日本の投資用マンションと自己居住用マンションには何か違いがありますか?

How to buy high-quality investment properties in Japan?

Preface

Hello everyone, I’m Okanushi (丘主). Today I’m here to talk to you about the most concerning topic of buying investment properties in Japan. In this article, I will start from the transaction channels of Japanese real estate, explain the interests of all parties from the fundamental principles, and systematically expound on the buying strategies of Japanese investment properties. The content is long, but I believe that you will gain a lot after reading it.

At the same time, this article will also involve many insider insights of the industry, and the results will inevitably affect the interests of many practitioners. Therefore, please remain calm and think independently, and do not be surprised if you encounter any strong or unpleasant comments in the comment section.

What is a high-quality investment property?

What kind of property can be considered “high-quality”? Everyone may have a different answer to this question. Some people may say that it needs to be in a good location, have a new age, require minimal management, face south, have high-quality tenants and a stable occupancy rate… Indeed, these attributes are all beneficial for the long-term stable operation of the property, and they can allow the landlord to be worry-free. However, defining a property that meets these conditions as a “high-quality property” is still too basic and one-sided.

We know that any type of investment, including real estate, is essentially evaluated based on two aspects: return and risk. Specifically for real estate, which is a fixed asset that requires long-term holding, we can break down returns into return rate and duration (i.e. how many years the property can be rented out in total). Based on this, when we list some real estate-related indicators, we can find that:

  • Return rate: annual rent, holding cost, property price…
  • Duration: age of the property, building structure, long-term population trends…
  • Risk: location, management, orientation, tenant quality, occupancy stability…

We should evaluate the three main indicators of return rate, duration, and risk comprehensively. However, if we follow the initial viewpoint, the rent and property price, which are related to returns (especially return rate), will be completely ignored.

In fact, for a country like Japan with a highly mature real estate market, almost all properties on the market have achieved a certain balance in these three main indicators (in other words, the cost-effectiveness is relatively similar). For example, without considering the reuse of land, the following can be observed:

  • New properties in downtown areas: low return rate, high duration, low risk.
  • Old properties in downtown areas: medium return rate, medium duration, medium risk.
  • Old properties in suburban areas: high return rate, low duration, high risk.

Of course, even if the cost-effectiveness of different properties is the same, they may still be “suitable” or “unsuitable” based on the specific investment goals and capabilities of the investor. For example, for investors who hope to obtain a large amount of short-term cash flow, new properties in downtown Tokyo are obviously not suitable; for investors who live in their home country, do not speak Japanese, and have no friends in Japan, properties in third- or fourth-tier cities that can only be managed by Japanese management companies are obviously not suitable.

On the other hand, although the cost-effectiveness of Japan’s real estate is relatively similar from a macro perspective, when it comes to individual properties, there may still be situations where the property price is too high or too low within a reasonable range. Therefore, the definition of “high-quality property” that we provide here is:

Properties where the property price is significantly lower than the market price, excluding properties that are difficult to operate.

To explain in more detail, “difficult to operate” refers to properties that cannot be operated normally or healthily by most investors without relevant professional knowledge, such as dangerous buildings (which require architectural knowledge), properties with borrowing rights/that cannot be rebuilt (which require legal knowledge), and properties such as shrines, theaters, restaurants, and factories (which require professional knowledge or qualifications).

The market price refers to the average property price under similar conditions during the same period. For example, properties that are within a 5-minute walk of a certain station and have similar age, orientation, and area conditions (or have been standardized) can be compared. In other words, you cannot compare a house in Saitama Prefecture with one in Tokyo and say that it is “below the market price”.

Properties that are priced significantly below the market price not only maximize your investment benefits but also indirectly reduce the holding risk of the property. The premise we need to understand is that if a certain type of property has its market price, it means that this type of property is marketable (can be sold smoothly) when it meets the market price. Of course, the speed of circulation may vary. For example, tax-saving properties need to find buyers who also want to save taxes, and large properties need to find buyers with similar budgets. To put it simply, within the scope of common sense, there is no property that cannot be sold if the price is right.

Properties priced significantly below the market price can ensure your resale income when you sell it, making it rentable and sellable (can be rented out or sold). Especially when the property you purchase is in a state where you can earn money by selling it immediately after buying it, even if it is only 1 Japanese yen, it means that you have at least a 70% chance of winning this investment. Note that this does not mean that if you buy a property for 9,999,999 yen and sell it for 10 million yen, it is priced below the market price, but rather that after taking into account various transaction costs (such as agency fees, registration fees, taxes), there is at least a profit of 1 yen.

Hidden Barriers to Buying High-Quality Properties

Since high-quality properties have so many benefits, they are not easy to come by, otherwise everyone would be a millionaire. To purchase such properties, we need to have the corresponding qualifications and be able to overcome at least one of the following “barriers.”

