How a salaryman in his 30s became a building owner (Chinese) [김범수의 좌충우돌 경제만상]

View of downtown Seoul from the observatory of the 63 Building in Yeouido, Seoul. yunhap news

‘The owner of the building above the creator’

It is an expression that compares the phenomenon of being the owner of a building as the top hope for the future of young people these days, because if they own a building, they can earn a living without having to work. However, the realities of building owners are not so rosy.

Kim (38), an office worker who won the auction for the 43rd generation one-room building in Dongjak-gu, Seoul. Kim’s wish to be ‘a building owner above the creator’ was fulfilled, but the joy was short-lived.

As soon as Mr. Kim received the bid for the building, he had to diligently search for real estate agents nearby to find a tenant. The price of the building that Kim won the bid for was 4.5 billion won. Among them, the loan amount alone is 30 billion won. This is because, if he cannot pay interest expenses of more than 100 million won a year, his building, which he purchased after hard work, goes to a public sale again.

If a vacancy is not found, the building will be sold at a public sale.

The only way to pay interest right now is rental income. Therefore, if the vacancy cannot be filled, Kim’s rental company will go bankrupt. The balance of monthly maintenance fees could not cover the interest expenses.

Kim calculated that he had to fill 30 or more of his 43 households and receive monthly rent to be able to pay interest to the bank stably. Since I had to pay interest from next month, I met more than 10 local realtors one by one and introduced my building without enjoying the joy of being the owner of the building. The real estate agents had to serve meals as well as give small gifts. Some went out with a rental corporate card, but most of it was financed by Kim’s private expenses. You have to save even a penny right now, and it could be a matter of embezzlement.

Kim’s building is located near the station, and after returning hours and weekends after work to find a real estate agent, he managed to finish the lease contract for 40 out of 43 households in less than a month. However, he did not have time to understand the character of the lessee who signed the contract because he was in a hurry to fill the vacancy. This was a risk that could cause problems in the future.

Kim explained, “Even if a one-room building is purchased at a lower price than the market price, if it is not leased, the building will go to a public sale immediately, rather than making a profit.”

There are two types of rentals: monthly rent and jeonse. The pros and cons of each were clear. If you receive monthly rent, you can generate profits even after paying interest, but the debt ratio of the building remains the same, and you always have to take on the loan risk.

Conversely, if the entire household was filled with cheonsei, all bank loans could be repaid, but they could hardly earn any income because they did not receive monthly rent. The balance of the management fee is all the revenue.

In addition, Kim formed a corporation with 11 other investors and bought the building, so he had to share the profits to hold the investors for a long time.

Kim said, “I was the one who attracted investors, so I had to personally manage the vacancy and pay interest expenses. Of course, there are companies that manage all the buildings, including rental contracts, but I decided to do it myself to save money.”

◆One piece of negligence bill ‘Hwadeuljjak’

Kim sighed to some extent as he filled the vacancy of the winning building and paid interest stably, but the peace was short-lived. One day, a fine for negligence suddenly flew to Mr. Kim.

The fine was due to illegal modification of the building. Kim’s building is being used as a studio, but the purpose of the building was to combine a gosiwon and a reading room.

If the purpose of the building is a gosiwon, it is possible to install a sink and induction for cooking in each household. However, cooking utensils could not be installed on the 2nd and 3rd floors, which were reserved for the purpose of reading rooms. However, the previous owner of the building installed cooking utensils in each household without obtaining permission from the local government, resulting in a fine for negligence. The amount of fines to be paid each year exceeded a whopping 80 million won.

This was the so-called ‘short sale risk’. The short sale does not explain all the circumstances of the building. In addition, the successful bidder bears all administrative and legal risks, such as fines for negligence, the exercise of liens, and the resistance of the lessee. In other words, it also means that there is a reason that most of the real estate comes out cheap through a short sale.

“It felt like the sky was falling when the fine for negligence came,” Kim said. He said, “The combined interest expense and fines are over 200 million won a year, and in this case, we couldn’t afford it with our monthly rental income,” he said.

However, he could not ask the ward office to change the purpose of the building. Because the purpose of the building is strictly managed by the local government, it was not changed for the convenience of one lessor.

The method Kim chose was to directly restore the problematic generation to its original state during the period of the administrative order for illegal remodeling.

First of all, the lease agreement was terminated after asking the consent of the lessee living on the 2nd and 3rd floors of the building. And after removing all the sink and induction of the generation in question, it was replaced with a small office (SOHO) rather than a studio for residence. I didn’t have the money to use an interior company. While studying, Kim did the construction herself.

In addition, one room located on the 2nd and 3rd floors in question was emptied and a microwave oven and a removable sink were installed so that people living in Soho could use it as a common lounge.

The idea of ​​renting some floors into offices was a big adventure, but contrary to Kim’s concerns, the rental agreement was easier than the housing agreement. It was because the office was in demand thanks to the advantage of being located near the subway station.

Kim said, “For the first time in my life, I did the (problematic generation) construction by referring to books and YouTube. There were times when I regretted buying the building for nothing because I thought I was having a hard time buying it.”

Reporter Kim Bum-soo [email protected]

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Source: 경제 by www.segye.com.

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