Double loss because of shophouse
In early 2022, many shophouse products were launched on the market with a "virtual" fever, pushing the prices of these products sky high. This caused many investors with speculative and surfing mindsets to rush into the market to seek short-term profit opportunities regardless of the risks.
Having bought a shophouse of over 140 square meters in a project in Thu Duc City (HCMC) for over VND20 billion, Mr. Long - an investor in HCMC is sitting on hot coals because the wave of land returns has made it impossible for his shophouse to find tenants. In addition, because most of the investment money comes from bank loans, each month Mr. Long has to manage to pay tens of millions in interest.
Shophouse is a type of property that has attracted the attention of many investors, especially in large urban areas and tourist areas.
“In the past, when renting was easy, this shophouse generated a cash flow of about 20 million VND/month. But in the past few years, I have left the house empty because I could not find a tenant, and I did not have time to take advantage of the business. Currently, I am selling it at a loss compared to the original price of 3 billion VND but have not found a buyer. There are some people who were brought by brokers but they just looked at it and left it there…”, Mr. Long shared.
This investor also said that at the time of buying this shophouse, he was promised by the broker the ability to generate easy cash flow to offset the loan capital. At the same time, when the urban area develops, this shophouse will increase in price and easily make a profit of 30% - 40% after 2 years. However, in reality, due to the impact of the COVID-19 epidemic, he was unable to do rental business after receiving the house. When he found a tenant, he could not extend the contract due to poor business.
Mr. Long said that the difficulty in renting out a part of the shophouse location was unreasonable when there was a lack of parking space, too few residents, and the shophouse area was far from the apartment complex. For that reason, this investor said that he had invested in the wrong place when he did not carefully research the business and profitability of the product.
Not to mention, investors have continuously launched many shophouse products in the market in recent years, even though the old products have not been sold out. The above reasons lead to the fact that house prices cannot increase, business is difficult, and bank interest must still be paid regularly, causing initial investors to suffer double losses.
Similar to the above case, Mr. Nguyen Truong Giang (Hanoi) is also "stuck" with a shophouse in a large urban area of the city. Mr. Giang had to borrow nearly 10 billion from the bank to own a shophouse worth 18 billion VND, with an area of over 100m2.
Despite spending a large amount of money, after buying this shophouse, Mr. Giang could only earn 30 million VND per month from renting it out. The rental income was not enough for this investor to pay the bank each month and had to mobilize more from other sources.
There are periods when the number of shophouses on the market is so large that supply exceeds demand.
It is worth mentioning that from the beginning of 2023 until now, Mr. Giang's shophouse has not found a tenant. Due to being too tired of the pressure from the bank, he is also reselling the shophouse for 14 billion VND.
“Many of my friends and relatives are also having to bear losses because of investing in shophouses in many places such as Hanoi, Hai Phong, Ho Chi Minh City, Kien Giang... Most of them have been stuck with this type since the hot market growth period in early 2022 and half of them are also having to sell at a loss. However, at this stage, I think cutting losses is also very difficult,” said Mr. Giang.
Making profit from shophouse is not easy
With the market “collapse” at the end of 2022, many people who could not sell their properties in time had to find tenants to wait for the market to improve. However, due to high prices and the use of large leverage, the cash flow was like a drop in the ocean compared to bank interest. Therefore, a series of losses occurred in a number of projects with excess supply, especially in urban areas far from the city center with a small population.
Some investors with many years of experience in "holding" shophouses also shared that the profit rate of shophouses in some areas is only 2-3%/year, which is 3-4 times lower than the interest rate of savings deposits. Not to mention that in the current period, business premises are being overshadowed by e-commerce. The wave of returning premises has made many landlords miserable, unable to find tenants for many months now.
Choosing the "right location" shophouse is an important factor to profit from this product.
In addition, many shophouse products also lose value over time because this type of property has a 50-year ownership period. In some projects, many shophouses have been left empty for 5-10 years due to delays in implementation due to many procedural problems. If investors do not have clear information, they will have difficulty buying these shophouses because the ownership period has shortened.
In addition, choosing a shophouse in the right place is also extremely important if you want to make a profit from this type. According to experts, choosing a profitable shophouse product must come with many factors such as a densely populated area, reasonable price, good product construction quality, project location with high expectations for infrastructure development...
In addition, buyers also need to choose products with suitable designs for ease of business, thereby making it easy to find tenants. In addition, the shophouse area should not be too small because it will be difficult to exploit commercially.
Source
Comment (0)