All Forum Posts by: David Gotsill

Hey @Chris Nelson - Welcome to the BP community.  

I just moved back to the US after about 6 years in Tokyo.  I'd be happy to connect offline and offer you my thoughts.

(1) My first suggestion would be to attend a few of the Meetups run by some of the BP community:

https://www.meetup.com/BiggerPockets-Meetup-Tokyo-...

They meet on the 3rd Thursday of each month in Roppongi.  There can be a wide variation of who attends each time, so I would give it a few months and see if it makes sense for you.  It was great for me.  There are a lot of foreigners in Tokyo who buy for personal residence and/or for investments.  With some legwork you should be able to meet a good mix.  If you have trouble meeting some, let me know and I can make a few introductions.

(2) You may also consider scouring the forums for other threads about buying in Japan, I feel like I've written and read many such posts.  Might be helpful for background. 

(3) Some things to consider as you look into buying there: (i) do you have PR (permanent residency), without which you may not qualify for a loan; (ii) do you have personal ties to Japan (Japanese spouse, parents, etc); (iii) do you speak Japanese (which can also help in getting a loan); (iv) how much capital will you have as a down payment - I understand 20% is commonly required.

Happy to address any specific questions you may have, so don't hesitate to shoot them my way.

Thanks @Amy Wan.  That's a really good point and likely something that everyone is considering.  From my point of view, it's still good practice to understand as much as you can on your own first.  Estate planning legal advice is likely key - and not just the state of residence, but the state where the real property assets are located as well.  And if the foreign spouse (and even the US citizen living abroad) is subject to inheritance laws and taxes in the country of residence, then legal advice is probably advisable in that country as well.

Hey @Bruce Crawford - thanks for starting this conversation.  As you know, I've been pondering the same question.

I've been trying to organize my own thoughts on the issue, and have come up with some of the following items for consideration:

• What happens if we "do nothing"?  I.e., if no preemptive measures are put in place, what is the process for assets flowing through general intestate law (likely state-specific), US inheritance (and other?) taxes (are these levied at the federal and state levels?), and Japanese inheritance taxes?
• What's the primary goal?  Is the goal to minimize the above taxes?  To minimize the 'red tape'?  To maximize asset protection, even if that means higher taxes and more bureaucracy? 
• Can we take proactive steps to minimize certain taxes (e.g., if not a resident of Japan for last 5 years, then no longer subject to Japanese inheritance taxes)?
• How does our approach to real estate assets work with/against any other assets we have (cash and securities)?
• Are strategies different if we are living in different places?  For example, if I adopt a strategy now while living in the US, do I need to adjust it when I move back to Tokyo?
• If you have children, can strategies that 'skip' your spouse be used to further minimize taxes or simplify procedures?

As you can see, I don't have any answers at the moment, but am fully for looking into these further.

Yo Bruce - 

Invest in both, obviously ;)   How's Tokyo these days?  This doesn't directly address your question, but here are some thoughts:

While I fully agree with the fine gentleman from Hawaii ('sup Kiley?), I'd also consider the current lending environment in Japan.  Fresh on the tails of the Suruga Bank debacle, I understand that Seibu Shinkin is also under investigation.  Seibu Shinkin was another one of the few banks that was willing to lend on investment properties at terms that make it feasible - not the least of which is disregarding Japan's "useful life" tax rules as guidelines for the term of a loan.  

It's my understanding that other banks are also increasingly skeptical of making the loans that exceed the artificial useful life, and that banks are looking for more in terms of down payments.  Anecdotally, I was looking into selling one of my J-properties, and the couple of brokers I spoke to basically told me to hold off because there's no way a buyer could find feasible financing in the current market that would bring me a purchase price to my liking.  I don't think that'll affect a refi now that you have PR.  I presume you have contacts already, but if you need I've worked with Chiba Bank and Yokohama Bank, I'd be happy to introduce you. 

And you've hit on another big issue - how does the foreign national spouse manage US properties when the US citizen dies?  Let me know if you have thoughts there, it's something that's on my mind, and on that of a few of my buddies. 

