Japan Investment Property

Deal Breakdown

For your convenience, we hereby present a sample deal breakdown of a property transaction, facilitated by NTI on behalf of a client. (If you’d like to analyze some potential real estate property investment deals on your own, please feel free to download our basic deal analysis spreadsheet template).

This is what the end costs and income involved come up to, with slight fluctuations due to exchange rates possible – ask us how to capitalize on those, at info@nippontradings.com

At the end, we’ll list the factors that make this deal attractive in our view, and in the process outline some of the criteria we would recommend for anyone considering investment in Japan at this time.

1. Property advertised for several weeks at app. $22K. As funds were prepared in advance, gaining interest, and exchange rates seemed stable, we waited, then applied at app. $18,500 – this price offer has been set based on the final return we would like to see for our client.

2. Allow 4-6% for the sellers agent/s, 10-11% for registration/stamp duty, purchase tax & legal fees (can be slightly discounted in some cases, such as multiple unit purchase for instance)

3. NTI’s fee for the entire sale process is then added – 5% again.

4. This brings us to a total of app. $22,200, with gross current rent income at app. $350/mth

5. On a monthly basis, we deduct app. $21 for property mgmt, $49 for buliding management (equivalent of HOA or body corporate – in Japan, combination of public area mgmt & future public repair/renovation fund – so no other building related expenses are to be expected), $11 for our translation & proxy fees and an astounding $1.10 for comprehensive insurance which includes earthquakes, fires and other natural or man-made disasters.

6. The total remaining takes us to app. $268/mth income on our $22,200 total expense, and 14.62% pre-tax return p/a. (To minimize taxes, vacancy periods and repairs on occasion, NTI utilizes a hand-picked team with a proven track record, consisting of property manager, accountant and renovation/repair professionals).

Selection Criteria – Why Recommend this Unit?

1. Kyushu area – landmass equalling half of Japan’s mainland – is as far away from Fukushima and as clean radiation-wise as you can get in Japan, barring Okinawa, a tiny island further offshore. Fukuoka prefecture is our favourite area to operate in at the moment – read why here.

2. Unit located in Hakata, Fukuoka city’s CBD. Fukuoka city is Kuyshu’s metro capital, numbering 1.5 mil pop – vacancy rate for this area doesn’t get any lower, nor should selling this property be an issue at any given time – other NTI investors and local market channels are first exit strategy potential, and normally perform well.

3. Large building, tiny flat (12.5 sqm), internally excellent shape, all of the above hopefully meaning minimal future expenses in reno/repair. Old building (’74) but with regular checks & huge repair/reno fund collected over the years, from 252 mostly occupied apartments. Tiny apartments also mean greatly reduced property tax.

4. Tenanted, paid in advance, by a company, for its single employee, for the past two years. Japanese company employees don’t tend to move around much as a rule, and would be grateful to keep their job for as long as they can. An ageing population also means our risk of tenant leaving due to marriage is further reduced as time goes by, enhancing the advantage of singles’ apartments.

Email us today to receive similar opportunities on a weekly basis, or read more about the Japanese tax system.

* (For comparable US home market data, check out Lake Tahoe Real Estate or other local examples)