These barriers may seem vague, but if we put ourselves in the shoes of our upstream partners – real estate agents – the conclusion is very clear.

Financial Barrier

In a capitalist society like Japan, money speaks, and this is probably an undisputed fact in many countries around the world. Generally speaking, the higher the budget for buying a house, the higher the probability of purchasing a high-quality property. This is not only because the higher the budget, the fewer competitors (other investors) you can compete with, but also because it is directly related to your most direct source of information: the real estate agent.

We know that in Japan, the commission for buying a property is generally 3% of the property price + 60,000 yen + consumption tax. This commission calculation method obviously links the agent’s income directly to the property price. Therefore, from the agent’s point of view, when spending the same time to connect with a potential buyer, it is obvious that the higher the budget of the client, the higher the value in the agent’s eyes, and the more worth it is to receive attentive service and provide more commercial resources (such as property intelligence, knowledge dissemination, loan channels, etc.).

On the contrary, the priority of low-budget clients will be lower, and they will naturally not be able to get any good properties from the agent. Especially if this budget is already lower than the agent’s basic labor cost, all kinds of tricks will emerge – this is like a one-day tour in Beijing for 10 yuan ($1.5) for middle-aged and elderly people in China. The result of signing up is bound to be dragged to various black shops for forced shopping, because the reward of 10 yuan is simply unreasonable, and the wool must come from the sheep.

Therefore, in Tokyo, for clients not living in Japan with a budget of less than 20 million yen, the English-speaking agent they connect with is most likely to arrange a novice/intern to practice, or to directly find several high-profit margin properties (such as extra rewards from the seller, or markup for resale) to make a profit.

Do not naively think that by connecting with an English-speaking agent, both parties speak English, and there is no need to visit the property in person, you can save labor costs, and they will prioritize serving you. The opposite is true. From experience, foreign buyers lack basic knowledge of Japanese properties and need to spend a lot of time popularizing them; they cannot understand Japanese materials and need manual translation; they lack the spirit of the contract and have a high rate of jumping orders (they asked A agent a lot of questions but ended up buying from B agent because B agent’s commission was cheaper), and the cost of reception is only high and not low compared to foreigners and Japanese living in Japan.

Similarly, to ask the agent to provide high-quality resources while negotiating the commission with the agent is tantamount to seeking something unattainable when buying high-quality properties.

Knowledge Barrier

So, does that mean that low budget can’t buy high-quality real estate? Of course not, because the agency is not your only source of information. To put it extremely, if you already have enough investment vision and information collection ability, then the agency is just a “tool” to help you execute the process of viewing and buying a house, as long as it does not involve exclusive house source issues, which agency you use is the same for you.

In fact, from the perspective of the original division of labor in the industry, the agency’s duty is to facilitate the smooth transaction of real estate in the market and play a role in connecting buyers, sellers, banks, management companies and other departments, rather than developing various investment plans and investment advice for customers. This has already belonged to the category of real estate consulting industry, rather than real estate circulation industry.

So how can we pass the knowledge threshold? Simply put, we need to have the ability to investigate and evaluate the property in a logical way after getting a house, and judge whether to sell it in a short time. Of course, no professional investor can have such efficient judgment on all properties-they usually focus on their own expertise, such as building investigation, leasing market investigation for specific areas, land price investigation and so on. At the end of this article, I will also recommend several areas that are relatively easy for novices to learn.

From the perspective of the agency, it is the same. If a client can communicate smoothly, investigate some information by himself/herself, and make decisions decisively, it will actually reduce the agency’s reception cost, and the agency will naturally be more willing to provide other business resources to you.

On the contrary, if the client is indecisive (the most common is to promise at the beginning, but suddenly hesitate and find various excuses when making a decision), or the logic is confused (for example, at the beginning, say that lighting is not a problem, but then refuse the recommended house source because of poor lighting), the agency will no longer prioritize the reception.

Channel Barrier

If the knowledge threshold solves the analysis and judgment after contacting the property, then the channel threshold solves how to contact potential high-quality properties.

In fact, this part has been mentioned in my previous article – When We Talk About Investing in Japanese Real Estate. The cost-performance ratio of real estate is usually related to its marketing cost. The worse the property, the higher the marketing cost required. On the other hand, particularly high-quality properties will often be snapped up as soon as they are released and there is no need to promote them on various platforms and channels.

I have to tell you a sad fact here – when you entrust an agent to timely recommend good properties to you, your agent will definitely be full of “good, good, good”, but this is just like when you greet a long-lost classmate and say “come to my house for dinner when you are free”, and the other party is full of “good, good, good”, but it is just as unreliable as finding you for dinner one day. Experienced people can recall that among the agents who promised to find properties for you regularly, how many actually did it?

