In the case of residential property, i'll support you. After all, housing has a high potential for appreciation, but it's just as bad for front houses, especially those that rent $10,000 a year。
Rate of return
The annualized return on investment is 10000/45000 = 2. 22 per cent, with a rent of $10,000 a year, with total investment of $450,000, which is less favourable than the rate of return on bank property items, an investment that will take you at least 40 years to recover (taking into account the possibility of subsequent rent increases, but also rent cuts)。
In terms of investment in real estate, there is a term called rental ratio, which refers to the ratio of monthly rent per square metre of building space to the cost of housing per square metre of building space. The concept of tenancy ratio is one of the international indicators used to measure whether a particular municipality is functioning well, usually from 1:200 to 1:300 (i. E. 0. 005-0. 0033). The higher the margin, the greater the value of investment in housing。
The monthly rent for the building area per square metre of your property is: (10,000/12)/28 = 29. 76 yuan/square; the total value of your front is $450,000, for a total of 28 square metres, at a price of 450,000/28 = $1. 607. 43。
The rental ratio = 27. 76/16071. 43 = 0. 00185, which is clearly less than 1:300, makes your investment very low。
Value added space
Many people think that there is room for a door store to appreciate, not just rent, but how much do you think it has? The general geographical location of such establishments is such that the rental ratio also shows that there is little room for such properties to appreciate and therefore not worth investing。
Secondly, if you have any interest in the rental of market-based shops and rents, you will be far removed from non-core shops. As can be seen from the figure below, a study by the institute of business and industry in 2017 (the data are relatively early, but can be consulted) shows that rents are on a downward trend in cities on the second line of the country, while vacancy rates have been increasing. It is also a second-line city, where the population is concentrated, and if it is a third-line city or below, the data should be even worse (which, in fact, can be seen from the second-line data, which is clearly above the first line)。
Summary
The value of a store's investment lies not in its high or low market value, nor in the size of a store, but in a combined rental return. Simply put, if a store returns less than 7 per cent, and the site is not what it wants, it is not worth investing in
On the one hand, the decline of the real store and on the other hand, the marked downward trend in the price of the house, together with excessive rents, make it very uneconomical to spend $450,000 on such a shop. For this property, the personal advice is not to buy it, and the money you get in the bank is much more than the return on buying the property. The annual rent of $450,000 for a 28-square-square house is a profit-making business, and i would prefer to keep the money in the balance sheet or even a five-year term deposit。
