Nagahashi Apartment Building

A 20-unit apartment building in Nagahashi, Otaru City, Hokkaido. The seller states 17 units are currently occupied and that annual rental income exceeds ¥6,500,000.

May suit

Investment

An income-focused building. Tenant demand, operating costs, building age and capex should lead the analysis.

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The seller describes a base of long-term tenants and scope to increase occupancy. Those are seller-supplied positions rather than verified figures. Otaru is a coastal city with year-round activity and proximity to Sapporo; what that means for this building depends on the rent roll, operating costs, building condition and near-term capital expenditure set out below.

Purpose fit

Investment: May suit an investor evaluating an existing income-producing asset, subject to verification of current operating performance and building condition.

RG Japan perspective

This is primarily an income-property proposition rather than a lifestyle purchase. The important questions are the current rent roll, occupancy, operating costs, building condition, near-term capex and the depth of tenant demand.

Occupancy and income figures here are seller-supplied. We would want to review current occupancy, rent roll, operating costs, building condition and near-term capex before drawing conclusions about return.

What to think about

Headline yield and net return are different figures once management, maintenance, taxes, insurance and vacancy are applied.
Current income has to be weighed against the age and condition of the building and the timing of likely capital expenditure.
Regional tenant demand and vacancy risk determine whether current occupancy is sustainable.
Liquidity and exit for a regional multi-unit building differ from those for a single unit in a major city.

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