Q & A: Investing in Multi-Purpose Real-Estate Property in Japan

SOHO

Home Business

20 Feb, 2018 –

Q: Are there SOHO (Small Office Home Office) or its variants, SOFO and SOVO available in Japan? If I want to rent out my apartment investment, would it better to buy a serviced apartment or even better, one that is managed by a reputable hotel management company? Are these properties subject to commercial rates in terms of utilities, taxes, etc?

A: As shown in our recently published deal analysis, there are plenty of apartments in Japan that are designated multi-purpose – meaning, they can be leased as a residential property, business, or any variation of the two. However, the distinction lies in local municipality area ordinances and building management restrictions – from the landlord’s perspective, there is no difference in taxation or rates (although certain building management companies may charge slightly higher monthly fees for management for units functioning as businesses) . Corporate tax rates are applicable only in cases of corporate ownership of the property, regardless of whether it is used as a private residence, a business, or both. 

As far as serviced apartments go, these are normally only used for short term leases in Japan, and are known here as a “weekly mansion” or “monthly mansion”. These can be attractive investments if they are located in well maintained buildings, close to city centers or other convenient locations, and are well equipped with functioning kitchens, internet access and electrical appliances. In these cases, the management companies would normally charge approximately 30% of the gross rental income, and would in turn take care of all advertising, placements (check-in/check-out), cleaning and monthly reporting on behalf of the owner. However, the unit profiles required to make these apartments popular with short term tenants, which tend to be traveling business-folk or visiting tourists, would make the initial capital outlay a lot higher than most profitable “standard” apartments (more central, newer buildings, larger units etc).

Generally speaking, the best way to approach these potential investments is to first contact a local serviced apartment management company and ask them for the designated profile fitting their current stock – then look for appropriate units available on the market and see if the price and projected returns make sense.

(Source – Ziv Nakajima-Magen, Nippon Tradings International”, Pic – SOHO / “Froschmann)”

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