If you live in Japan for long years, you may consider which is better to purchase a real estate or rent it.
At first, Conclusion. buying a Residence is better.
(“Average land price in comparison with average rental fee in Japan ➡”)
If you have enough cash to purchase it, you will purchase it without renting it.
Now, I will explain reasons.
PRECONDITION
Assumed Ms. Nancy comes to Japan and lives in Japan for 10 years.
① Duration March, 2015 ～ Feb, 2026. For 10 years.
Reinforced concrete, Room area : 18 ㎡.
Rental fee when she rents this apartment is 70,000 yen per a month.
② Duration of lease contract is for 2 years.
She needs to pay renewal fee for every 2 years correspond to 1 month rental fee.
So, she needs to pay Monthly rental fee × 24 months + Renewal fee every 2 years.
③ When an apartment becomes older, the rental fee will be lower.
So, every 2 years, the rental fee decreases by 2 %.
④ Total amount of rental fee and renewal fee for 10 years is 8,406,930 yen.
⑤ Assumed that she purchases this apartment at 8 million yen.
If she rents out this apartment, monthly rental fee is 70,000 yen.
So, gross yield rate is 70,000 yen × 12 months ÷ 8 million yen = 10.5 %.
I think her purchase price is reasonable and realistic.
Assumed that value of her apartment decreases by 3 % every year.
So, 3 % × 10 years = 30 %.
Value of her apartment will decrease by 30 % after 10 years.
Her capital loss is 2,400,000 yen
In 2025, annual rental fee if she rents out this apartment is 807,072 yen.
If someone purchase this apartment at 5,600,000 yen from her, his gross yield rate is 14%.
So, I think this selling price is realistic.
⑥ Monthly Apartment Management Fee and reserved fund for repair at the time of her purchase is 14,000 yen
The amount of 2 years is 14,000 × 24 months.
The amount of these fee increase by 1 % every 2 years.
⑦ The annual property tax is 34,000 yen. 34,000 yen × 10 years
⑧ When she purchases and sells this property, she has to pay fee for realtor
Purchase price or Selling price × 3 % + 60,000 + Consumption tax
⑨ If she purchases this apartment, total cost is 2,924,178 yen.
This is much lower than ④4.
So, in this calculation, buying an apartment is better.
Please refer to ” WHICH IS BETTER TO BUY OR RENT AN APARTMENT IN JAPAN ( IN THE CASE OF EXPENSIVE APARTMENT ) “