The process of finding properties through agents is much more difficult than you think. This is not only because the system they face (reins) is 10 times more difficult to use than the systems (such as Rakuten, Kenbiya, Athome, etc.) that are aimed at general consumers on the market, but also because the success rate of recommending houses like this is really low. First of all, at least 70% of the buyers who rely on agents to find properties do not look at platforms or understand market prices. Most of the properties that are recommended to them are either replied with “OK, I’ll study it” and then forgotten, or are stalled with ambiguous reasons (such as “the appearance is not good”, “the location is not familiar”, “I feel this house is expensive because it is being speculated by Chinese people”), or they claim to “compare three stores” and let the agent find a bunch of similar properties that cannot be compared, and the agents naturally lose motivation to recommend properties over time.

Secondly, as mentioned earlier, the role of agents is to liaison between the buying and selling parties and various forces, assist in investigating properties, and ensure that the transaction contract is correct, not to provide investment advice. Therefore, the reasons for the agent to recommend properties are often simple and crude: the return rate of this property looks good, this property can be loaned for a long time, and the location of this property is good. Even if some agents have a deeper understanding of investment properties, they are generally not willing to further explain – because it takes a lot of time to investigate and analyze, these services may be left to repeat customers, but they will not be left for new faces without any trust relationship.

The ideal relationship between agents and customers that I have seen and experienced is that both parties clearly perform their duties. The agent focuses on providing properties according to the customer’s requirements, and does not interfere much in other aspects. The customer will evaluate the properties according to their own logic, and give timely feedback and adjust conditions to the agent. Unfortunately, this kind of relationship requires higher professionalism from both parties, and can only be seen in a few high-quality agent companies.

Once, a top sales level English real estate salesperson revealed to me the secret of his successful marketing to Foreigners: praise one or two properties excessively and let the customer directly make a deal, do not let the customer compare, do not let the customer ask questions, the more he asks, the less he buys. If the opponent is still not moved after a fierce attack, abandon early and wait for the other party to take the initiative to approach or find the next new customer. The unreliability of entrusting an agent to find properties is evident.

Therefore, I still recommend that everyone find properties by themselves, at least in the early and middle stages, cultivate yourself as a “reliable” investor, so that you will encounter “reliable” agents. In the later stage, clarify the direction of finding properties by yourself, and then let the agent make up for the gaps.

I will talk about specific methods for finding properties later.

Are all high-quality properties taken by agents?

Talking about this, most people will probably think of this question: since high-quality properties are so good, do ordinary people still have a chance to buy them? As our upstream, agents will definitely be the first to contact these properties. When they find that the properties are good, won’t they secretly buy them first? Are the properties we buy the ones that they “left over”?

Regarding this issue, I can only say that it’s partly true and partly false. It is true that some properties are indeed taken by agents first, but in fact, a large part of these properties are not accessible to ordinary people in the first place. What’s not true is that agents are not as powerful as everyone thinks, and there are still a large number of “fish that escaped the net” even after passing through the agents.

So how do agents get high-quality properties in the first place? There are two mainstream channels: one is through lawyers and banks, and the other is through cash purchases from individuals.

Firstly, as we know, in Japan, if an owner encounters financial difficulties and causes the mortgage to be cut off, the owner can negotiate with the bank and sell the house to repay part or all of the remaining loan under the bank’s agreement. This type of sale is called “任意売却” (shortened to “任売“) in Japanese. These types of properties are often sold significantly below market prices due to limited sales time and the owner’s eagerness to sell. Of course, the bank and lawyers who have a relationship with the owner and are on the verge of bankruptcy can obtain this information in the first place, and they will disclose this information to agents with whom they have a cooperative relationship. After learning the news, agents will immediately use full cash or short-term loans to take down the properties.

Secondly, in Japan’s second-hand housing market, the vast majority of properties in circulation are entrusted by owners who actively go to agent stores to sell their houses. However, a small portion of the properties are generated by agents who take the initiative to guide owners to sell their properties through leaflets, phone calls, and connections. These types of agents specializing in the “production” of properties from scratch are called “物上げ屋” in Japanese. However, as the saying goes, high marketing costs mean low cost-effectiveness, so the prices for properties acquired through these channels are usually much lower than market prices.

Hato Yousuke, a famous “product flipper” active on Japanese Twitter, is actually a funny and entertaining person in real life

As an individual investor, is it possible to buy high-quality properties by visiting lawyers, banks, or asking friends and family if they have any properties for sale, like a pawnshop? I can responsibly tell you that it is impossible.

