Real Estate Japan | Tokyo, Osaka, Nagoya Properties For Rent & Sale

For individual investors interested in a steady income from real estate investment opportunities, the best rental income yields can be found in growing areas on the outskirts of major cities, where urban development continues apace. We often hear that land values are highest in Tokyo so it makes little sense to buy anywhere else. Our experience and a comparison with what is available in/near other major Japanese cities both confirm that Tokyo is overpriced in many cases. Seeking information about opportunities outside Tokyo, especially used apartment complexes in residential areas, is worth the time and effort.

When investing in property in Japan, is there more value in buying-to-rent or in land appreciation?

Buying used apartment complexes to rent for monthly income (positive cash flow) is the smarter, more realistic option. Since Japan has been mired in depression since the mid 90’s, property values have, by and large, remained depressed, thereby keeping land appreciation out of the equation. While land is the most important factor, typically counting for about 80% of a property’s value, it will take many years to achieve a worthwhile capital gain which might never eventuate if land values don’t recover.

How have Japanese land prices changed in the past few years, and which direction are they headed in?

Land prices have stabilized over the past few years when considered against the huge drops of the mid 90’s and early 2000’s. But again, if you are investing mainly for positive cash flow, investing in Japanese property can be lucrative – and if property values do increase you will have lucked out. Still, this is mere speculation, not an investment strategy per se. Most people mistakenly look for property appreciation, which may work in other countries, but seldom does so in Japan.

How do you view Japanese real estate for investment purposes?

Japan has three main advantages over the other major economies.

1. Rents are usually high enough and mortgage repayments low enough to provide a positive cash-flow for the property owner.

2. In most cases land accounts for about 80% of the value of the property, whereas in other major economies the land value is more like 30-50% of the property’s value.

3. In Japan the landlord is usually viewed as doing a favor for the renter. In addition to a security deposit, the tenant often has to pay key money (1-2 months’ rent as a gratuity) to the owner for being able to rent the property, plus a contract renewal fee (1 month’s rent) every two years. Moreover, real-estate management companies are usually good at managing the details because Japan is a service-oriented country.

In conclusion, investing for capital gains only in Japan is risky, but the 3 factors above make Japan an excellent place to invest in property for positive monthly cash flow.

Special thanks to Jason Hurst (CII IFA) Director of Operations of International Solution Group (ISG). Contact Jason and get further information from ISG about property investing in Japan here.

Tokyo Apartments For Sale | Tokyo Apartments For Rent | Real Estate Japan