How to preserve the value of your apartment? Buy and sell every 10 years

If you want to maintain the value of your real estate investment, Attractors Lab President Yujin Oki suggests that you should change apartments every 10 years.

Why 10 years?

One reason is that our lifestyles tend to change every decade or so. For example, your home requirements will be different as you move through different phases in life such as being single, getting married and having a two-income household, having children, retirement and old age. 

The second reason is that buyers of second-hand apartments typically prefer ones less than 10 years old. If you buy a brand new apartment, you best time frame to sell it is within 10 years of purchase.

In order to be able to upgrade every 10 years, it is essential that your property holds its value.

We tend to think that an apartment has only increased in value if we sell it for more than we paid for it. Unless the property market significantly improves, as an apartment ages it may drop in value when compared to newer properties. This preference for new over old is not solely unique to Japan.

However, you must consider the money you are saving by buying rather than renting. Typically the monthly rent on an apartment is going to be higher than the equivalent monthly mortgage repayments and building fees. This difference in cost can be considered a ‘gain’ as you should have more money in your pocket at the end of each month if you buy. Over 10 years, this saving can be quite significant.

Choosing the right property

It’s all about location.

The key to choosing a property that will hold its value or only decline slightly is to find one in the best location. This will, of course, be limited by your budget, but aim for something as central as possible. Ideally it should have access to train stations with at least two different lines, be in an area with a well-known name or station name and be within a 7 minute walk to the station.

Source: Shukan Post, July 19-26 2013 Edition.