A century-old wealthy family that rose from Shanghai

Chapter 80: Repayment of principal upon maturity (Please subscribe~Please give me a monthly ticket~)

In an office, Chen Guangliang, accountant Chen Shukun, accountant Guo Deming, and architect Lu Yuantai discussed the real estate project on Yuyuan Road together.

Among them, Chen Shukun is a part-time worker, but he has already put in more than 20 days of work and has basically figured it out.

Why does Chen Guangliang insist on having two 'accountants' to work for him?

It was very simple. The real estate project he was going to invest in next was a "speculative" business, so he had to make sure he had a clear budget. If he lost money or couldn't make ends meet, it would not be worth it!

"The construction cost plus taxes will not exceed 18 yuan. Are you sure you can do it?" Chen Guangliang asked again and again.

The original estimate for the construction cost was 15 yuan, but it has exceeded the budget by some margin, mainly due to the garden, steel windows, sanitary ware, hot and cold water pipes, and everything else.

This is much more expensive than the traditional old-style Shimenku building.

Chen Shukun said: "There is absolutely no problem. There is enough room in the budget."

Chen Guangliang nodded, then looked at Guo Deming and Lu Yuantai, asking them to express their opinions. They had also been involved in this project for ten days.

Guo Deming immediately said, "Well, I've discussed this with Yuantai, and 18 yuan is doable. But this doesn't include the land rent, which is quite a bit, after all. Fortunately, it should be payable annually."

Chen Shukun was stunned and said, "Rent, isn't it the land you bought?"

Chen Guangliang smiled and shook his head, saying, "The land is intended to be leased, and the construction costs will be paid for by the tenants themselves. I call this a 'construction-on-behalf-of project.'"

Chen Shukun was even more confused, and Guo Deming and Lu Yuantai also didn't quite understand what was said next!

Chen Guangliang only explained the matter of "leasing land" to Chen Shukun, and did not say much about the subsequent "construction on behalf of others". After all, he needed to find a bank as a "guarantor" next.

The plan must be implemented step by step!

Jincheng Bank Building.

Chen Guangliang came to Cheng Zikang's office to discuss cooperation matters.

"Manager Cheng, I plan to lease a piece of land on Yuyuan Road for twenty years and then build a new lane. I'm here to seek your cooperation!"

Cheng Zikang said in surprise: "Leasing land and investing in real estate, will the owner agree?"

Chen Guangliang explained that the owners here can not only get rent, but also get a new-style house in a lane after 20 years, which is very cost-effective.

"I see. If you were to profit from rent collection in this way, you'd be able to make several times the profit in twenty years. However, considering the interest on the loan, it would be difficult for you to make any profit."

Currently, Hua Xia’s deposit interest rate is 8%, and its loan interest rate is 15-20% (there are also low-interest loans, even at 8%, but few people can get them), which are both relatively high.

This is because the business environment of this era is such that high profits must be guaranteed to withstand "high risks".

Chen Guangliang said: "We don't lend money"

Cheng Zikang was surprised that such a large project didn't require a loan. He asked, "Then why did you come to me?"

Chen Guangliang's next words opened Cheng Zikang's eyes.

"For this project, I've come up with a 16-word business plan: rent the land, build the house, sell the rooms separately, repay the principal at maturity, and the house will return to the landlord."

After some thought, Cheng Zikang said, "Renting land to build a house, and the house belongs to the landlord—these eight words are easy to understand. But how do you explain 'selling the rooms separately, and repaying the principal when due'?"

Chen Guangliang said confidently: "After we sign the land lease agreement with the owner, we will advertise the sale of the property in layers in the newspaper. That means the customer can deposit a sum of money into our bank account as a 'construction fee', for example, 4000 yuan. The monthly interest on this money is less than 30 yuan, which is their rent. This saves them 10 yuan per month, and there is no risk of rent increases, and they save a transfer fee of up to 500 yuan."

Cheng Zikang understood a little bit about the trick, but he couldn't believe it and said, "And you really plan to return their principal in 20 years?"

