So, here it is (edits in blue).A while back in [url=http://www.letsjapan.org/forum/viewtopic.php?f=2&t=255747]this thread[/url], Mogura wrote:Would you be interested in doing a little write-up about how you ended up landlording in the Business Center? I would really like to hear how you got into it, what challenges you had, lessons learned, etc. Probably some other people would be interested in knowing as well? Whaddya say?
First, some general information. I am not a professional landlord; I do not make my living by letting apartments. I just have one apartment that I rent out to earn a bit of pocket money, although I have owned others before. Also, this is all just my opinion based on my experience; the pros out there will no doubt be able to offer much better information than I.
Please, let's stay on topic. This thread is not a discussion of:
- How to become a professional landlord and maximize your income. There are countless books on that.
- Real estate purchase prices or rental incomes in Japan. These are easily found on the 198,437,198,436,165 real estate search sites out there (here is one of them). Suffice to say that you can find apartments for as little as a couple of million yen and as expensive as... well, let your imagination run wild.
- Banks, mortgages and their relevance to purchasing and letting an apartment.
- General real estate topics.
- Investment properties
- The purchase
- The lease
- Key money
- How to look up potential properties
The actual process of buying and letting an apartment turned out to be quite easy; I think anyone could do it. However there is a surfeit of rental apartments in Japan and potential tenants are spoiled for choice, meaning that although there are heaps of affordable apartments out there and they are easily bought, you have to choose wisely, otherwise you will end up with a place that no-one wants to rent.
I made a conscious decision to wait until I found a place that there would be some actual demand for. Even once I had decided to buy a rental property, I sat on my money for months as I looked at and decided against apartment after apartment. The biggest drawback for most of them was that they were too far from the station.
Apparently, previous generations didn't mind being 20 and 30 minutes from the nearest station, but these days, the trend as I see it seems to be towards a maximum of 10 minutes. I held out for an apartment that was on an express stop. Naturally, there was a clear correlation between station proximity and apartment affordability, and a quick trip to your local real estate agent will show that the same applies to rents.
I mean, think about it: You've seen how many out-of-the-way places appear to have been abandoned, right? You've seen the shotengai with most of the shops permanently shuttered, and you've noticed how the only people you see are elderly, haven't you? The general trend sees people moving out of those areas to urban centres. Sure, like any trend or rule, there are exceptions, but I don't have the courage to bank my meagre savings on exceptions, so I decided to put my money where the chances were better.
If you want a fighting chance of attracting tenants to your apartment, there are a few things that people have come to expect. These include auto-lock and intercom, elevators and, more recently, a separate bathroom and toilet as opposed to the all-in-one yunitto basu that was common up to the mid-90s. Other creature comforts can be added, but these are basic structural items that cannot be changed without the agreement of the owners of the other apartments in your building (good luck trying to obtain that!) and without spending lots of money, which sort of defeats the purpose of this exercise.
Anyway, I found that many of the cheap apartments lacked some or all of these, and many of them lay vacant, so I'd say it's best to make sure you buy a place that already has these things.
Incidentally, Japan's building code was revised around 1982. That law change covered lots of things, one of which was elevators. Under the new law, it became compulsory to install elevators in any new apartment building with more than five storeys. Little coincidence, then, that a number of apartments I saw that seemed to be perfect (if a little old) were, on closer inspection, seventh floor units with no elevator. Nowadays, when tenants are spoiled for choice, no-one is going to willingly walk up and down anything more than two flights of stairs, so I felt it best to find a place with an elevator.
Ready-made rental apartments for landlords
Any apartment can be rented out; you just buy it and advertise. But many real estate agents and websites trade in toshi bukken (investment properties). These generally come in two types: entire apartment buildings where you buy all the units; and individual apartments that are already let (or at least geared for letting), and the buyer can take over the apartment with tenants already in place. This practice is called owner change by local agents.
Making the purchase
The actual purchase process is easy, and I will not go into detail here except to list what you will need:
- The money.
- Your Alien Registration Certificate (not the card - the certificate)
- Your registered inkan.
- Your inkan registration certificate.
- Agent's fee. This is a fixed amount. Unless the apartment costs less than 4 million yen, I think the fee is 3% of the purchase price + a flat-rate 60,000 yen + consumption tax.
- Stamp duty for the inshi that has to be affixed to the contract. I can't remember, but I think it was just a couple of man yen.
- The judicial scrivener's fee. The shiho shoshi is the bloke who files all the documents to the authorities to register the sale and you as the new owner. The real estate agent will have a shiho shoshi on hand.
- Real estate acquisition tax. This is a one-off tax.
- Fixed asset tax. This is an annual tax, and you will likely be presented with a bill for the tax for the remainder of the year worked out on a per-diem basis so that the you and previous owner only pay tax for the respective times when you actually owned the apartment.
Usually but not always, I use real estate agents for this (more details later about why I occasionally don't use them). They advertise your place, show prospective tenants around, handle all the contracts, etc., and their fee is usually one month's rent.
