The number of high net worth individuals with financial assets of more than 1 billion won is estimated to be over 160,000. The proportion of deposits of these so-called 'super rich' out of the total is also on the rise. 

As the super-rich increase, competition among financial institutions to attract them is also gradually heating up. Nevertheless, the super-rich still love real estate. They are actively investing in small and medium-sized buildings that can provide stable rental income. 

Mr. Lee, who was a branch manager of K Bank, purchased a small building in Daechi-dong for 5.4 billion won early this year. The market price of this five-story building was over 6 billion won. However, it was put up for quick sale, so the price dropped to 5.4 billion won. There are no vacancies at all. It was a good deal, with an expected annual yield of 5%.

I borrowed 1.6 billion won, which is about 30% of the purchase price, and the remaining 3.8 billion won was raised through stock sale funds and deposits. In the pursuit of a higher rate of return than the deposit interest rate of 2%, I looked for a stable investment destination, and there was nothing like a building. 

As the real estate market slows down, apartment transactions are slowing down, but investment interest in income-generating real estate is not ceasing. In particular, interest in small and medium-sized buildings among the super-rich continues steadily. 

Just as in the past, owning an apartment in Gangnam was considered rich, these days owning a building has become a measure of being rich. Riding this boom, investments in small and medium-sized buildings are gaining popularity. 

Most buildings in key areas such as Gangnam are listed for over 10 billion won, but if you look toward the back streets, you can occasionally find buildings worth 1 to 5 billion won. Buildings have emerged as the number one asset on the list of the super-rich.

“I have about a billion won in spare cash. Can I buy a building with stable rental income?” This is one of the most frequently asked questions by Gangnam real estate agents these days.

The advantage of small and medium-sized buildings is that you can receive regular monthly rent and expect to make a profit when selling them in the future. In addition to office space for business, commercial buildings worth 1 billion to 3 billion won with a stable return of 4 to 5% are also popular.

At one time, the commercial space with the most coffee shops had the highest prices, but now, many people are looking for commercial spaces with SPA brands. 

Some super-rich people look for section offices when they have difficulty purchasing a whole building due to a small investment amount. Section offices refer to a place where one floor of an office building is divided into several sizes and sold. There are also places where they are sold not only in sections but also in units of 1 or 2 floors.

However, we must take into account the recent trend of increasing building investment risk. The slump in the rental market is serious. Now, the rising vacancy rate and stagnant rent are becoming structural phenomena. The red light has been turned on for the building investment return rate. 

The explosive increase in building supply is also a burden. High-rise buildings are scheduled to be built in the city center and Yeouido until 2017. As a result, the building market is expected to face an oversupply situation for the time being. 

Furthermore, considering the economic scale, production population, and office demand, the possibility of adverse effects due to oversupply is expected to increase in the future. Investors who are planning to enter the building market should adopt a conservative strategy. Until they are certain that they will make a profit, a defensive investment strategy is desirable. 

It is essential to check for vacancy. The key to building investment is vacancy. It is essential to analyze the vacancy rate and tenant status of the building in question, and also check the vacancy status of surrounding buildings. 

You should anticipate not only the current vacancy rate but also the future vacancy rate. The more quality tenants, such as foreign companies or financial institutions, move into a building, the better it is.

Major career 
2004~2009 ERA Korea (Head of Headquarters) 
2009~2013 CEO of Wide Partners Co., Ltd.
2013~Present Representative Director of RE/MAX Korea

- Director of Gangnam Chamber of Commerce, Seoul Chamber of Commerce and Industry
- Standing Director of Korea University Economic Association 
- Advisory member of the Gangnam-gu Honorary Company Attraction Advisory Group 

Original link: http://www.newsway.co.kr/view.php?tp=1&ud=2014072907232126962