Investing in Japanese Properties with Peace of Mind

01 Apr, 2019 –

Japan Share House

Japan Guest House

Taking the first step to invest in properties outside your backyard can be daunting. The opportunities sound fruitful, but how exactly would you manage a property in Japan if you do not know the language? It is entirely possible and from the comfort of your own home with the services of a trusted English-speaking proxy in Japan to research the right property, purchase, manage, collect payments, transfer income and eventually resell, all upon your direction.

Here are some of the highlights of what a proxy (like us) can do for you –

Help You Achieve the Best Yield for your Growing Portfolio

Japan’s high yield property market is one of the top reasons investors are drawn to this highly active real estate market. Yield varies depending on location, population growth and prices in the area. To break it down, properties in metropolitan, first-tier cities such as Fukuoka, Osaka and Nagoya, close to transportation, pose the lowest risk to steady income due to high rental demand. Since prices have increased in the last two years, these cities generate a slightly lower yield of 6% to 8% net pre-tax.  For slightly higher yield you would enter the second-tier city market such as metropolitan Sapporo. Here you will find yield of 9% to 10% mainly because prices haven’t shown any significant increase. In the third tier are smaller townships, where finding a tenant after a vacancy could take more time. Although prices are lower, the properties we facilitate hold good profiles with yield of 10% to 12%. When building a portfolio we recommend a mixed portfolio to maximize returns and minimize risks.

Conduct Due Diligence

To invest in a foreign property, you rely heavily on thorough due diligence. Once you instruct us to make a conditional offer on your behalf, we proceed with the due diligence process. We receive the history of repairs to the building as well as the building’s accumulated funds. The accumulated funds confirm that there are sufficient funds for additional repairs, or justify lack of funds due to repairs already conducted. We also receive information on the background of the tenant to ensure, to the best of our ability, steady rental income. In addition, we look at how many units in the building are currently advertised as vacant. This will determine if for any reason the property of interest is not attracting tenants. We explore and flag any deviations from the realtor’s listings and only sign purchase contracts and pay deposits on behalf of our clients once all due diligence has been performed and confirmed by the seller, building management company and property managers. If the property does not meet our standards, we will recommend forgoing the deal. And, if you are not satisfied with the due diligence you can pull back your offer.

Manage Vacancies

You’ve taken the plunge to invest in Japanese real estate and we know you will be pleased with your steady flow of monthly rental income. Leases are normally on a two year term and automatically renewed unless prior notification is provided (6 months on the landlord side, 1 month on the tenant side, as is usually the case).  On average, tenants in single person sized units tend to stay four and a half years based on portfolios of ownership of several units. However, the law in Japan is highly tenant-oriented, and tenants may move out at a month’s notice. In such a case, the most you would be able to charge would be one or two months of rent, usually achieved through a security deposit.

Should your tenant vacate, we will help you find a tenant as soon as possible. Fees will vary depending on the advertising required, lease conditions, cleaning, renovations, etc. On the bright side, one factor that attracts investors to Japan properties is the culture. You will hardly ever encounter any serious tenant payment issues, evictions, damages, etc. Depending on the profile and location, it could take one to three months to repair, clean, renovate, and re-tenant, all of which we manage on your behalf. In some extreme cases, where the location isn’t very attractive, or market conditions aren’t favourable, it could take as long as six months. It’s rare, but may occasionally occur.

Our success rate for tenanting properties is around 93% to 94%, much higher than the national average. In terms of size, most investors prefer to purchase smaller apartments as they are easier to tenant in case of a vacancy. That being said, larger properties, although not as in demand as small apartments, are family-oriented and therefore, tenants generally stay for a longer term.

Unless you specifically request a property for personal use, the properties we facilitate for purchase are already occupied for immediate monthly rental income. As your arm in Japan, whatever your budget, preferred location, size, etc. feel free to talk to us about purchasing and managing properties on your behalf.

 

(Source – Priti Donnelly, Nippon Tradings International”, Pic – Japan Guest House/ “Nippon Tradings International“)

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