As a consultant for real estate companies, I have personally participated in negotiations between intermediary companies, banks, and law firms. The difficulty here is beyond what most people can imagine. Taking banks as an example, the number of any available properties for sale in most banks is limited, and it has already been agreed upon with a specific cooperative intermediary before you enter the market. Even if you are lucky enough to find a bank with some leeway, the next step is to gain their trust – treating the bank representative to good food and drink, opening an account with the bank and transferring the main account of the company to this bank are just basic operations. You also need to do everything you can to make fixed deposits, purchase financial products, and borrow money and repay on time. Finally, you need to have enough funds to eat the house provided by the bank – you must make a quick decision to buy, and you cannot be too picky about the property. It is like buying a carload of potatoes from a wholesaler, there are always a few sprouted or damaged ones, but you cannot pick them out for resale (that is the job of retailers), otherwise the wholesaler will not sell to you.

The closed door I encountered from the bank when I assisted the agent to expand the market once.

Law firms also specialize in bankruptcy liquidation. Every week, faxes pour in from various intermediaries, all with the same purpose: seeking cooperation or selling properties.

As you can see, none of these channels can be operated alone, and this upstream source of properties is full of blood and tears behind each property, which cannot be easily summarized with the word “intercept.”

On the other hand, intermediaries are far from as powerful as we imagine. Friends who are slightly familiar with this industry should know that intermediaries are a typical “fast money-making” industry, and the only indicator of a salesperson’s performance is how much commission he or she has earned for the company in a year. For every commission revenue generated, at least 70% is used to pay the salesperson’s salary (including commissions, basic wages, social security, medical insurance, and daily expenses). In other words, unless you specialize in real estate acquisition, the capital pool of intermediary companies is generally small and cannot afford large properties. Especially for small-scale English real estate agency companies, they can generally only handle a few 1R investment properties, and cannot really reject any type of property.

This is why I recommend that you have a high enough budget before investing in real estate – your budget (including loans) should be at the same level as the capital pool of these small and medium-sized intermediary companies, otherwise, there is really not much chance of success.

By the way, one thing that may surprise you is that the properties “eaten” by intermediary companies are generally not held for long and are quickly re-sold on the market after a price increase. Some students may ask: Isn’t property supposed to be held for the long term? Can they maximize their profits by selling properties so quickly? This is actually related to the issue of investment reproducibility – if investment can be immediately reproduced, then short-term realization is more in line with the “quick money-making” business model of intermediary companies. On the contrary, for ordinary people, it is precisely because it cannot be reproduced in the short term that they need to hold onto their properties for the long term.

What are some investment models suitable for beginners?

Investing in real estate is actually a very cruel thing, because its essence is a game between buyers and sellers (including developers) – excluding the situation where individual sellers are in a hurry to raise money, investing in real estate is essentially:

Seller: I think this house is no longer profitable vs. Buyer: No, I think this house can still make money.

If you think about it carefully, you will find that the seller usually has far more information about the house than you do: the landlord has held it for so many years and naturally knows the rental situation of the house, knows the building/decoration problems of the house, and the developer knows the land and construction costs of the house… To “defeat” the seller in this situation, you must have one or more of the following conditions:

  • Condition 1: Your budget is greater than the capital pool responsible for trading this property by the intermediary.
  • Condition 2: You have your own system for evaluating the property, and your perspective and accuracy can exceed that of the seller and intermediary.
  • Condition 3: Your ability to tolerate low cash flows is stronger than that of the seller and intermediary.

Let’s take a closer look at which models can meet the above conditions and can be quickly mastered.

Whole apartment and AP (apartment) in urban areas

The biggest advantage of owning a whole apartment or an AP in terms of asset value is that the proportion of land is high and the owner has complete control over it. They can freely decide to demolish or rebuild the building, divide or merge the land, and can even evict tenants. This fits well with the fact that land in urban areas is a valuable commodity and is difficult to depreciate easily.

Given this fact, investing in whole apartments and APs with land values significantly higher than the market average is a very advantageous investment strategy. High land value can bring many benefits, such as the ability to sell the land for a high price when the building is demolished in the future, banks that focus on evaluating property security value will provide higher evaluations, and the property’s ability to retain its value will be stronger.

The key to this strategy is that most investors and intermediaries only look at the superficial return rate of the property, a minority of professional investors who calculate the operating cost and actual cash flow of the property, and only a few investors and intermediaries calculate the value of the land.

Therefore, once we have grasped the evaluation method of the land value of the whole apartment and AP, we can meet the second condition. If your budget is high, you can also meet the first condition.

