When Winning Means a 400 Million KRW Capital Gain... Attention Focused on the Sale of 'Hope Rental' Apartments

Apartment Complex of 146 Units to Be Sold from the 20th... Caution Needed for Loan and Funding Plans

Operation Method of Hope Rental REITs.

[Asia Economy Reporter Donghyun Choi] The government will sell 146 apartments nationwide, whose contracts expired, that were purchased in 2014 to assist marginal borrowers (house poor) starting from the 20th. The first winners will be selected by a 100% lottery system, and some units in prime locations such as Seoul could yield up to 400 million KRW in capital gains, so a large number of bidders are expected.

According to industry sources on the 16th, the "Hope Rental Housing REIT No. 3 (hereinafter Hope Rental REIT 3)" will accept purchase applications for 146 apartments through Onbid starting on the 20th. These apartments were secured by the government in 2014 through the Housing and Urban Fund by purchasing homes from owners struggling to repay mortgage principal and interest, then re-leasing them. The units being sold this time have expired lease contracts. Although the sale is conducted on the public auction platform Onbid, it is a general sale, not a public or private auction, so there are no legal defects or loans on the properties.

Looking at the announced units, 125 units, or 86% of the total, are apartments located in the Seoul metropolitan area, including 25 units in Seoul. For example, a 143㎡ unit in Seoul Forest Hillstate, Seongsu-dong, Seongdong-gu, is appraised at 1.717 billion KRW, while the current market price for the same unit is 2.1 billion KRW. Winning this unit could yield about 400 million KRW in capital gains. In the case of a 134.95㎡ unit in Doosan We've, Gasan-dong, Geumcheon-gu, the price is set at 590 million KRW, while the current market price is about 800 million KRW. Since appraisal values are generally set around 80% of market prices, units in prime locations in Seoul can yield capital gains of several hundred million KRW. A real estate expert said, "Recently, many investors have shown interest in the Hope Rental REIT 3 units. Since these can be purchased cheaper than at auctions and have no defects, competition will be fierce."

The buyer selection method first involves selecting winners through a lottery. If the units remain unsold, the highest bidder wins in a highest-price bidding system. When submitting a purchase application, applicants must deposit 3% of the purchase price as a reservation deposit, and the remaining 7% must be paid as a down payment by the 28th. The balance is due by June 19. Some apartments are currently occupied by tenants; in such cases, the balance can be paid excluding the deposit. The sales contract can only be concluded through the Ministry of Land, Infrastructure and Transport's electronic contract system.

However, there are precautions. When purchasing apartments in regulated areas requiring loans, the loan-to-value ratio (LTV) is determined based on KB Real Estate or Korea Appraisal Board market prices, not the appraised value, so this must be checked carefully. The submission of a funding plan is also required. The period from contract signing to balance payment is about two months. When the Hope Rental REIT No. 2 sold apartments last November, one apartment in Daegu attracted 513 bidders. Park Cheol-ho, head of the Auction Academy, said, "Apartments sold by Hope Rental REIT are not public sales due to national tax arrears or auctions under the Civil Execution Act, so submission of a funding plan is required. Loan limits vary depending on whether the property is in a regulated area and the level of home ownership, so these must be confirmed."

This content was produced with the assistance of AI translation services.