In general, the yield gap is the difference between the investment yield and the long-term interest rate (10-year Japanese government bond yield, an indicator of long-term interest rates) or borrowing rate, and is one of the important indicators for investment decisions when investing in real estate with loans. It is one of the key indicators for investment decisions of major real estate investment funds in Japan and overseas.
One point to note is that the investment yield in this case may be considered based on the“surface yield,” which does not take into account the purchase cost at the time of real estate investment and the various expenses and taxes that need to be paid after real estate investment. If this is the case, the investment may fail due to the lack of expected income after real estate investment.It is important to calculate the "yield gap" based on the actual yield (NOI yield), which takes into account the purchase cost at the time of real estate investment, various post-investment expenses, and taxes.