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Comparison between Ordinary Real estate Renting Out Business and Hotel Business

Comparison between Ordinary Real estate Renting Out Business and Hotel Business

Yield on investment in the case of Minpaku business

Assumed that you purchase an apartment of 8 million yen in Tokyo and rent it out to foreign tourists with rent of 5000 yen per a day per a person.

Once you acquire Minpaku registration, you can operate this business legally without hotel license.

Your business is called Minpaku (民泊) and your apartment is Minpaku Hotel.

When you own an apartment, you need to pay Apartment management fee and reserve fund for repair and it may be 10,000 yen per a month.

Assumed that occupancy rate of your Minpaku business is 50% and always 2 persons use your hotel at the same time.

In this case, yield rate will be 21 %
( 5000 yen × 2 persons × 15 days  – 10000 yen ) × 12 months / 8 million yen = 0.21.

In the case of ordinary real estate renting out business (You rent out your real estate to a person who lives in your real estate and pay monthly rental fee), you can not expect yield on investment of 21%.

So, you may want to operate this kind of business in Japan and some persons are operating this business through airbnb.

By the way, in the case of Minpaku registration, you can operate your Minpaku business up to 180 days per a year.

However once you obtain Hotel license, there is not such limitation.
So, you may want to obtain hotel license

Legal information relating to Minpaku Business in Japan

In the case you want to operate airbnb business ( Minpaku ) in Japan, you need to know about law relating to hotel business.

You can operate airbnb business without a hotel inn license if you register your real estate based on New Minpaku law.

Many persons have operated Minpaku business without necessary license nor permit.

But, now they are inflicting public order and most of them are illegal.

And now they can not list their real estate in website of Airbnb. So, it may be difficult to find enough guest to their illegal hotel.

Strong demand for hotel, Ryokan, Inn in Japan

In Japan, if you accommodate a person ( guest ) and receive fee ( Even if you receive the fee in the name of other expense  ), you need to obtain hotel license or register it based on Minpaku law.

But, on the other hand, Japanese government wants to increase the number of foreign tourists.

Thus, they have designated Ota ward ( Haneda air port is located in this ward. ) as special ward to contribute this demand.

Now, there are a lot of foreign tourists though, the number of hotels to accept such tourists are not enough. And even if there are hotels, hotel fee is more expensive than other country.

If foreign tourists can find affordable hotel or inn, the number of foreign tourists will increase.
So, if you rents out your apartment to foreign tourists at reasonable fee, you can find renters ( tourists ) and can get some profit with low management cost.
So, through some companies like airbnb, you register  your apartment as inn and receive fee from guest.

Some persons operates their hotel business without permit. And it is illegal, not grey.

They may be sentenced to imprisonment, fine. You can not select one of it by yourself.

Special district to operate Hotel business

Japanese government has designated Ota ward as special ward.
When you operate hotel business in Ota ward, standard to operate hotel business is eased.

But, unfortunately, even after this designation, procedure to obtain this authorization is not easy.

For example, duration of stay of guest should be MORE THAN 3 DAYS, 2 NIGHTS.

And I do not think you can find such guests easily.
And room area should be more than 25 ㎡ for guest room.
So, even if you have small apartment of 20 ㎡ 、you cannot operate hotel business legally.

And in the case you have an residential apartment, there is an apartment ordinance.
And it should stipulate that you cannot operate business in your apartment.
Because, purpose of your apartment is residence.

Punishment on illegal minpaku Operator

In January 27th, 2016, Osaka court house issued provisional injunction to order owner of apartment to cease operation of Minpaku ( illegal hotel business ).

This is the first time that court house issues such injunction.

A person who owns apartments has operated hotel business without getting permit from government.

There are over 100 rooms in whole building and a person owns at least 2 apartments there.

A person in apartment association noticed that the number of foreign tourists who entered his rooms increased and asked the owner the reason.

However, the owner did not provided reasonable reply.

Then, apartment association filed provisional injunction to order the owner to cease the usage of his apartments and court house approved their petition.

In their apartment rule, it is stipulated that owner needs to use his apartment for residential purpose.

And articles 6, paragraph (1) of Act on building unit ownership stipulates that Unit owners shall not engage in any conduct that is harmful to the preservation of the building or any other conduct that is contrary to the common benefit of the unit owners with regard to the management or use of the building.

And in Article 57 It is stipulated that all of the other unit owners or the incorporated management association may  for the common benefit of the unit owners, demand him  discontinue such conduct.

Moreover, in Article 58 In the case he ( = the unit owner ) does not accept demand from other unit owners or incorporated management association, they can file petition that his unit should be auctioned.

Even if Japanese government does not take quick action to come down hard on illegal hotel business, other unit owners may take necessary action without delay.

Because, operation of illegal hotel business in residential apartment may conflict other owner’s interest.

So, if you want to operate hotel business legally, you need to purchase detached house.

Independent house should be better compared to apartment

In the case of detached house ( Kodate = 戸建 ), there is not a apartment ordinance.
So, you can operate hotel business or Minpaku business without problem.

Though, there are a lot of standards to satisfy, if you order me, I can find suitable detached house and assist you to obtain hotel license or Minpaku registration.

At the moment, it is not easy to operate airbnb business with standard of Ota ward.

So, if you are a serious business person and have intention to abide by law, you need to obtain hotel license or register it based on New Minpaku law.

On the other hand, in the case of Minpaku registration, you can operate up to 180 days per a year. So, you may want to obtain hotel license.

In the case you obtain hotel license, you can operate your hotel business every day.

That is why, I will explain how to obtain hotel license in Japan

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