Most real estate agents also provide a management service that includes collecting rent, following up on non-payments, fielding the tenants' requests for repairs and whatnot. They charge a fee for this, too, and I've been quoted anything from 5% through 9% of the monthly rent amount.
While I'm on the topic of fees, remember that, as owner of an apartment, you will need to pay two monthly management fees to the "management committee" of all the owners of apartments in your building. One is the kanrihi for day-to-day cleaning, repairs and upkeep of shared areas and facilities of the building; and the other is a monthly contribution to the tsumitate fund accrued for major renovations and repairs as the building gets older.
I guess the salient point here is this: Your apartment is just one of hundreds on the agent's books. Sure, they'll make an effort to get you tenants but, in my limited experience, an apartment will sit empty for months unless it has what the tenant wants. What do tenants want? AFAIK, close to the station, auto-lock, intercom, clean, tidy, safe.
Now, why would I not use an agent in some cases? Well, maybe things are different in Tokyo, but one thing I've noticed here in Kansai is that the Japanese real estate agencies don't speak English. I suppose that if you want English service, you have to go to one of the companies specializing in real estate for gaijin (not sure though--never dealt with one). So, if you find a foreign tenant who doesn't speak Japanese, there is little point in having an agency do the day-to-day management for you because they rarely speak English. In this case, I've found it much easier to work directly with the tenant in English.
In my experience, an agent will occasionally come to you and say that a potential tenant wants to negotiate. Maybe they've asked for a little discount on the rent or deposit or something. I have found that if you give them what they want--at least to some degree--they will sign the lease.
So that's why they charge key money!
When I first spoke to a real estate agent about letting my apartment, one of the things they asked was, "How much key money do you want to charge?" I admitted the whole key money thing was a mystery to me and asked why I should charge anything at all instead of just a refundable security deposit. "Well, presumably, when the leaves you'll want to replace all the wallpaper and repaint everything and probably the floors, right?" I see...
None of the agents I've spoken were hostile to the idea of not charging key money (after all, they have some such properties on their books), but all of them recommend I charge, even if it was just a little. Their reasoning was that the no-key-money properties invariably attract less desirable tenants and the potential for problems increases.
So, when going through an agency, I make a sort of compromise on key money. Any agent will be able to give you a ballpark figure for key money that other landlords with apartments similar to yours in your area charge; I just take that figure and ask for a substantially smaller amount that I hope will please the tenant, the agent and not nag my conscience too much. When not using an agency, there are no "cultural differences" to be explained so I don't need to bother with key money.
Problems with tenants
I haven't had one yet. Seriously.
I suppose that if you remain patient until you find the right apartment, find the right agency (or agencies) and work with them and the tenants in good faith, you'll prevent most problems before they arise.
How much can a landlord actually make?
Tall Tall Tree wrote:Do you think you could throw some more specific numbers at us? How much did you pay to buy what type of apartment, and did you finance that purchase or pay in cash? How much of the rent are you pocketing after paying the management committees and other fees?
Sorry. I have deliberately kept specific numbers out of this thread. I don't mean to obfuscate or be difficult; it's just that I'm not comfortable with putting any part of my finances online and I seriously don't think it would be of any help because the prices vary so much from area to area.
However, I want to help if I can, so here is a short passage on...
How to look up potential properties
It's quite simple to do a quick calculation for any area. Use the link given above or other such sites to do a search for apartment prices around your chosen station (the sites usually have then under 買う, 買いたい or 売り物件 links). You can narrow it down by area, station, distance from station, price range, no. of rooms and parameters. Then use the same link to see what the same type of apartments rent for around the same station (the sites usually have then under 借りる, 借りたい or 賃貸物件 links).
Don't forget to add 10% on to the purchase price to cover fees and costs. That should give you a rough of idea of how much rent (gross) you will make in relation to the purchase price. But even that doesn't take into account any money you might spend getting the apartment into shape to rent. Don't forget: it's got to be spik'n'span if you want someone to choose your apartment over any of the zillions of others available.
As for how much of the rent you get to keep, well, that depends on so many variables: kanrihi, tsumitate contributions, perhaps mortgage repayments and, of course, income tax as well. When I did my calculations, I assumed that I'd only be able to pocket half of it. If it was more than that, well, bonus.
In my short experience, successfully renting out an apartment comes down to finding the right property to buy. I can't stress enough: renters are spoiled for choice with comfortable, convenient apartments, so your place has to be comfortable and convenient, too.
If your apartment...
- Is within 10 minutes' walk of the station (preferably an express stop) in an area with a reasonable population;
- Has auto-lock and intercom;
- Has a separate bathroom and toilet;
- Is in good repair;
- Is clean and tidy; and
- Is reasonably priced
I guess if there's one thing that will help you more than anything, it is the ability to speak Japanese. There is a lot of good information out there for amateurs wanting to invest in an apartment to earn a few yen on the side--books, websites, TV programmes... I found lots good information in all sorts of places. It's just that most of that information is in Japanese.
It is possible to be a landlord in Japan. I am, and I recommend it. Good luck.