Wouldn't it be more profitable for someone like Lee Dae-ho to save money in a bank rather than buying a building?
I heard that former baseball player Lee Dae-ho owns a building in Seomyeon.
Looking it up, it is a scale of 13 floors above ground and 2 floors below ground.
I don't know the exact market value of that building, but comparing it to the surrounding market prices,
I estimate it to be approximately 12.7 billion KRW.
Of course, one doesn't buy it for the full 12.7 billion KRW. When buying a building, depreciation is deducted to some extent,
and since you buy it by assuming the Jeonse (lump-sum deposit) liabilities, the sale price is reduced by the amount of those deposits.
Since he likely negotiated with the previous owner, even if we assume he bought it for a slightly discounted 10 billion KRW,
including acquisition tax, the actual transaction price would be expected to be around 10.5 billion KRW.
However, vacancy rates for commercial buildings in Busan are severe these days, so you can't charge rents as high as in Seoul.
If we assume an annual yield of 5%, for a building like that, I estimate about 4.5 million KRW per floor.
If we set the average revenue per floor at 5 million KRW, assuming all 13 floors are fully occupied,
the pure rental income would be expected to be around 65 million KRW, or 71 million KRW including VAT.
If you add the management fee income from each floor, the pre-tax amount is expected to be around 75 million KRW.
But for a building that large, fixed costs are enormous.
Just looking at the list of taxes: VAT, comprehensive income tax, local income tax, land holding tax, plus health insurance premiums—it's massive.
Looking at just the monthly fixed costs: common area electricity, elevator maintenance, CCTV rental, fire insurance, and management office staff salaries...
I suspect at least 50% goes out every month for taxes and fixed costs.
If we assume the rental income hitting Mr. Lee Dae-ho's bank account is 75 million KRW,
the monthly fixed expenses would be expected to be at least 36 million KRW + alpha.
Since Mr. Lee Dae-ho also engages in broadcasting activities, he will be subject to progressive taxation on comprehensive income tax,
so his income tax will be huge... and since vacancy rates in Seomyeon are serious these days, a single vacancy causes a big blow.
Wouldn't it be much more peaceful to just put the money used to buy that building into a bank and collect the interest?
If we assume he bought the building for 10 billion KRW, the monthly interest income after tax would be around 20 million KRW.
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