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This time, it was distributed on CONSPIRIT's official channel on YOUTUBE.Episode 53: Boost your quality of life with real estate management!I would like to send you the contents.

This time, the lastPart 1 of "Leverage Judgment"Following on from that, we would like to bring you the second part.

In the first part of "How to Measure Leverage," we talked about the concept and various indicators required for analysis.

However, since this explanation has become quite long, in the second part I would like to evaluate leverage using actual examples.

By watching both parts of the video, I believe you will be able to check for yourself whether your leverage decisions and financial plans are appropriate.

An example of the property looks like this:

Apartment for sale for 50 million yen
Purchase costs: 3 million yen
Annual income: 4 million yen (8.0% yield)
LTV 90% (loan amount 45 million yen)
Borrowing interest rate 2.5% Term 35 years

Monthly management fee 5%
Building management fee: 10,000 yen
Fixed property tax: 300,000 yen/year

So, let’s look at the leverage judgment explained in the first part.

K% < FCR < CCR

Let's calculate what this will be.

First, the K%.
If we assume 45 million yen / 2.5% / 35 years,
The monthly loan repayment amount will be 160,872 yen.
The annual repayment amount is 1,930,464 yen, so

1,930,464 yen ÷ 45 million yen × 100 = 4.29%

And K% is 4.29%.

Next, let's calculate the FCR.

For an annual income of 4 million yen,
The operating costs are as follows:
The rental management fee is 5% of the income, or 200,000 yen.
Building management fee is 120,000 yen per year
The fixed property tax is 300,000 yen.

Usually, unpaid losses and vacancy losses,
AD etc. will be added,
This time, we will make the calculation assuming that it did not occur.

In other words, the net operating income (NOI) is
4 million - (200,000 yen + 120,000 yen + 300,000 yen) = 3.38 million yen
It becomes.

The purchase cost is 50 million yen for the property plus 3 million yen for other expenses.
53 million yen.

FCR is
3.38 million yen ÷ 53 million yen × 100 = 6.38%

This leads to the conclusion:

And finally, the CCR is calculated.

The initial cost of the purchase was paid in cash.
The difference between the property price and the loan amount is 5 million yen,
The cost will be 3 million yen,
Total: 8 million yen.

BTCF (pre-tax cash flow) is
4 million - (200,000 yen + 120,000 yen + 300,000 yen) = 3.38 million yen,
This is the amount minus the annual loan repayment amount of 1,930,464 yen,
1,449,536 yen, this is the net cash flow.

therefore,

1,449,536 yen ÷ 8 million yen × 100 = 18.12%

So, the cash yield, or CCR, is:
The figure was 18.12%.

This is used to determine whether leverage is working.
This means all the numbers are aligned.

K%: 4.29% < FCR: 6.38% < CCR: 18.12%

Based on the above results, we can conclude that leverage is functioning properly.

By the way, the factors that affect K% are the interest rate and the term, so in cases where the interest rate is gradually reduced by making a large down payment, K% will fluctuate, but please note that K% will remain constant even if only the loan amount goes up or down.

Real estate salespeople sometimes push the idea that "real estate is good because you can leverage it," but strictly speaking, it's impossible to make an accurate judgment without determining "how much leverage there is."

If you are considering purchasing an income-generating property with financing, we recommend that you conduct this analysis.

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