A Realistic Approach to Purchasing a Japanese Countryside Property

With the shifts and twists of trying to adjust to a comfortable lifestyle under COVID-19, a common trend has been moving away from crowded cities into rural areas or, if not rural, at the very least, more spacious areas. This has prompted many foreigners to think about Japan’s fresh air, greenery, and rivers of its countryside whether for retirement, to raise a family, or even to generate an income on short-term rentals. With the country’s campaign back on track to boost tourism, the concept is alluring. We take a look at how turn the idea of purchasing a home into a workable plan, a realistic home away from home.

Restoring old, abandoned properties

Abandoned properties have taken the limelight recently for their affordability and countryside location. One couple from Alaska, fascinated by the beauty of traditional Japanese timber work and craftsmanship, had dreamt of using their home-building skills to restore an old, traditional kominka style (large stand-alone) home for a place to settle in for retirement. Ideally, they wanted to find an akiya or abandoned property for no more than about USD$20K, but weren’t sure if their plan was realistic.
Given their background, their retirement dream is very much achievable. When purchasing abandoned homes, the three points of consideration are price, costs and inspection. Even though this couple would have the benefit of being able to explore some of the much more affordable, older, run-down houses in the smaller towns and villages of the beautiful countryside because of their restoration and DIY skills, price-wise, USD $20K could be a little under the mark. Realistically expect to pay no less than $50K for a property that wouldn’t require substantial work. And, generally, renovation costs could amount to between $50K and $100K. Upon finding a potential property, an assessment would be required to confirm if the land and soil are safe to build on, as well as an inspection on the structure for its condition. The cost for the ground inspection would be around $500 with structural inspection approximately $1,500.
For those who are not DIY experts, it is possible to find renovated two storey houses with five to six rooms at incredibly affordable prices, some as low as $65K. Of course, expect to find the distance to the nearest station far enough that it would be best to own a car.

Generating an income

Looking at the demand, prior to the outbreak of the COVID-19 pandemic, the number of overseas visitors to Japan was 31.9 million in 2019 with a target of 40 million by 2020. The pillar of its growth strategy was the 2020 Olympics and Paralympics which was halted abruptly by the pandemic. With vaccines and the resumption of travel, the country has relaunched its campaign to meet an ambitious goal of welcoming 60 million overseas visitors by 2030. This time not all tourists will be looking for the hotel scene with amenities but, instead a home away from home beyond crowded cities with a desire to connect to nature, explore traditions, enjoy cuisine, and find relaxation. There is no question the demand of tourists is there to generate an income. But, if you are not aware of the regulations, you could find yourself tied to the hassle of regulations and licensing.

To rent out your property, you have two choices, minpaku (short term rentals) of under a month, or longer term standard leases of over one month. While appealing for the higher income they generate, short-term rentals involve compliance of zoning approvals from the ward, plus possibly a hospitality license. Furthermore, stays of less than one month require staff to be available to respond to any urgent matters 24/7, normally within 15 to 30 minutes distance of the property. This means staff would need to be hired in most cases as short-term stay management companies are close to non-existent in rural areas. Instead, to avoid having to jump through the time-consuming and expensive hoops of the short term Airbnb style rentals with a check-in/check-out type arrangement, the way to rent out the property with a minimal amount of hassle would be on standard tenancy leases with stays of over a month.

If on the other hand, you are purchasing a property which already has been approved for a short-term license then all that would be required is a local judicial scrivener to confirm the approval and advise what needs to be done to bring the property up to compliance. Keep in mind that each prefecture and local municipality has its own regulations. The approximate cost for the scrivener is $180 to $260. Take for example, a traditional 100 year old farmhouse on a plot of land of 2,500 sqm, with 6 bedrooms plus living, dining room and kitchen in a remote area of Hyogo, an hour away from Osaka. This property was approved with a hospitality license with the potential to generate approximately $100/night for a double room.

Whether your informed decision leads you to minpaku rentals or standard leases, the next step to consider would be how to advertise the remote property. Perhaps a “countryside experience” to appeal to international tourists, artists, businesses for corporate retreats, and general vacationers. With careful planning, vacation houses can be a viable way to earn extra income year round, or seasonally if one is willing to put in the work.

Resort living

In addition to the “hard core” countryside, travellers are also drawn to resorts with the appeal of ski lifts, onsen, pool, and other amenities. It sounds logical to consider a building or purchasing a guest house on a resort-serviced property. But, unfortunately, guest houses cannot be built or used on resort land because, similar to co-owned buildings, resort-serviced properties have an owner union which often do not allow monthly or long term rentals. Nor do they allow the stay of anyone aside from property owners and their friends and families.

If a guesthouse is your goal in a resort environment, the approach to take would be to find a free-standing parcel, not on a serviced resort, but close to a resort, approximately one to three km away. Perhaps a two storey home with three to four rooms. Prices would be approximately $130K to $526K. Alternatively, you could consider clearing the area to develop a log or pre-fabricated cabin for personal use for family and friends. Keep in mind, there could be restrictions in terms of the structure, materials, colour, access to resort facilities and other benefits.

The monthly service fee would be approximately a nominal $350/year for the land which covers gas, electricity and hydro to the property line via the resort’s infrastructure. This fee would of course, increase once a structure is developed. The fee generally covers management of the resort and use of various facilities such as discounted prices for the pool, onsen, ski lift, the resort’s reception for deliveries, ski equipment storage room, etc. The dream getaway for ski aficionados.

Whether for personal use or for investment purposes, that home away from home can be more than just a pipe dream. Quite realistically, when it comes to the countryside, the grass just might be greener on your side.

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