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Tips for real-estate investors

By on July 26, 2009

Investing in real estate isn’t always a safe proposition. There are risks, but it can be a very good investment in terms of providing a steady cash flow and the tax benefits for Japan residents can be huge.  Wise investors always look at properties with principally three things in mind: LOCATION, MATH (terms such as IRR and NOI predominate) and PROPERTY AGE.

Many savvy investors have this saying about real estate: Location, location, location! The discussion related to numbers with real estate investments can be tedious, so to cut it short, things such as a property’s internal rate of return and net operating income should be looked into well before putting in an offer. Some invest any potential difficulty selling the property five, ten years down the road.

Not everyone can find the ideal condo, house or building within a 5-minute walk to a major train station and the “location x 3” portion of the equation can be a factor of convenience, closeness to greenery or parks, popularity of the area, number of  train lines within walking distance, etc.  Looking at comparable properties in each area is going to give you a very good idea of the type of rent which can be expected.  The best way is to look at ALL comparable properties in the area and total up the rents and floor space area to come up with an average-per-square-meter price and use that to determine the estimated rent (there are other factors involved!).  Subtracting the various expenses (expense ratio) incurred from our rent (revenue) will provide us with a probable NOI figure so we can determine the Internal Rate of Return.

Bobby Dozier, a 20-year veteran of Tokyo, with real estate experience in Japan and the US is the Sales Director at Platinum Ltd and can be reached at bobby@platinum1000.com or (03) 5114-1266.

About Bobby Dozier