Owns 14 rooms and earns 6.6 million a year from rent collection! The couple thought they could have a stable retirement and "this incident" turned out to be a nightmare

Succession planning is not just about finding ways to save taxes, but more importantly, ensuring that the next generation will be able to take over. (Diagram, Reuters)

[Financial Channel/Comprehensive Report] The annual rent is 32.57 million yen (approximately NT$6.67 million), he owns 14 properties, and his net worth exceeds 330 million yen (approximately NT$67.58 million). He originally thought he could live his old age comfortably on rent, but he didn’t expect the real crisis was yet to come! A Japanese couple in their 50s is seeing their house gradually aging. They may have to spend a lot of money on renovations and reconstruction in the future. What's even more troublesome is that "their three children have their own plans for inheritance." What was originally an enviable life as a rent collector may turn into a financial bomb that the next generation cannot shake off.

Japanese media reported that the couple surnamed S (pseudonym) has purchased income-generating real estate over the years. Currently, the husband owns 7 properties and the wife also has 7 properties, for a total of 14 properties. The annual rental income is approximately 32.57 million yen. After deducting operating expenses of approximately 8.11 million yen (approximately NT$1.66 million), the annual net income is still approximately 24.46 million yen (approximately NT$5.01 million). The leasing business is currently quite stable.

The total value of the real estate held by the couple is approximately 336.25 million yen (approximately NT$68.86 million). However, these properties are not without their pitfalls. Among the 14 properties, some buildings are over 20 to 30 years old. In the future, the exterior walls, roofs and drainage equipment may need large-scale repairs, or even demolition and reconstruction. Once multiple houses enter the renovation stage at the same time, the funds required will be considerable; the aging of the buildings may also affect leasing, resulting in an increase in vacancy rates and a decrease in rental income.

What makes the couple even more troubled is that their three children have different ideas about inheriting assets. The 30-year-old eldest son is interested in real estate management and will consider taking over the leasing business in the future; the second son holds a real estate broker's license and has also worked in a real estate company and has relevant professional background. As for the 25-year-old eldest daughter, she hopes to inherit assets that do not require too much effort to manage.

The tricky thing is that if 14 real estate properties are directly distributed to 3 children, it may not only increase the management burden, but also cause disputes due to joint ownership. For example, whether there will be future renovations, how the cost of the repairs will be shared, or even whether the home will be sold.

In this regard, experts suggest that the couple should re-examine the profitability, age and repair costs of each property, and classify the properties into types such as continued holding, repair and improvement, demolition and reconstruction, and sale. Properties with stable income can be retained. Properties that are older, have heavy repair costs, or have a high risk of vacancy can be sold, and then the funds can be invested in new properties with lower management burdens. Instead of constantly adding properties in the past, we can shift to eliminating the weak and retaining the strong.

As for asset inheritance, experts recommend that the eldest son and second son get involved in the leasing business in advance, from sorting out property information and income and expenditure records to actually participating in leasing, repair and sale decisions, and gradually accumulate business experience. The eldest daughter can inherit assets with low management burden, such as deposits, securities and life insurance, to avoid joint holding of real estate and reduce future disputes.

At present, the couple has begun conducting real estate sales valuations and building inspections, and is evaluating the feasibility of demolition and reconstruction of some items. At the same time, they are planning to clearly arrange the inheritance of the property for their three children through a fair will.

Experts point out that inheritance planning is not just about finding ways to save taxes, but more importantly, ensuring that the next generation has the ability to take over. For families holding a large amount of income-generating real estate, a larger number of properties does not necessarily mean greater wealth. If the aging of the buildings, repair costs and management burdens are ignored, assets that could originally generate income may become a heavy burden for their children in the future.