Although few people know how to evaluate land value, it is not as difficult as everyone thinks. I often help my clients evaluate the land value at work. I use the following method: first, find the land that is similar to the target property (preferably in the same district) that is listed or sold, and then use the following formula to calculate the land’s “unit price” (a standardized index that converts land to building efficiency):

Unit price = Land price ÷ Land effective area ÷ Floor area ratio

Then, according to the differences in orientation, shape, and whether there are remaining buildings between the target land and case land, adjust the unit price above. For example, give 10% extra points to south-facing land and 20% reduction to flagpole land to eliminate the differences in conditions between the two pieces of land.

Finally, investigate the route price of the two pieces of land on the public land price website, and use the following formula to calculate the market price of the target land:

Target land price = Case land unit price × Target land route price ÷ Case land route price × Case land floor area ratio × Case land effective area

If you are worried that the case land price is accidental, you can choose another case land for verification. If the calculation results of the two are similar, the estimated value of the target land is almost accurate.

After calculating the land price of the property, we can also estimate the value of the building based on its structure and age. For example, if an AP has a wooden structure, is 20 years old, and has a building area of 60 tsubo (approx. 198.9 square meters), assuming that the economic life in the area is around 50 years and the construction unit price is 800,000 yen, then the current estimated value of the building is:

28.8 million yen = 800,000 yen × 60 × (20-50) ÷ 50

If the land valuation plus the building valuation of a property is greater than the selling price, it means that the property has an advantage in terms of price and is worth considering. In fact, even in fiercely competitive areas such as Tokyo, there are still many properties that can be discovered through calculation. Often, you don’t even need to calculate the value of the building, you can use common sense to judge whether the property is cheap enough (for example, the selling price minus the land valuation is only a few million yen, or even lower than the land valuation).

Renting Out Homes with Leases to Apartments

This investment model may seem counterintuitive to domestic friends, but a little research will reveal that this model is highly practical and very suitable for beginners.

We know that for some specific properties, there is a greater demand for self-occupancy than for renting. Typical examples include high-end apartments, large-sized apartments, and school district houses (although Japan’s school districts do not require parents to buy houses to live in, the houses rented for living are generally average in management and interior decoration, and cannot be decorated at will, so parents still tend to buy houses).

On the other hand, Japanese law (Land Lease and House Lease Law) is more biased towards tenants. The Land Lease and House Lease Law stipulates that when the landlord and the tenant sign a “general lease contract” (a popular rental contract in Japan), if the lease term expires and the tenant expresses willingness to renew the lease, the landlord must unconditionally agree to renew the lease unless there is a legitimate reason (such as significantly lower rent than market price, or the house is a dangerous building no longer suitable for living, etc.).

When these two characteristics are combined, a phenomenon that is very surprising to our domestic friends appears- some of Japan’s rented houses are actually sold for much lower prices than empty houses!

An example where a rented property has a lower per-square-meter price than a vacant property. The blue box shows the per-square-meter price of the rented property, while the red box shows the per-square-meter price of a vacant property in the same building (already sold).

Typically, this type of rental property comes into existence when a landlord buys a property several years ago, perhaps for personal use or to wait for appreciation. When the property is vacant, they hope to generate some cash flow by renting it out. However, when the landlord needs money or wants to sell the property quickly, they find that there are few buyers – because first-time homebuyers cannot get a loan (Japanese residential loans do not allow rented properties, and therefore require that the property be empty when purchased), and even if they buy with cash, they do not know when they will be able to move in. Only investors are left. However, the return on investment (ROI) for these types of properties is usually not very high (because the risk is low), and because the total amount of the property is usually relatively high, it is difficult to attract the average investor’s attention. As a result, the landlord has to sell at a low price, resulting in the phenomenon of rented properties being sold cheaper than vacant properties.

Buying this type of property is actually quite simple – just search for both rented properties and vacant properties in the same building, and then compare the prices. As long as you find that the price per unit area of the rented property is lower than that of the vacant property, you can calculate the profit margin when purchasing the rented property based on the price difference. If it’s suitable, you can buy it.

The only requirement for investors using this investment method is that they need to endure a relatively long period of low cash flow. Because the ROI for these types of properties is usually lower than that of ordinary investment properties on the market, and because the landlord has no right to ask the tenant to leave, it is uncertain when this investment can be maximized, it could be one year later, or it could be 10 or 20 years later. Of course, low cash flow can still be profitable. Since the endpoint of the investment is when the tenant moves out, the occupancy rate of the property can be guaranteed to be 100% and there is zero risk of vacancy during the holding period. In addition, the apartment does not need to be managed by the investor themselves, so it is as easy to hold as a bank’s fixed deposit.

This investment model satisfies the above-mentioned condition three. Of course, if your budget is higher, it also satisfies condition one, and the profit margin will be larger. This investment model is more suitable for investors who have some idle funds, do not need high cash flow, and are only interested in making a sufficient amount of profit in the end. For Foreign investors who are not familiar with the Japanese market and do not speak Japanese, I also recommend this investment model.

