Several matters to be confirmed when you launch Real Estate Investment in Japan
When you invest in a real estate in Japan, other than a price of real estate, you should know several matters.
To explain it, I hold up an apartment as an example.
This apartment is located in 7 minutes walk from Shinjuku station.
Room number : 911
Room area : 13,11㎡
Gross yield rate : ７％
Sales price : ８.５ million yen
A Buyer does not need to pay fee for realtor as for this property.
A number of passenger of getting on and off Shinjuku station is 3.35 million.
Built in 1981.
Accumulated reserved fund for repair is 44,161,274 yen.
Amount of accumulated Reserved Fund
In the case of an apartment for investment, there is sometimes insufficiency of reserved funds for repair.
Because owners of such kind of buildings are not interested in the management of a whole building.
( In case there are several kinds of room areas in whole building, situation is different from building for investment. In wider room, owner and resident are same. Some family are living there and they are interested in management of whole building. )
Moreover Developer of the building tries to attract investors by increasing the ostensible yield rate.
So, management company of apartment, that will be a subsidiary company of developer, will decide the monthly amount of reserved fund for repair at a low price.
If the amount of monthly reserved fund for repair is small, it will increase the ostensible yield rate.
i.e., Apartment Management Fee + reserved fund for repair ÷ Purchase price = yield rate.
And if additional reserved fund for repair is required in the future, owners have to pay extra fund.
So, when you purchase an apartment in Japan, you need to confirm the amount of accumulated reserved funds for repair.
Investors need to know about current renter
Current tenants renewed a lease contract in March 2015.
When you purchase an apartment, you need to know about current tenant.
What is her job ?
If she is working in bar and restaurant business, or sex industry, doesn’t she neglect paying rental fee ?
( I am very sorry if this is my prejudice )
How old is she ?
Who is joint surety = Guarantor = Hoshonin ?
If she is young but her father is not her joint surety, why does not her father become her joint surety ?
Did she make any trouble in the past lease contract and her father hesitates to become her guarantor ?
Some owners ( Assumed named Nancy ) asks her friend to be her fake renter.
Nancy and her friend sign a lease contract and Nancy tries to sell her property at a higher price.
If there is already a renter in her apartment, some investors will try to purchase it at a higher price.
Because next buyer does not need to care about finding a renter.
In order to avoid such incidents, you need to look at current lease contract and prior lease contract.
And you need to look at mail box of renter.
Is there renter’s name plate on mail box ?
When she is a fake renter, she may not put her nameplate on mailbox.
And you need to confirm when former renter left seller’s apartment and when seller found next renter.
If there is a long period of vacant, it proves that seller’s apartment does not have competent to find tenant.
Assumed that Monthly rental fee : 62,000 yen.
Apartment Management Fee, reserved fund for repair : 10,200 yen.
So, owner can receive 51,800 yen ( 62,000 yen – 10,200 yen )
So, net yield rate will be 51,800 yen × 12 months ÷ 8.5 million yen = 7.3 %.
Though, this apartment is too small and you do not live in this room.
But, this apartment is located in very suitable place to commute.
So, some Japanese persons willingly rent this room.