All Forum Posts by: David Gotsill

Hey @Kathryn Kuo - fellow Japan-based investor here.  My personal opinions below, with a lot of generalities.  And with no intention of being a wet blanket...

In my experience, most US citizens invest in US properties, even when living in Japan.  In my opinion, the primary reasons are financing and appreciation.

Generally, you're likely to have trouble getting financing for investment properties here.  This is true even if you set up a business and establish a track record.  RE loans to business usually require the business owner to personally guarantee the loan.  So you're left with acquiring properties all-cash.  But since J properties generally depreciate over time (not like properties back home which appreciate), the idea of sinking cash into a property that is worth less five years from now is not terribly appealing.

Like you say, then the question is what sort of yield can you get, and will it cover the deprication losses?

I have seen posts where investors seem to be having success with airBnb rentals and/or acquiring "akiya" or other extremely cheap properties.  Acquisition costs are low, so easier to generate good yields.  People are doing it, so presumably it works.

FWIW, I invested in Japan for a few years, but lack of rent growth, lack of appreciation, concerns about natural disasters, and just general lack of confidence in the J market led me to shift focus only to the US. Totally happy to meet up if you're in Tokyo to discuss REI.

Finally, i'll ping a few others I believe are active/interested in Japan properties and generally based here in Japan (sorry guys).  - Dave

@Casey Maeda

@Zachery Hitchcox

@Daniel Mills

@Shu Matsuo Post

@David Kohutynski - Fellow Japan-based investor here.

I would echo what you and Ty have already stated.  There is little we can do to off-set cap gains under J taxes.  This is exacerbated since J taxes allowed, until a coupld of years ago, accelerated depreciation on foreign real estate.  The depreication recapture can be brutal for those properties.  

I know a couple of Americans who have gone so far as to repatriate to the US for a couple of years - long enough to no longer be a "tax resident" under the J tax regime - in order to complete a shuffling/1031 rebalancing of their US portfolios.  Once that is compelte, one returned to JP, the others I am not sure.  

@Benjamin Stickler - I don't think so.  but if you want to grab coffee or something in central tokyo, I'd be down.  I know a couple of other investors who might join too, although arrangine schedules can be a challenge.

@Tacuma Bradley - I know there are a few people who are successfully doing STR in Japan, and others doing more traditional LTR, and that they are successful. So it can be done. I'd encourage you to find them for some perspective to contrast the wet blanket mess I'm about to drop...

In my personal experience, the only reason it made sense was b/c I was able to 100% loans for the purchase, with interest rates less than 1%.  I had two buildings, one with 24 and the other with 30 units.  I used professional PM, fees were fine.  But I was never able to get them cash flowing as projected (by the broker), in part because rents continued to fall as newer (and better) competing rooms opened nearby.  In contrast to the US, my oldest tenants paid highest rents, and newer tenants were lower.  In the end, I did fine overall because the rents amortized the loans a good deal. But I didn't really cash flow much.  And no way I personally would do it if I had to put anything down.  I'd rather move the funds to the US and deploy there.  Just my opinion.  

@Tacuma Bradley - Well, in general it's more difficult to rent out older places here, so there is such a constant flow of new property on the market.  So, I'm not sure what the house would rent out for, or how much renovation you'd need to do to make it "rentable" for the current market.  In the US, many people use a 5-6 year rule:  if you can recoup the costs of renovations in 5 years (through increased rents) then it's worth it.  I can't say that same logic applies to JP, but it's a place to start.

Also, are you going to be hit by inheritance tax on the home?  Presumably yes.  So, selling and using proceeds to satisfy the tax obligation is one of the main reasons that properties come on the market.  The location outside of Ikebukuro seems good, so you could consider taking proceeds (after tax) and investing into an apartment or whole building.  Prices for whole buildings will obviousl vary based on age, size, location, but they are fairly high IMO.  Prices for single apartmetns are fine, but I don't know if they are often profitable.  In the few times I've looked into it before, the single apartments I saw (via a broker) were not profitable after tax.

Any specific questions?

Hey @Chris Magistrado - I'm local in Tokyo, Japan - been here about 10 years.  I'd be happy to take a stab at any questions you have.

In related experience, I was a real estate lawyer in Tokyo for 6 years (catering to foreign institutional buyers targeting A-class J properties) and I owned about 60 units in two multifamily buildings in/near Tokyo for 5 years.  Sold both properties last year.

Hey @Gosuke Kawano - welcome.  I am also based in Japan, in Tokyo.  There are a few of us Japan-based investors on this forum, so I hope you can meet some others.

I'd be happy to connect and talk real estate.  If you are in/near Tokyo we can do coffee.  If you're elsewhere in Japan, zoom would be good.

Good luck!

@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

@Zachery Hitchcox - I replied to you in a couple of other threads, reach out if you'd like to meet up and chat REI.

@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?