Risk of nonpayment of your renter in Japan
When you think of buying real estate in Japan and renting out, you will care about risk of nonpayment of rental fee.
Even if you purchase nice apartment at reasonable price, when renter does not pay her rental fee, your investment will fail.
In Japan, there is system of guarantor ( Hosho nin ) in renting an apartment.
When a renter wants to rent an apartment, landlord will ask renter to provide guarantor.
And if renter does not pay rental fee, landlord can order her guarantor to pay rental fee on behalf of renter.
But, if the guarantor refuses to pay rental fee on behalf of renter, landlord has to file civil lawsuit.
And it will cost several hundreds thousand yen.
In order to avoid this situation, landlord can hire rental guarantee company ( Yachin hosho kaisha = 家賃保証会社 ).
This is example of guarantee company.
Landlord and rental guarantee company make agreement of Indemnity.
Assumed renter Nancy does not pay her rental fee, Landlord notifies his rental guarantee company.
And within 3 days of this notification, rental guarantee company will pay rental fee on behalf of Nancy.
If Nancy has not paid her rental fee for 24 months, rental guarantee company will pay rental fee on behalf of Nancy.
The maximum period is 24 months.
Then, if rental guarantee company has paid rental fee on behalf of Nancy, this company will charge this rental fee against Nancy.
In order to adopt this system, landlord does not need to pay fee for rental guarantee company.
When Nancy rents this apartment, she has to pay fee for rental guarantee company.
The amount will be 50 % of monthly rental fee.
So, her monthly rental fee is 100,000 yen, Nancy has to pay 50,000 yen to rental guarantee company.
And Nancy also has to pay fee of 10 % of monthly rental fee per a year..
( at least 10,000 yen.)
So, when Nancy signs building lease contract, she has to pay 50,000 yen to rental guarantee company and 100,000 yen per a year.
In this way, landlord can rent out her apartment to people who can not find guarantor in Japan with low risk.
facebook invest japan real estate 2015.4/30.
Business in Japan2015.4/30.