There are many things to consider when investing in a building. Among them, there are six major essential checkpoints that can be identified as the most basic. 

First, you need to invest time and money in finding and analyzing the target area and target real estate to invest in. When analyzing real estate, it is essential to first check the location conditions. Basic location analysis such as whether it is near a subway station, whether there are many government offices or large buildings, and whether there are landmark buildings is essential.

As a commercial real estate, the building is located in an area where commuters can easily commute to work. Buildings in such areas are ideal for providing convenient transportation and also for increasing the promotional effect of the tenants.

Once the general location analysis is completed, a detailed analysis of each building should be conducted. The vacancy rate and tenant status of the building in question should be analyzed as a basic task, and the vacancy status of surrounding buildings should also be checked.

If the vacancy rate exceeds 20%, it should be excluded from investment. In addition, the vacancy rate should be expected not only at the current rate but also in the future. The more quality tenants such as foreign companies or financial institutions move in, the better the property is. 

Second, the physical analysis of the building. It is very important to check the condition of the building. It is recommended to get help from an expert for the physical analysis. If the physical analysis is not done properly, the future maintenance cost may be high, and the case may be worse than the stomach. In particular, for buildings that have been completed for more than 10 years, the building condition should be examined with a 'microscope'. The external condition, septic tank facilities, electrical and gas safety, fire management, beautification management, elevators, and environmental facilities should be checked in detail. 

Third, the rate of return analysis. The expected returns from building investment are capital gains and rental income. It is not easy to predict capital gains in advance. There are many variables that affect price fluctuations, such as economic trends, supply and demand, and interest rates. However, considering the recent market situation, conservative calculation of capital gains is a way to reduce risk.

On the other hand, the rental yield can be calculated relatively accurately. First, you should check the vacancy status at the time of purchase and analyze the expected vacancy in the future. One thing you must be careful of is that if you calculate the yield solely based on the lease agreement, you may suffer a loss. Recently, various options are often provided as a service to tenants. Therefore, you should be aware that the contract and the actual contract contents may differ.

Fourth, review of various documents. You can prevent troublesome problems in advance by understanding the legal rights relationship in advance. Legal review of public records such as the rights relationship in the register, lease agreement, land use plan confirmation, urban plan, and district unit plan is basic. 

In addition, it is necessary to thoroughly check related documents such as various drawings related to electricity, facilities, civil engineering, and architecture, as well as various service contracts related to electricity, gas, elevators, mechanical parking, safety inspections, landscaping management, facility management, and security, national and local tax payment certificates, environmental improvement charges, traffic generation charges, and road occupancy fee payment certificates.

In addition, we analyze matters related to investment funds and set up a specific funding strategy to review its suitability. We review and decide on the total investment amount, how to procure funds, and, if using borrowed funds, what conditions are most appropriate.

In particular, the use of borrowed funds has a positive aspect of increasing the rate of return on equity capital, but excessively increasing the proportion of borrowed funds increases the risk of investment.

Finally, we must consider depreciation. Buildings depreciate, which means that the value of the capital invested decreases over time. In addition to physical depreciation due to natural wear and tear, buildings are subject to functional depreciation or economic depreciation.

Functional depreciation refers to factors that decrease in value, such as falling behind trends or styles that do not fit the times, over time. Economic depreciation refers to factors that decrease in value due to changes in relative position or external conditions. The depreciation of an investment target is a factor that increases risk. 

Original link: http://www.newsway.co.kr/view.php?tp=1&ud=2014111814041265198