In this article we take a look at the necessary preparations before you can rent out your investment property. Most of these steps require a knowledge of the Japanese language, and in general, trying to manage your Japanese property on your own from abroad is very difficult, so the following explanations are based on the assumption that you are appointing a property manager for assistance.
1. Determining the Monthly Rent
The amount of the monthly rent is the first and most crucial decision to be made before the search for a tenant.
In order to set an appropriate market rent there are many different factors to be considered. The area and local infrastructure, access to public transportation, construction year and build quality, apartment size, room plan, floor number, natural lighting: This is to mention only some of the important considerations!
When we are commissioned to assess a rent level, we use our research database and tools that can only be accessed by licensed real estate companies. We also visit the property to check the surroundings with our own eyes to get a real impression of it. This information will be used to estimate the rent based on the current market and comparable properties.
2. Choice of property management service plan
When you come to an agreement with a PM (property management), they will use their resourses and contacts to find a tenant for your property. After the tenant is approved and has moved in, the PM starts collecting the rent from the tenant, which is then transferred to your designated bank account on a regular basis. You will receive the rent as long as the unit is tenanted, and the PM receives the agreed fee for their services.
Your PM might also offer a so-called rental guarantee plan. With this kind of plan, the PM guarantees a certain monthly amount of rent which you will receive regardless of whether the unit is actually tenanted or not. Of course the PM needs to charge a higher management fee compared to the plan without rental guarantee to cover their risks and expenses, but if you are looking for a hassle-free service and a stable monthly rental income without the risk of loosing income due to longer periods of vacancy, this is probably your best choice.
3. Pre-inspection and property handover
These points only apply to new properties (“shin-chiku” in Japanese).
As an investor you have the choice to buy a pre-owned property or a brand new one. New apartments are quite popular in Japan, and usually the rent for a property is higher for the first tenancy.
You, as the owner, have to attend the pre-inspection and handover of your purchased unit. At the pre-inspection you are asked to check the property together with the developer staff and claim any visual or functional defects of the apartment. These claims need to be documented and submitted in written form to the developer, who then sets up a schedule for an after-inspection.
At the handover you will receive the keys and related documents and get various explanations and information regarding the maintenance of the property. The place of the handover is decided by the developer and will normally be one of their local offices.
These events usually require your attendance three to four times, so you need to plan in advance to travel to Japan. If you are able to attend, make sure that you have someone to explain the details in Japanese.
Most property owners do not have the time to fly to Japan several times for this purpose. Ask your PM if they have a service to attend pre-inspections and handovers and take care of all the necessary paperwork. At our company we do offer these services as a package with a fixed sum, which is most likely lower than a single flight to Japan.
4. Property Advertisement
When it comes to the search for a tenant, even Japanese owners use the help of real estate agents and/or a PM. Very few people would try to handle on their own the complete process of registering and promoting the property on different platforms, arranging room viewings, reviewing applications and preparing the unit for the lease.
Regarding the advertisement of the property, some developers and PMs have their own system which enables them to promote properties through in-house networks. As cost-efficient as this is, for you as the owner, it may be advisable to also consider an approach where the PM uses major nationwide real estate listing sites. This guarantees a wider market range, making the property accessible to more potential clientele.
Having experienced both of the above mentioned ways, our leasing experts have found that with the approach through outsourced, independent platforms, tenancy rates can be increased.
If you need any advice on property management in Japan, please do not hesitate to contact us via below form.
Tokyu Housing Lease Corporation is one of Japan’s leading property management companies.
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