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Hiuchi 6 Residential Condos
The purpose of this real estate project in Osaka Japan was to build a new block of 6 x 35 square meter rental apartments. It is intended this project will be owned a minimum of 7 years. The project did come in on budget at under the $1,000,000 mark and was built to provide a 8% gross return on the building's rental income. Additionally capital gain's of 40% are anticipated on the land and building content.
The Architect and Land.
The project started with plans being drawn by Japan Investment's architects. Next came a slightly complicated land and zoning negotiation. This piece real estate is in Hyogo, Japan. The development block desired was one of four blocks that were subdivided from a single foreclosure. Four banks held notes on the single foreclosure and they agreed that subdivision was the best answer to the distribution of available asset against their notes. The blocks were zoned for residential family dwelling. Single homes. One lot was purchased and permission sought for acceptance of an apartment building. Six weeks of amicable negotiations led to acceptance by both the city of Kawanishi and the local neighbors . The project could begin.
The Builder.
The real estate in Japan can be difficult (expensive) for inexperienced builders. Japan is a mountainous country and in many cases Japan gave little consideration to town planning as she grew from the ashes of the second world war back to economic stability. Much of the real estate in Japan offers restrictive and in many cases difficult access to building contractors. Of course it is from these difficulties that we have been able to attain immediate capital gains by taking on jobs many others would walk away from as being to troublesome. It is well worth hunting out tradesman that can handle the challenges. Japan Investments has several building contractors that have been used over the years at our disposal. Contractors need to be specifically selected not only for their quality workmanship but also for the specialty in regards to the to site conditions. Narrow roads, steep angles, legislated street set backs, proximity to other buildings can all add massively to the cost of construction unless appropriately skilled masons are chosen. On this project the street was very narrow preventing access to large vehicles. The Building contractor chosen for this project had proven experience in working restricted access sights. We were fortunate that the piece of real estate behind ours was a public parking lot. Permission to bring all large vehicles into the lot was negotiated and then cranes were used to lift in all the materials and pump trucks for the concrete.
The Building.
Three floors. Walk up (no elevator) The construction is a concrete base, metal frame, metal roof and ALC walls. Unit bathrooms were lifted into place and then closed in. Floors are concrete with timber polished wood finish. The three floors each had two apartments per floor. Each apartment is 35 Square meters. (about 350 square feet). Toilet, Washroom, Bathroom, Main entrance and living area all separated. Plumbing is all plastic and access is under floor. Seven ventilation points per apartment are provided to facilitate compliance with the "sick house" laws of Japan. 3 x 4 meter walk in closets have been provided within each apartment and undercover parking for 6 bicycles is provided at the entrance to the building. The front door has video camera feed to each apartment and an auto lock system enables tenants to see who is at the front door and prevent or provide access to the building via the switch in their own apartments. Construction took 173 days start to finish.
The Money.
With the present real estate values in Japan as at May 2005 The resale value of this property is set at 75.000.000 yen. With an 8% ROI on rental income. We leveraged our own cash using Japanese bank finance of 35 years at 1.9% interest rate, fixed for ten years and employing a 50% loan 50% cash ratio. At time of building we predicted some increases in the Japanese prime rate however with these ratios we felt very safe indeed. Some may argue we could borrow more and leverage our cash harder they may be right but we went for the safety on this real estate investment and with 8.0% ROI on a new building we saw no reason to expose our self any further.
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