Comparison between buying or renting a house in Japan
Here, I want to compare which is better to buy or rent an apartment in Japan.
Assumed Ms Nancy comes to Japan and lives in Japan for 5 years.
If Nancy rents this apartment…
① Duration March, 2015 ～ Feb, 2020
Reinforced concrete Building apartment, 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 5 years is 4,305,350 yen.
If Nancy purchases this apartment…
⑤ She buys 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 × 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 % × 5 years = 15 %. Value of her apartment will decrease by 15 % after 5 years.
Her capital loss is 1,200,000 yen
In 2020, annual rental fee if she rents out this apartment is 840,350 yen.
If someone purchases this apartment at 6,800,000 yen from her, his gross yield rate is 12.36 %.
So, I think this selling price is realistic.
⑥ Monthly Apartment Management Fee and reserved fund for repair at first 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 × 5 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 1,912,897 yen.
So, in this calculation, buying an apartment is reasonable.Japan 2015.4/6