The repayment of principal upon maturity is obvious. Chen Guangliang nodded and said, "That's right. The bank will guarantee that these houses will be completed and delivered within one year. The bank will also guarantee that their principal will be returned after 20 years. Of course, they will also return the houses to us."

The temptation is too great. Currently, there are only 80,000 houses in Shanghai (excluding refugee shelters), but there are millions of people.

There are still a lot of people who can afford it, mainly because houses are not sold in layers, and they are all purchased by the building (most owners are reluctant to sell), and a small villa costs tens of thousands of dollars.

Moreover, in this plan, the principal can be returned after 20 years, which is equivalent to "living for free". Of course, the house must also be returned after 20 years.

In this era, there was no precedent for "selling and buying properties by floor and room", only leasing.

Cheng Zikang's expression turned serious, and he asked, "Then what benefits does our bank offer? After all, although customers deposit money, you will use it for construction costs, etc., but we have to guarantee to repay their principal in twenty years?"

In fact, he already understood, but just wanted to hear a specific plan from this young man.

Chen Guangliang said confidently and charmingly, "Why not cooperate? First, your bank might gain hundreds of high-quality customers. Second, if we calculate based on 135 buildings with 50 floors, we can obtain nearly 8 yuan in funds. We only need to withdraw a little over 50 yuan for construction costs, etc., and we will still have about yuan in the bank. The annual interest (%) can be used to pay for land rent, compound interest, and dividends from the real estate company. This way, the funds in the account can gradually return to yuan. At the same time, we are also mortgaging our house with your bank, which is a double insurance."

His accountant has calculated the cost, which is 180,000 yuan.

Changjiang Real Estate reported tens of thousands more in construction costs, increasing it to around 23 to 25 yuan.

In this way, the extra tens of thousands of construction funds will be the "profit" of Changjiang Real Estate this year.

There was still about 30 yuan left in the Jincheng Bank account, generating 2.4 yuan in interest annually. About 4500 yuan would be used as annual rent, 10000 yuan would be deposited into the Jincheng Bank account to compound interest, and the remaining 9500 yuan would go to Changjiang Real Estate's dividends and rental taxes.

This is a 'win-win-win' situation:
The land owner won the rent and the house rights after 20 years, the bank won a large amount of funds and hundreds of potential high-quality customers, the owner won the house that he could live in for free for 20 years, and Changjiang Real Estate won a good profit and annual dividends.

"Alright, such an excellent business plan, truly a classic. We at Jincheng Bank are willing to cooperate, but the specifics require detailed discussion. For example, what should be the limits between the construction funds you withdraw initially and your own profits? For example, what is the annual interest ratio between the three? You should have a detailed plan for these, right?"

Chen Guangliang nodded and said, "I've hired two accountants, and they've calculated the accounts very clearly. Once we sign the land lease with the owner, we can discuss this in detail!"

Cheng Zikang evaluated the work as very comprehensive and every step was planned.

The calculations here really need to be done by a professional accountant, otherwise if there is a mistake in any place, all the work will be in vain.

Finally, Cheng Zikang was quite curious about a question: "You also have land on Yuyuan Road. Why don't you use your own land?"

Chen Guangliang said, "I only have one piece of land that's suitable, but the location is a bit off. Besides, once this piece of land is successfully operated, the value of the land I own will also increase. It won't be too late to consider it then."

Cheng Zikang said with foresight: "If you can make this project a success, there should be land owners willing to work with you!"

This is the truth, Chen Guangliang himself had the same idea.

Changjiang Real Estate not only wants to make a lot of money, but also wants to earn enough "credibility".

Reputation is something that is of immense value and cannot be bought with money.

Chen Guangliang said modestly: "I hope so, but I still hope to complete this project steadily this year!"

Cheng Zikang said, "Okay, if you need any help, just let me know. Our bank has more experience in real estate investment."

This is not about giving Chen Guangliang a bargain, but about winning over such a "real estate upstart".

From the very beginning of their acquaintance, Cheng Zikang attached great importance to Chen Guangliang and would exchange experiences on land investment.

"Okay, thank you, Manager Cheng."

(End of this chapter)