Investment Properties in Third and Fourth-Tier Cities

Is there a way to invest without having strict requirements? Of course, there is. That is investing in real estate properties in third and fourth-tier cities in Japan.

I have already discussed this in detail in this article: How I Bought Fully Rented Investment Properties with a Surface Yield of 19.2% in Japan, so I will not go into it further here.

How to effectively find potential high-quality properties?

Finally, let’s talk about the channel issue that everyone is most concerned about – no matter how sophisticated our investment model is, we still need to come into contact with a large number of potential properties and carefully select from them. This will be a long process. The essence of selecting investment properties is like finding a needle in a haystack. Or more bluntly, it is like searching for a few regular properties from a pile of junk properties. You need to have patience, focus, and continuous attention. It is not something that can be solved by looking at houses for just one or two days.

Regarding the channel for buying a house, although I have repeatedly emphasized that finding a house by yourself is more reliable than using a real estate agent, this is not something that everyone can do (for example, for investors who are in oversea, don’t know much about Japan, and don’t understand Japanese). Therefore, here, I will share with you the methods of finding properties myself and inquiring about properties through agents.

One thing to note is that no matter whether you choose to find a house by yourself or entrust an agent to find a house, you must have some knowledge of both methods. For example, for foreign investors who mainly rely on agents to find properties, you must at least know where to find properties online, know what areas of houses you can afford, and what the general prices and returns of houses are in certain areas. This will prevent you from being “slaughtered” and buying a property that is obviously higher than the market price. At the same time, understanding the general situation and the rules of the game will also help you communicate smoothly with the agent later.

On the other hand, for investors who want to find properties by themselves, it is best to also understand the business model, motivation, and inner thoughts of agents. After all, agents still play an irreplaceable role in the entire real estate transaction process. Establishing a good relationship with them will also make them think of you first when they encounter properties that are difficult to sell but of higher quality in the future.

Finding a Property Yourself

In Japan, the investment properties listed online are mainly distributed among three platforms: Rakumachi, Kenbiya, and athome. These three platforms feel like they account for about 80-90% of the market circulation (in other words, only a very small portion of properties are not publicly listed online), so if you can navigate these three platforms, it is completely possible to find a successful investment property solely by yourself.

Out of the three platforms, I highly recommend athome. This platform doesn’t seem very “professional” because they cover everything (buying and selling of primary residences, buying and selling investment properties, renting, moving, etc.), and on some platforms (such as the PC web version), it’s even hard to find the entrance to the investment property buying and selling section. Additionally, the UI design and color scheme of the website are also quite “outdated,” and at first glance, it may not seem very professional.

athome represents the typical red “local” theme and serves as an entrance for investing in single-apartment properties (you need to click “買う”-“マンション” to display the information).
To find a whole apartment building or an apartment building with multiple units for sale, you need to click on the ‘売りビル他’ option.
ATBB is a business system offered by athome for management companies.

On the other hand, in Japan, rental management companies and intermediary companies are basically integrated – there are few companies that only do rental management or only do intermediary work. However, each company’s business has its focus, such as English real estate companies generally focusing more on intermediary services rather than rental management. On the other hand, there are many Japanese companies stationed in a fixed area, engaged in rental management for many years, and they tend to focus more on management business – which means they are not very good at buying and selling houses. For example, when appraising house prices, they may give prices that are different from the market level, and the search platforms they use for sales may also be relatively limited, which reduces the competition among buyers. (In Japan, when the major search platforms publish house information, they need to negotiate and sign a separate contract, and it is not easy to just click a few times online to start listing the house).

Therefore, from the buyer’s perspective, the chances of finding a treasure house in the property listings of real estate companies that focus on management business will be greater. For sellers (landlords), since they have entrusted management companies to handle daily management for a long time, they have accumulated a lot of trust and relationships, and they may consider entrusting sales to management companies for the first time. Therefore, these real estate companies that are good at rental management still occasionally have high-quality properties for sale.

On the other hand, since ATBB is naturally bound to athome, no matter how the management company’s sales strategy is, it will generally list the properties on athome. Therefore, the chances of finding high-quality properties in athome are the highest among these three real estate companies.

Of course, recommending athome does not mean that the other two (Rakutai and Kenbiya) are not worth considering. After all, the property listings on the three platforms are not exactly the same. For investors, taking into account all three platforms can effectively expand the search range and also be more conducive to understanding market conditions.

Here, I would like to specifically mention investors outside of Japan who do not know Japanese. Now, most browsers are equipped with automatic translation functions, and the Japanese used on search platforms is generally simple phrases that can be understood by automatic translation almost 80% to 90% of the time. Therefore, even if you don’t know Japanese, I strongly recommend that you can first visit these websites to take a look and understand the market.

