Originally posted by
@Bill Baldwin:
As an American living in Tokyo who's been extremely active in the Japanese real estate market since diving in head first 4 years ago, I feel like I could write a book about my experiences... and yet I often feel like I'm still new to the game, and find myself learning something new everyday.
Long story short in REI in Japan:
Japan banks offer 100% LTV loans - including all closing fees, insurance, and taxes - for in excess of 30x your pre-tax annual salary at anywhwere from 1-4.5% over 23-40 years.
There are zero tenant issues in Japan. Zero. All tenans need either an individual or "guarantor company" to back them, who is legally responsible for rent if the tenant doesn't pay.
Property management companies are reliable, do everything for you, and charge less than 5% gross rents. Some are obvioisly better than others, but I've never heard of any screwing people as they can (I know this all too well) in the US, as many are run by larger Japanese companies.
Properties in Japan actually depreciate over time. The majority of the value of most properties however (generally 2/3rds on average) are in the value of the land, and not the building itself. Since the bubble crash 27 years ago land values have stayed mostly flat, with a bit of an uptick the past few years (conversation for a different time).
Tenants must pay 1 month rent to renew their contract every 2 years, however initial leasing fee can run you anywhere from 1-3 months rent, depending on location.
Japan population is slowly decreasing overall, so buying anywhere outside of a few major cities is a recipe for future disaster, no matter the caps they offer now.
Speaking of caps, Tokyo cap rates have been compressed pretty tight over the past 5 years. A few of the other major cities aren't far behind.
The entire closing process is crazy. There are generally no inspections, and no escrow. I actually am in the process of selling a property, and as the buyers just transferred 10 million yen (just under $100k) to my bank account for the down payment. But there's no "in contract" period and they're performing no inspections, and if they don't transfer me the agreed sales amount on the date we agreed to they have to pay me 20% of the sales price in cash and lose the deal (same goes for me if I pull outta the deal early). And yes I'm totally hoping they cancel and have to pay the 20%, but not counting on it.
Depreciation scheduled are dependent on the construction material of the building (concrete, brick, steel, wood, etc.) and the year build.
The tax laws here are antiquated, and quite frankly a bit whacked, for lack of a better word. There are some massively exploitable loopholes, but also a few things you have to be extremely careful about.
I could go on and on but... happy to field any questions people may have!
