In the real estate market, interest in existing condominium units purchased with renovation in mind has continued ever since 2016, when the number of resale condo transactions surpassed new-build sales. This article explains strategies for increasing asset value through renovation when investing in used condominiums.
Why are used condominiums being chosen now?
Lower prices and easier financing
Used condominiums, which are not directly affected by rising construction costs, are overwhelmingly more affordable than new builds. In a prolonged low-interest-rate environment, they offer the advantage that existing properties with lower acquisition costs can more easily achieve higher yields.
More inventory and better location choices
Unlike new builds, resale properties offer a broad range of attractive options, including homes near stations and in quiet residential neighborhoods. As investment targets, they allow for selective decisions focused on area and location.
Renovation can create added value
Unlike the uniform layouts often found in new builds, used condominiums can be renovated into distinctive spaces suited to current lifestyles. This is also effective for differentiating rental properties.
What are the key renovation points for used condominiums?
Renovation priorities for exclusive-use areas
The following are the main renovation priorities, ranked by cost effectiveness.
- Wet areas: separating a three-in-one unit bath, installing a system kitchen, and adding a bathroom dryer (particularly effective for reducing vacancies in properties targeting women)
- Layout changes: converting to an LDK layout (integrating separate rooms with the dining kitchen) and changing a traditional closet into a wardrobe closet
- Interior finishes: changing wallpaper and flooring materials, and eliminating level differences
Renovating common areas also helps improve asset value
If owners want to enhance the overall image of the building, entrance upgrades, exterior wall cleaning, landscaping, and changes to exterior lighting are effective measures. In particular, introducing marble-style materials or indirect lighting at the entrance can significantly change the impression of prospective tenants.
How does renovation affect asset value?
The asset value of a used condominium depends heavily not only on location and building age, but also on the condition of the living space. Especially for properties around 20 years old, the actual quality of the living environment increasingly drives demand. Compared with unrenovated properties of the same age, renovated units tend to be less vulnerable to declines in asset value and are also better positioned to maintain rent levels.
From a rental management perspective, profitability can be maximized by combining this approach with strategic leasing operations. In addition, selecting a reliable property management company is essential for preserving asset value over the long term.
Related Reading
- What are “leasing operations” that determine success or failure in rental management? A thorough guide to vacancy measures and profit-maximizing strategies
- How to choose a property management company for rental real estate | 7 points owners should prioritize and the keys to success
- Why rent setting influences sale price | A real estate investment strategy where a JPY 10,000 monthly difference creates JPY 3 million in asset value
Frequently Asked Questions (FAQ)
Q. What is the typical cost range for renovation?
As a general benchmark, full renovation of wet areas typically costs around JPY 2 million to JPY 4 million, while a full renovation including layout changes is often around JPY 5 million to JPY 10 million. Actual costs vary significantly depending on property size and specifications.
Q. Which is better for investment: a renovated used condominium or an unrenovated property?
If you keep acquisition costs low and handle the renovation yourself, you may be able to target higher yields, but there is vacancy risk during the construction period. Renovated properties, on the other hand, are move-in ready and offer greater stability, although they tend to be more expensive.
Q. At what building age does a used condominium have renovation value?
In general, properties that are 20 to 30 years old often see a substantial increase in asset value through renovation. However, this assumes prior confirmation of the building structure, management condition, and earthquake resistance.
Q. Can common-area renovation in a condominium be decided solely by individual unit owners?
Renovation of common areas requires a resolution by the condominium owners association. Ordinary work generally requires a simple majority vote, while large-scale renovation requires a special resolution of at least three quarters.