Of course, when making inquiries, you may still need the assistance of English agencies to solve language communication problems. Although most of the property listings in Japan can be introduced by any intermediary, there is still a considerable part of the listings that are exclusive to intermediaries (essentially, general media listings that are signed with only one agency, and you don’t need to pay too much attention to the specific operational details), and your English agency may not be able to introduce them. There are relatively few exclusive listings like this on athome, so in this sense, I also recommend that you use athome more often.

Finding a House with a Real Estate Agent

One of the most crucial factors in finding a house through a real estate agent is maintaining a good business relationship with the agent.

I have always believed that in the process of buying real estate, especially investment properties, the relationship between the agent and the client should not be that of a service provider and a customer, but rather that of business partners working together towards a common goal of successfully purchasing a high-quality property.

Some friends, especially those in sales, may think that since they are spending a large sum of money on a house, they are like gods, and the agent should work according to their rhythm, and it’s natural to scold the agent if they make mistakes. (Especially among friends in sales, I believe many people have been scolded all the way up in their company, making it easier for them to bring this kind of emotion to the agent.)

Here is a typical misunderstanding: real estate sales are not just “real estate sales,” but a different nature from “product sales” in general industrial companies. For example, if you sell ¥10 million worth of products for your company, your company will generate ¥10 million in sales revenue, while for a real estate agent, selling a ¥10 million house only generates the commission, which is only ¥396,000 in sales revenue, and most of the money you pay goes into the seller’s pocket. Obviously, the level of service expected for ¥10 million in sales revenue and ¥396,000 in sales revenue is different, even if you actually pay ¥10 million in cash.

Secondly, real estate sales are ToC sales, not ToB sales, and it is also a revenue model based on transactions – you don’t have to pay when you walk in the door, but only when the real estate transaction is successful. This means that from the agent’s perspective, the customer is abundant and can be screened and treated differently – customers who are likely to make a transaction and have sufficient budget are worth more time and resources, while customers who are unlikely to make a transaction and have limited budget are not worth such treatment and can even be abandoned if necessary.

Of course, as investors, our ammunition (funds) is always limited and cannot be changed in the short term, so the most effective way to improve our relationship with the agent is to reduce the cost of communicating with the agent and increase the likelihood of making a transaction in the agent’s eyes. In other words, we need to be a “reliable” investor.

In fact, from the agent’s perspective, it is the same – most real estate agents prefer to provide services to a mature investor with a budget of 20 million yen and a high likelihood of making a transaction, rather than to a novice customer with a budget of 100 million yen but no knowledge, who only has some vague hopes. In the eyes of the agent, the quality of the customer is usually more important than their budget.

Let’s give some examples of “unreliable” clients from the perspective of intermediaries to help everyone understand:

  1. Clients who have no knowledge of the industry and no willingness to learn. Common questions include: how much does one square meter cost for a house in Tokyo? What kind of house can I buy for 1 million RMB? These are questions that can be easily answered just by searching on a real estate platform.
  2. Clients with illogical demands. For example, clients who want a new house with a good location and orientation, but also want a high return on investment. Clients who change their buying requirements constantly, saying that they don’t mind poor lighting at first, but then change their minds and reject recommended properties for vague reasons such as disliking the appearance or not being familiar with the location.
  3. Clients who are vague about their own situation but demand full service from intermediaries. For example, clients who want to buy a house but refuse to discuss their specific budget, or who want a loan but won’t disclose their annual income or visa type. Clients who try to gather intelligence from intermediaries about properties from other channels, such as asking for opinions on a property with a 7% return rate in Yokohama that’s only 10 minutes away on foot.
  4. Clients who are impolite and have a condescending attitude. For example, clients who use commanding language in their messages and never say “please,” “thank you,” or “excuse me.” Clients who ignore questions asked by intermediaries but expect them to reply immediately.
  5. Clients with a shallow understanding of the industry who pretend to know more than they do, or who lack decision-making skills and habitually rely on their half-informed friends and family. For example, clients who claim to work at a bank and know more about loans than the agent does, or clients who say that a property in Tokyo must have a return rate of at least X% (but the number they give is clearly from years ago). Clients who rely on friends who claim to know a lot about real estate and whisper to them during property visits without giving specific reasons for their opinions.
  6. Clients who lack decision-making power or who are not yet qualified to buy a house. For example, parents who worry about the house their children want to buy (whether they will buy it or not), or women who worry about the house their male partners want to invest in. Clients who refuse to let intermediaries directly contact their children or husbands because “the child is shy” or “the husband is busy with work,” or clients who request various documents and ask intermediaries to take them to see properties before they are even qualified for a loan or before their domestic funds have been received.

