Meeting the property of destiny

Last time, I talked about "what made me start real estate investment" and "the specific actions I took to find a property." In real estate investment, the choice of property plays a major role in the success or failure of the investment. My wife and I also spent a lot of time and effort selecting a property.

In this article, I have summarized the episodes from when I started searching for properties to when I found my "fateful property" three months later. I will also touch on the real story of how to narrow down the property selection and the preliminary loan screening, so please read to the end.

Determine the criteria for selecting a property: Create a persona for "a demographic with a lifestyle similar to ours"

When searching for a property, my husband and I prioritized the following conditions: "Within 90 minutes of our home" and "Return rate of 12% or more."

As a result, many of the properties we found were located in areas far from the city center. It gave us the impression that they were somewhere in the middle between the city and the countryside. As we gathered information, we gradually began to feel that we should narrow down our search to properties that were more targeted at families than single people. The reasons for this were:

• Properties for single people tend to have high turnover rates, which means high management costs.

• If it's a family property, the tenants are likely to stay there for a long time.

• It is easier to get financing for a used apartment than for a used house, and you will earn more in rental income.

They mentioned the following. Then, when we imagined "what kind of family would move in if we bought the property," the persona of "a young couple and a family with two preschool children" came to mind. We thought that many of these families would spend their time in an apartment until their children started elementary school, and then buy a house when their children started school. That was actually the case for us. Thus, we decided to look for a property with an exterior and interior design that was convenient for newly married couples who were thinking of having children soon, and families with small children. If a newlywed couple could move in, they might stay for nearly seven years. If that happened, we could expect stable occupancy and long-term rental income. By clarifying the occupant demographic from "a persona based on our own lifestyle and experience," we were able to have consistent criteria when choosing a property.

Meeting with A Real Estate and finding the ideal property

In order to find the ideal property, we always visited real estate companies after requesting information. The idea was to become friends with a real estate company that made a good impression on us, and have them introduce us to valuable properties. Among them, our encounter with "A Real Estate" was a major turning point.

One day, we visited Real Estate A and told the person in charge about our thoughts and standards regarding real estate investment. The person in charge responded to us very sympathetically. He understood our needs and immediately suggested a property that met our criteria. That was how we found our "fateful property." (We talked about our reasons for investing in real estate in our previous article . Please read it if you are interested.) The property that was introduced to us was,

• A 22-year-old, 2-storey apartment building for families with eight 2LDK rooms

• The property price is 45 million yen

• Built by a major company as a leased construction business

• Heavy steel construction

• Yield exceeds 12%

• No vacancy

• Parking spaces for 2 cars per room

• Profit simulation shows sufficient profit

• The estimated price and the selling price are the same

And it was quite fascinating.

We immediately went to the site to inspect the property and the surrounding area. It was a 40-minute walk from the JR station, so it was quite far from the nearest station. However, since it was located in an area where people mainly live by car, we decided that it would be better to prioritize ample parking rather than proximity to the station. There were no properties that could be rivals, so we thought we would be able to differentiate ourselves sufficiently. We also looked into the rents of properties in the area, and confirmed that the current rent of the property introduced was in line with the market price in the area, and found that there were no problems. From the information on the documents and from our on-site inspection, it was an ideal property.

Loan negotiations and unexpected developments

We immediately decided to start preparing for financing in order to purchase the property. When we asked A Real Estate if they had any financial institutions affiliated with us as lenders, they introduced us to a non-bank bank, so we decided to ask them to apply for a loan. However, this preliminary screening was not approved. The reason was that the target property was outside the area. We visited banks near our homes and workplaces, and asked members of the landlords' association we belonged to at the time for advice on finding a bank. Using the information we obtained there, we negotiated with two banks.

• A commercial credit union whose head office is located in the prefecture where the property is located.

• Non-bank banks

I requested a loan review for the full amount of 45 million yen, the same as the property price, but to my surprise, the commercial credit union I had visited earlier contacted me to say that they could provide me with an overloan of 45 million yen (property price) + 2 million yen = 47 million yen, with an interest rate of 3.8%.

To be honest, we felt that the interest rate was high, but when we recalculated it with a profit simulation, we still had a profit, so we decided to take the plunge and go ahead and enter into a contract to purchase the property. However, just as we thought we had taken a concrete step towards purchasing the property, an unexpected turn of events occurred. The seller's son said, "I'll manage the property myself, so please don't sell it," and the sale of the property was cancelled. We were very disappointed by this unexpected turn of events, but since we hadn't yet signed the contract, we couldn't argue and there was nothing we could do. We had no choice but to look for another property.

The encounter with destiny and the journey to purchase

After our attempt to purchase a property from Real Estate A fell through, we had the opportunity to visit another real estate company (let's call it Real Estate B). When my husband went to greet Real Estate B, he told them about our thoughts on real estate investment that we had talked about when we visited Real Estate A, as well as the story of how we had failed to purchase a property from Real Estate A. The salesperson immediately introduced us to a property listed on REINS. That was how we met our fateful property. (REINS is a network system operated by the Real Estate Transaction Organization, and is joined by real estate companies across the country. It is generally not available to the general public.) This property was located in the same town as the property introduced by Real Estate A, and like the previous property, it met our desired conditions in that it was a "heavy steel-framed structure for families."

• A 23-year-old, 3-story apartment building with 12 2LDK rooms for families.

• The property price is 65 million yen

• Construction by major companies as leasing construction business

• Heavy steel construction

• Yield exceeds 12%

• 1 room available

• Parking spaces for 2 cars per room

• Profit simulation shows sufficient profit

• The estimated price and the selling price are the same

The only difference between this property and the one from A Real Estate that we were unable to sign a contract for was that it was a three-story building.

• 23 minutes walk from the nearest JR station

• Close to the main road

• Near an elementary school

It had all the necessary conditions to attract the families we were targeting. When we surveyed the site, we found a supermarket just a short drive away, newly built houses scattered around the area, and it seemed like a place where young people lived. The air was clean and the elementary school was nearby, so we thought it would be an ideal environment for a young family to live. The owner of the property was an elderly woman who ran a local textile company, and by building the apartments, she had attracted young people from the area and was grateful to the school and the community. Hearing this story further improved our impression of the property and solidified our decision to purchase.

Looking back, it took me three months to request information from 77 different real estate agencies and visit five different companies before I finally found the property that was right for me.

summary

It took my wife and I a lot of time and effort to find the perfect property. However, we were finally able to narrow down our search to a property that targeted families with a lifestyle similar to ours. There were some unexpected developments along the way, but by continuing to take action and making use of the experience we had gained up until that point, we were once again able to find the ideal property that met our criteria. In our next post, we will tell you the specific story of how we purchased this ideal property, from purchasing it to securing the loan. Please look forward to it!