![[Example Explanation] How to Use Urbalytics: 5 Steps to Identify Overvalued Properties?](/_next/image?url=https%3A%2F%2Fcdn.sanity.io%2Fimages%2Fgopsma22%2Fproduction%2F982731cd13fd268aa2fef74c89904c1456a8f192-2074x1204.png%3Ffit%3Dmax%26auto%3Dformat&w=3840&q=75)
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Since the launch of Urbalytics, we have received a lot of user feedback: "It has rich features, but I don't know where to start."
This article will teach you how to quickly assess the investment value of a property using Urbalytics through real life cases - especially those properties that are clearly pitfalls at first glance.
⚠️Reminder: Some features (such as rent inquiries) are paid features and are only available to paying users.
📍Case Information (Figure 1)
Case Info (In Japanese)
• Location: Hirai 3-chome, Edogawa-ku, Tokyo
• Price: 249.8 million yen
• Gross Return Rate: 6.5%
• Land Area: 198.34㎡
Step 1 | Use "Property Search" to Quickly Locate Target Listings
1. Log in to Urbalytics, click [Property Search] from the main menu.
2. Select "Building" as the search area type in the upper right corner.
3. It is recommended to use the metro station name (e.g., "Hirai") or address keywords (e.g., "Edogawa-ku Hirai") for the search (Figure 2).
use the metro station name to search
4. By narrowing the scope of results using the land area (198.34㎡), the object can be precisely located (Figure 3)
Landsize（198.34㎡）to narrow down scope
5. Click the details button on the right to enter the analysis page (Figure 4)
Detailed Info View
Step 2: Identify "Resold Items" from Price Change History
1. Scroll to the [Price Change History] section (Figure 5)
【Price Change History】Section
2. It is evident that there have been 32 price changes for this property.
3. According to the "Price Trend Chart," this property might be sold in May 2024 for 197.5 million yen or less.
4. It was then resold for 280 million yen, but within six months, the price dropped to the current level.
5. Considering a 20% profit, the seller, as a trader, likely has a psychological price range of 230 to 240 million yen.
6. The multiple price adjustments and quick re-listing indicate that this is a typical resale case.
Step 3: Compare the surrounding return rates to see if it is "overpriced."
1. Slide to [Nearby Sales History] (Figure 6)
![[Nearby Sales History] Section](/_next/image?url=https%3A%2F%2Fcdn.sanity.io%2Fimages%2Fgopsma22%2Fproduction%2F091f03665be15c994285766bd628b0fe0276a86d-2740x1680.png%3Fw%3D1600&w=3840&q=75)
[Nearby Sales History] Section
2. Filter criteria: Building age of 30 years or more (additional criteria can be added based on the property situation)
3. Yield range obtained: 4%～11.02% (average 6.81%, 80th percentile is 9%)
4. The current property's yield is only 6.5%, below the average, classified as a "buy to lose" type of property.
Step 4: Evaluate the Potential for Rent Increase
1. If the rent is below the market average, returns can still be increased through operational improvements.
2. Slide to the [Rental Upside] section (Figure 7).
![[Rental Upside] section](/_next/image?url=https%3A%2F%2Fcdn.sanity.io%2Fimages%2Fgopsma22%2Fproduction%2F8aa2711fbff8d688e1276dcb6299377ec73e0578-2756x1536.png%3Fw%3D1600&w=3840&q=75)
[Rental Upside] section
3. The results indicate: the rent of this property is 17.6% lower than the surrounding area, which implies potential for an increase.
4. Assuming an improvement could increase rent by half (i.e., approximately 8.8%), proceed with a cash flow simulation (next step).
Step 5: Calculate the Payback Period and IRR with Cash Flow Simulation
1. Slide to the [CF Simulation (Cash Flow Simulation)] function (Figure 8)
【CF Simulation】Section
2. Adjust the expected annual income to: 16.23 million × (1 + 8.8% rent increase) ≈ 17.65 million
3. At the same time, adjust the expected rate of return on future sales to: 7.5% (considering the age of the property at the time of sale and the discrepancy between the listing price and transaction price, an increase of about 10% was added on the average of 6.81%)
4. Simulation results show: Cash flow turns positive from the 6th year (Figure 9), selling in any of the first 5 years results in an overall loss.
Cash flow is positive from 6th year
5. Viewing the [Detailed Data Table], the highest internal rate of return (IRR) for investment is achieved by selling in the ninth year, approximately 2.52% (Figure 10), while in other years it ranges between 1-2, which is extremely low.
IRR highest at year 9
6. To achieve the goal of "10% IRR within five years," the purchase price needs to be reduced to approximately 210 million yen (Figure 11).
210 million purchase price to achieve 10% IRR for 5 years
IRR (Internal Rate of Return) is an investment project's own "earned" annualized return rate, used to determine whether it is worth investing in. If it's higher than the return you require, it's worth investing in; if it's lower, it's not worthwhile.
✅ Conclusion: Is this item worth acquiring?
Price History: A typical resale item with frequent price fluctuations within a year.
Current Quote: Expected to exceed the previous purchase price by over 60 million.
Return Rate: Significantly below the regional average, difficult to attract mainstream investors.
Rental Level: Below the surrounding average, with some room for improvement.
Investment Return: Significant price cuts are needed to meet IRR requirements.
Summary
If the price cannot be reduced to below 210 million, even with improved rent, the long-term IRR is only about 2%. Unless you have a particularly optimistic view of the future appreciation of this area, it is advisable to approach this property with caution.
To conduct similar analysis on your own items, you can log into Urbalytics for a free trial:
👉 https://urbalytics.jp/login?tab=signUp
Or send us the object picture, and we will customize a detailed report for you 📩
