anyone investing in japan?

Question

Anyone investing in Japan now that the yen is weakening? buying now vs pre-pandemic the yen has dropped about 38%. Japan is a cashflow not an appreciation market. the fed raised rates a lot and plan to pivot in the coming years and BOJ hasnt risen rates but probably will sometime in the future to fight off inflation, it could be a good time to enter. buy cheap houses now with cheap rents then when things go back to normal in several years your cashflow will increase and what you can sell it for will too when converting back to usd.

David Gotsill · Answer

@Royce Talbo - Definitely a great place to have a second home.  Or a frist one ;)

I would look into the borrowing terms a bit more.  My understanding from speaking with people here is that residency is a condition for borrowing.  Would be great if that weren't the case.

As to STRs, many localities have regs that limit the number of rentable STR days to no more than 180 days per year.  So defintely check into that if you're going to go that route.  For LTRs, I think you're largely correct that rent collection is less of an issue, especially if you insist on a rent guarantor.  Some downsides to LTRs in Japan are, generally, that rents decrease over time (rather than rise, like the US), and that the value of the property also decreases over time (no market appreciatin like in the US).

If you're interested, here are some other forum links from the past few years with discussions of investing in Japan.  Although I sound negative about it, I invest in Japan and have been reasonably satisfied.

https://www.biggerpockets.com/forums/311-buying-selling-real-estate/topics/604063-buying-rentals-in-japan

https://www.biggerpockets.com/forums/86-local-real-estate-networking/topics/975973-is-anyone-investing-in-japan

https://www.biggerpockets.com/forums/76-americans-international-real-estate/topics/366335-investors-in-japan

Royce Talbo · Answer

@Taylor L. I would agree with you if it was only a speculation play, but what i have noticed is that the properties i am looking at, its price point is that of d and f neighborhoods in the midwest. in japan those prices are for c/b areas due to the culture. they have a delinquency rate of only 1.6% and they have renters insurance that not only covers damages but missed rent.  basically guarantee rent like sec 8 but without the tenants destroying things and skipping out.

a lot of single japanese live in a small apartment that they basically use just to sleep, shower and store their things.  sometimes they dont even go home because they miss the last train and just spend the night at karaoke or internet cafes. most of the day they spend out which means very little wear and tear.  my friends husband only spends about 6-7 hours at home and pretty much only sees his kids sleeping or on the weekends which is sad but that is the average life style in japan.

for property taxes if its an older home that is depreciated out you only get taxed on the land value. havent calculated returns yet as i dont know all the expenses but thats why i wanted to see who else is investing there. annual rent to price is about 8-12% for the places i have looked at.

basically low maint tenants with guarantee rent is drawing me to take that chance on speculation on currency exchange. there is a lot more i need to research but thats why i wanted to see if anyone is investing there now.

Taylor L. · Answer

I think for Americans it's a mistake to speculate based on currency exchange rates and how they may make properties overseas look cheap. It's best to focus on what we know and can control.

Casey Maeda · Answer

I do the opposite. I buy US properties and finance them using Japanese debt.  I did this years ago when the yen was strong so it’s worked out nicely.  Looking to refinance with a U.S. lender and rinse and repeat when the yen strengthens.  I wouldn’t invest in Japanese properties solely because of the weakness in yen as there’s no crystal ball as to what the rates will be in the future.  Plus real estate is illiquid so hard to time the market moving money across borders to achieve a favorable exchange.

Kevin Kim · Answer

@Royce Talbo I am thinking same investment in japan as dollar is strong. I am still researching how to buy property in Japan though.

Royce Talbo · Answer

@David Gotsill thanks for the links ill check it out.  I remember years ago when i looked into loans in japan around 2008 that was the condition. i was kind of shocked it changed when i read that article but they might have been wrong. in any case i dont think i dont think it would make sense in my situation since the units i was looking at are cheap and depreciated out so not much of a collateral.

thanks for the insight i read i would have to get a license or certificate or something to operate but didnt know about the cap on days. ltr seems more and more the better route.  heres my play that i was thinking about, instead of getting something in the midwest that doesnt appreciate i would get something in japan for the same price.  something that is already depreciated out wouldnt command high rents but i felt would be the bottom of what rents could go and would be stable.  i know newer places would depreciate and rents along with it, but older places would be stabilized.  I think it terms for cars like if you bought a cheap 20yr old car you for like $3000 could use it for 10yrs while maintaining it and sell if for just about the same price.  japan vs midwest, i felt japan would have less evictions and less chance of tenant destroying the place.  when the yen gains back some strength that would mean the rents and value though staying the same in yen would increase in usd thus similar to appreciation.

Royce Talbo · Answer

@David Gotsill no, i have some cash and a heloc. from what i read once i establish a rental business i can start borrowing in Japan from Japanese lenders. not looking for multifamily or anything big just couple 1bed/1bath condos. at first i was looking at airbnb since Japan finally opened up for tourist and a bunch of my friends are back visiting family and vacationing there.  pre pandemic i used to go there at least once a year and my mother in law used to go about 6+ times/yr, so i thought it would be a good place to have a 2nd home type of thing.  then i started looking at ltr to see what the numbers were if airbnb fails and can i still cover as a ltr. while researching it seems like ltr might be a better play as rent is pretty much guaranteed.

David Gotsill · Answer

@Royce Talbo - Obviously it's being done successfully at the institutional level, but not sure how many individual investors can make it work.  I think the first question I'd want to know is would you be looking for financing?  If so, then probably a non-starter? I don't think that non-residents can borrow in Japan from Japanese lenders, and no way a US lender will lend for you to buy out of state (unless you have an S-BLOC or something).

@Casey Maeda any thoughts on this?

anyone investing in japan?

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