miscellaneous expenses,
you will be looking for properties that fall within 60 million yen.
For example, if the property price is 55 million yen,
the miscellaneous expenses are 3.85 million yen,
so you can estimate the actual price to be 58.5 million yen.
This fits within the 60 million yen limit, doesn't it?
Therefore, for your first property,
you will be targeting a price range
of around 45 million to 55 million yen.
Now that we have narrowed down the target price range,
next time, I will talk about things like the "location" you should choose.
Thank you for reading until the end.
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