With the premise of avoiding becoming an “unreliable” client, I would like to recommend a growth path for those who are complete beginners and wish to communicate effectively with intermediaries and continuously receive property recommendations:

  1. Learn the basic knowledge of investing in Japanese real estate, such as the types of properties that can be invested in and their respective characteristics. This knowledge can be obtained from books or by reading my article: Qiuzhu: What We Are Talking About When We Talk About Investing in Japanese Real Estate.
  2. Visit the three property search websites mentioned above (athome, Rakuten Life, and Kenbiya) and conduct a preliminary search for the property type, location, and budget that interests you. For example, check whether there is enough inventory for this type of property, the age of the property, the price, and the distribution of the return on investment. If you do not know Japanese, please use the translation function of your browser to view the contents.
  3. If you find a property type that interests you and fits your budget, you can contact a reliable intermediary for further inquiry. If you do not know any real estate intermediaries in Japan, you can ask me for a recommendation or consult with me directly.
  4. During the initial contact, you should first explain your purpose (to learn about investing in Japanese real estate) and describe your situation and needs in as much detail as possible, including but not limited to: whether you want to buy the property in full or with a loan, whether you hold a long-term visa for Japan, the type of property you are interested in, your budget, and your investment goals (rental income, resale, tax avoidance, immigration, etc.). If you are still unsure about some details (such as whether you can obtain a loan, which affects your budget), please truthfully tell the intermediary.
  5. Generally, the intermediary will start to guide you further in the process. During this process, you will inevitably ask more questions, but please try to ask specific questions and avoid asking broad and difficult-to-answer questions. For example, “What is the average return on investment for houses in Tokyo?” “How are houses in Kanagawa?” “Which is a better location, A or B?” On the contrary, your questions should be as specific as possible: you can add more prerequisites to your question or tell the intermediary your investment goals to ask for advice. For example, “If I want to focus on rental income/future resale/tax avoidance, which area is more suitable for buying an apartment for around 20 million yen?” “Is it suitable to invest in a large apartment for rent in Area A?” The more specific your questions are, the more valuable the answers you will receive.
  6. When receiving property recommendations from a real estate agent, it is important to provide timely and clear feedback. Real estate agents do not mind if you reject their recommendations, but the premise is that your reasons for rejection are clear and logical. The feedback you provide actually clarifies your needs further and means that both parties are closer to reaching a deal, making it a positive action. Feedback should be objective, such as “Not having a bathtub is not conducive to renting out the property. I want to buy a property with a bathtub” or “The houses near the red-light district (such as Minowa, Iriya, Uguisudani…) have poor security. The return on investment can be lower, but please recommend areas with better security.” Feedback should not have too much subjective color, such as “The appearance is not good”, “I don’t like the look of it”, “The return on investment is too low (the return on investment needs to match the risk)” and so on. If the property content involves your knowledge gap, please communicate by asking questions instead of using ambiguous feedback, such as “What kind of tenants would rent a property for 50,000 yen in this area?” or “What are the nearest commercial areas to this location?” This kind of feedback will be more positive than “I don’t want to pay 50,000 yen. The quality of the tenants must be poor.” or “I’m not familiar with the location, so I won’t buy it.”
  7. If you want to buy properties that are better than average, please make decisive decisions as much as possible. Everyone’s personality is different, so this rule is not suitable for all investors, especially for newcomers. However, high-quality properties are fleeting if you don’t buy them today, someone else will buy them tomorrow. Therefore, when the real estate agent recommends a property that emphasizes its rarity/high quality, please give feedback as soon as possible-if you are satisfied, start the purchase procedure immediately; if you have any questions, communicate with the agent to resolve them as soon as possible; If you are not satisfied, please let the agent know that the property is not suitable, so that the agent can recommend it to other clients. Try not to use feedback that delays time, such as “I need to discuss it with my family”, “I want to compare prices with other properties”, “I need to think about it” and so on. Although the agent will not say anything, the next time a similar property comes up, it will not be prioritized for you. If you really need time to think, please add a sentence like “During this period, you can recommend this property to other clients, it’s okay.”

Closing Remarks

Before publishing this article, I showed it to a few friends who suggested that the amount of valuable information it contains could make it a paid article. After much consideration, I have decided to give up on making a little bit of money and instead share it for free so that more people can benefit from it. I also hope that you can help by liking and sharing this article, so that there can be fewer misunderstandings in the industry and more sincerity. I also hope that many foreign investors in Japanese real estate will no longer be “suckers” who don’t understand the market.

Finally, I wish everyone a prosperous new year and hope that you can all buy your dream homes.

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