Azuki Partners: Objective Real Estate Investment Advice for Foreigners in Japan

Japan has seen a tremendous surge in buyer interest in residential real estate in 2023. On Real Estate Japan, inquiries to bilingual agents handling properties for sale throughout the country have increased over 51% year-on-year in the first three months of this year.

The many attractions of buying a home or investment property in Japan are longstanding, and we expect the market to continue to gain momentum this year.

However, as a foreigner it can be extremely difficult to get objective, transparent information about the market. The language and cultural barrier, as well as differences in the way that sales and purchase transactions are actually carried out can make it challenging to even know if you are asking the right questions.

Objective investment advice

If you are seriously considering buying property in Japan, it is essential to seek out objective advice from a professional with an established track record in the industry.

Real Estate Japan recently had the opportunity to email interview Tsuyoshi Hikichi, a real estate professional with over 20-years experience advising foreigners on buying and selling property in Japan. He recently launched Azuki Partners, a real estate consulting company in Tokyo.

1. What was the impetus for your decision to start this new company and what makes it unique? We had the opportunity to do an email interview with you last year about Axios Management, but how do you propose to provide objective market analysis for investors? Do you feel there is any conflict of interest given that are also the Managing Director of AXIOS and IREA real estate agency?

I have run Axios Management, a property management firm, for several years. I have over 20 years’ experience in the real estate business, and I have seen many investors make mistakes because of their lack of knowledge and limited information about real estate in Japan.

Most of our clients already know about Axios because of our reputation for turning around the properties. But unfortunately, there are limitations on how much we can improve any property’s performance. So it occurred to me, “What if I could advise investors before they acquire a property? Wouldn’t it make their investment even more successful?”

There will be no conflict of interest because the reason I work with Axios and IREA has always been to protect the interests of our clients. This new consulting firm, AZUKI Partners, gives clients an entryway to real estate investment in Japan. Axios and IREA could provide subsequent services. While I would want to recommend these companies, it is entirely up to my clients whether they would want to use them. The collaboration between the three companies would allow clients to get consistent service in a one-stop solution, but it is totally up to them.

2. Do you think that it is a good time to buy property in Japan? Kazuo Ueda, who has been nominated to be the next Governor of the Bank of Japan, has said that he thinks it is appropriate to keep interest rates low for now; but where do you see interest rates in Japan going this year and how would an increase in rates affect someone considering buying property in Japan?

My current opinion is that it is unlikely for the interest rate in Japan to go up in the next four to five years at least. If the rate goes up, property prices could go down because of the increase in borrowing costs, which might dampen demand.

When I talk to my clients, they buy or invest in  properties in Japan because they love Japan.

Maybe five or 10 years ago, not many overseas investors were interested in property in Japan because they had no idea about Japan, and also because of the language barrier and cultural differences.

But these days, they visit Japan and enjoy a safe environment while enjoying its increasingly tourist-friendly infrastructure, history, food and culture.  Some of our clientele just want to relocate to Japan or have a second home in Japan. It is not purely for  investment purposes but also to add some extra value to their lifestyles. They choose to come to Japan to enjoy their lives more. So in summary, even if interest rates increase  they will probably be buying a condo or house in Japan not only for the investment purpose but also to enhance their lifestyle.

3. Can you tell us about yourself and your experience and track record advising English-speaking foreign clients?

I started this career when I was 27. I joined an estate broker agency that specialized in foreign expat clients. I worked for two years but I realized that as the estate agent, I had very limited capacity  and potential to support non-Japanese clients. This is because property owners or property management companies tend to refuse non-Japanese tenants at their discretion, because they feel uncomfortable renting to people who don’t speak Japanese.

I realized I could not change this as a leasing agent so I decided to work at an investment firm which was run by non-Japanese so that I could learn more about global standards in real estate financing and management. Because of this experience, I came to understand the Japanese property market but from the perspective of Western expectations of property investment.

I can use my understanding of the requirements of global investors or property owners, including their language needs, to help them become successful in property acquisition in Japan.

4. Have you been surprised by any questions that foreign clients have asked you about buying property in Japan?

I was quite surprised that some of my clients didn’t even know about acquisition tax or property fixed asset tax in Japan. It’s probably that some estate agents only show cash flows, but more importantly, they should look at tax and CAPEX strategies. That is exactly what I want to advise clients about before they engage in any property acquisition in Japan.

5. How is buying an investment property in Japan different from doing so in another market, like the United States and Europe or other Asian countries?

While I do not have direct experience in buying property in other countries, I know well that each country has different regulations and customs, so therefore I would like potential buyers to understand what investment properties in Japan require and the risks and benefits. A lot of things could be new to them, but this is exactly what I want to advise them about.

6. Do you have any advice for people who are thinking about buying a property and operating it as an AirBnB-style private accommodation?

I worked for a hotel investment firm before. The accommodation business requires a lot of operating expenses. It can give you high gross yield, but because the operating expenses are also high, net cash flow could be almost identical to residential properties.

From my experience, investors need to find a very good operator who they can trust and team up with. This is the key to be successful in a hotel or AirBnB-style investment.

7. What are the key questions that people should ask when they are considering investing in Japanese real estate?

Tax, future repair expenses, and a rent evaluation. Please do not only look at the current gross yield. The current tenant might be just overpaying rent so if the tenant moves out, the next rent could end up being much lower. Investors can mitigate their risks by asking me to consult with them on fair market rent, property value, tax, and CAPEX strategy.

8. What are some things that foreign buyers sometimes forget to consider when they are doing due diligence of a property, doing a cash flow simulation or other analysis relating to buying a property?

Some foreign buyers don’t realize the importance of finding the right consulting professionals to give them objective advice in good faith.

Buying property might be easy if investors have plenty of cash and get financing from banks, but the most important thing is to succeed in the investment. To consult with a trusted team to make their  investment successful is the right move.

9. Do you have any closing words you would like to share with our readers?

If you want to make your investment successful, please feel free to contact us for a consultation!

More information

If you are interested in learning more about AZUKI Partners‘s services, please visit their company website.

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