In the end though, for me I'm skeptical to put my cash into Japanese properties, where you're more likely to see actual depreciation.

@Daniel Mills - Great idea.  You want to go halves on my travel costs?  I'll be there.  

Just flagging this for @Kevin Elliott, who is down in that area.

Good luck guys!

Hey Shu - welcome to BP.  I just left Tokyo a few weeks ago, had been there 6 years this time.  If you're in the Tokyo area, there is a monthly BP meetup that you might consider looking into.  You can probably finding it searching the forum, or if not, I can send you the details.  That meetup helped me make some connections to invest in Japan and in the US.  Plus, just all around good guys.

Always happy to discuss any ideas, and good luck.

David

@Casey Maeda & @Kent Hall : hey fellas - I just left Tokyo myself, had been there for a few years.  If you're in the Tokyo area, there is a monthly BP meetup, you should look into it.  Helped me to make some connections for investing both in Japan and back here in the US (targeting Huntsville, AL at the moment).

Good luck!

Hey @Bill Hamilton (woo-hoo Colorado!) - that's an interesting question.  

This may come off negative, although it's not meant to be.  And I've heard good things about @Priti Donnelly's company, so not trying to undermine them.  And I should say that I have property in Japan, and have spent nearly 15 years there. Love the place most of the time (not a fan of Tokyo rush hours trains). So I'm not trying to bash the market there, just speaking in broad generalities and of my own opinion. So...

Assuming we're considering the advantages for American's to invest in Japan, I personally think it only makes sense in a select few situations.  Most American investors are more likely to get better investments elsewhere.   

I'll acknowledge that, in general, there is something to be said for diversification of market and diversification of currency.  Both sound strategies.  Is Japan a good place to carry out that strategy? Could be.

I think that for most individual American investors leverage is a critical tool.  If you're not resident in Japan, you can't borrow from Japanese banks, and so that's out the window.  That eliminates most investors right there.  If you could borrow in Japan that'd be sweet, since rates are often near or below 1.0%.  For example, I have a loan that's at 0.97%.  Ridiculous. 

Two other key aspects that worry me about Japan are (1) generally depreciating values of real estate and (2) generally decreasing rents.  For (1), from a US perspective, we expect real estate values to increase over time.  In Japan, it's the opposite, at least for structures (land and building values are separate).  Rising land prices are not that common either, and limited to select areas.  There are of course people whose properties appreciate, but that's the exception rather than the norm.  For (2), as properties age the rents you command decrease.  Landlords have limited ability to raise rents, and the market standard is that rents drop.  Moreover, Japan tends to see constant new construction, meaning there are frequently newer properties to compete with.  

Those factors, and others, such as high prices in desirable markets, make finding a solid investment difficult.  That's not to say that it can't be done.  I met a number of people through BP when I was in Tokyo who had some pretty awesome deals there.  ALL of them were residents in Tokyo and took advantage of cheap financing.  

But to restate my point: MOST Americans have a BETTER CHANCE of getting a BETTER INVESTMENT just staying in the US.  When most US investors are faced with the prospect of converting (lots of) USD to JPY, to buy properties in cash, that in depreciate in value (when contemplating resale) and face decreasing rents over time... you need something else to justify choosing Japan over the US.

Hey @Nico Nakamura - Hello from Tokyo.  

I would suggest reading "What Every Real Estate Investor Needs to Know about Cash Flow".  It's got a great overview of many of the metrics real estate investors use, including those mentioned by @Hai Loc, which are among the most important.  This, together with analyzing deals, as you suggest, would certainly be helpful.  

Are you in Tokyo?  If so, you should reach out to people at the major real estate companies here, such as CBRE, Savills, etc.  I'm pretty sure that if you phrase it right you can meet current employees or brokers for an informational interview and/or a coffee.  (To be honest, that's what I did in Tokyo 10 years ago before changing careers, and it was invaluable.)  

I'm heading back to the US soon, but happy to connect/keep in touch in case you have any questions while in Japan.

You can get a clean and renovated, but old, condo in Tokyo.  It'd be tight, but you could cook dinner while still in bed...

https://www.homes.co.jp/mansion/b-9520000416/