お金の基礎知識

2023年08月04日

Sale of Investment Condo: Seeking to Maximize Profits from Unintended Real Estate Investment

I responded to a consultation at FPCafe, where you can find a lifelong financial partner.

Inquiries from:

Me – Company Employee (39), Husband – Company Employee (38), Residing in Oita City, Renting an Apartment.”

 

Consultation Details:

In 2016, while still single, I purchased two newly-built one-room condominiums for investment purposes. I was persuaded to buy them at an investment seminar. (Unit A: Purchase Price: 20.7 million yen, Remaining Debt: 17.4 million yen (as of 2023) / Unit B: Purchase Price: 17.3 million yen, Remaining Debt: 13.7 million yen (as of 2023))”

I am aware that I fell into what is commonly known as real estate investment. The initial investment was about 1 million yen, and even with the tax benefits, the annual balance has been break-even at best with no profits. Although I have wanted to sell them before, I hesitated because it would result in a loss.

Recently, as condominium prices have increased, I am considering the possibility of selling them. The projected sale price exceeds the remaining loan balance. I’m unsure about the fees and taxes involved in the sale. The sales pitches from real estate agents have become overwhelming.

As someone lacking in knowledge, I’m concerned about not being taken advantage of during the sale process. How can I sell them safely? Regarding Unit B, since the market value is estimated at 1.5 to 1.8 million yen against the remaining debt of 1.37 million yen, I am thinking of selling this unit first. If there’s a profit, I would like to put it toward the repayment of Unit A.

Response:

Thank you for consulting with us from Oita. It seems that when you were single, you were persuaded into purchasing two investment condominiums in 2016. You want to sell them now. The main cost involved in selling is the real estate agent’s commission. The upper limit is 3% of the price plus 60,000 yen, but negotiating to get it reduced by 10-20% is also possible (I always negotiate).”

There might be a small fee for prepaying the loan. The cost to remove the mortgage lien is around 10,000 yen. Since there hasn’t been any profit, there won’t be any taxes. While it’s difficult for us to assist directly in Oita prefecture, we can certainly help you determine a fair property value through online consultations if you’re interested.”

Important considerations when selling real estate:

・Don’t rush the sale

・Contact multiple real estate agents to determine a fair selling price

・Entrust the sale to a reputable agent

・Start with a slightly higher asking price and gradually lower it if there is no response.

 

While you’re considering selling the appreciating unit and keeping the non-appreciating one, the opposite might be a better approach. Appreciating implies it’s popular, likely to be in demand for renting, and you might be able to increase the rent.

Please consider the above advice. We look forward to assisting you with your consultation.

 

Yoshiko Nakamura

Personal Financial Planner

Alpha and Associates, Inc.

 
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