In this article, Nils Herchenroeder of Tokyu Housing Lease Corporation reviews 2016’s top trends and most frequently asked questions on residential property management in Japan. Tokyu Housing Lease Corporation is one of Japan’s leading property management companies.
Most of our clients from overseas this year came from the following countries:
- Hong Kong
Hong Kong and Taiwan have been represented the most amongst our customers during the year, closely followed by Singapore. Clients from China and Indonesia are newcomers to the mix but are steadily increasing. We are also looking forward to a significant number of customers from Malaysia in 2017 because of recent sales events and seminars there.
Most Popular Areas
- Osaka, Chuo Ward
- Tokyo, Minato Ward
- Tokyo, Chiyoda Ward
- Osaka, Kita Ward
- Tokyo, Chuo Ward
Such factors as higher construction costs have depressed yields in Tokyo, making Osaka an increasingly popular target among our clients. This is especially true of investors looking for yield. That being said, the central five wards (Chiyoda, Chuo, Minato, Shibuya and Shinjuku) continue to see stable activity due to assumed capital gain opportunities and stable rent. Fukuoka has also appeared on investors’ radar as a possible property investment destination, so we may see more activity there in 2017.
USD/JPY Exchange Rate Effects
Over the summer we saw many of our clients requesting valuations of their property to prepare for eventual sales. However, the current USD/JPY rate environment has caused some foreign investors to consider investing in additional properties in order to take advantage of the stronger US dollar.
Top 6 Property Management Questions
1. How do I pay the monthly Management Fees/Repair Reserve Fund from overseas?
If you buy a condominium unit you are required to pay monthly management and repair reserve fees to the building management association. This can be an obstacle for off-shore property owners because of restrictions against non-residents having a bank account in Japan. It is important to check with your property manager to see if they are able to pay these fees on your behalf.
2. How do I find a tenant for my property?
If you are an owner who has engaged the services of a property manager, you may wonder exactly how the PM will find potential tenants for your property. There are two main ways that a PM will promote the property. Some PMs work exclusively with their in-house leasing brokerage service, through which you can have access to their database of tenants. If you work with a pure property manager, they will promote your property to leasing brokers throughout Japan. This gives you access to a bigger pool of potential tenants. Additionally, properties are usually promoted online on several popular websites as well as leasing information databases (e.g. REINS) that are only accessible by licensed realtors.
3. How does the actual property handover work?
Overseas owners should be aware that they will be required to attend a pre-handover inspection of the property. This gives you a chance to check for any damage that can be fixed by the developer at no charge. This is especially true if you are purchasing a brand new property.
On the day of the actual handover of the property (the day when the keys change hands), the new owner must also be present. However, many overseas purchasers are not able to be in Japan on the actual day. In this case, you should check with your property manager to see if they can represent you during the handover process.
4. What is the difference between a Ordinary and Fixed-Term Lease?
In Japan, there are two kinds of residential leases: ordinary lease contracts (with a duration of two years, automatically renewable) and fixed-term contracts (where the lease term is defined in the contract and usually between two and five years).
Please see this article for more details on how the type of lease can affect your investment: Managing an Investment Property in Japan: FAQs
5. How do I receive payment of rental income?
You should check to make sure that your PM can accommodate overseas wire transfers. Since bank transfer charges are usually borne by the owner, it would be advantageous to reduce the frequency of remittances (for example, to just four times a year). In most cases, the PM fee as well as the monthly management fees for the building management association and repair reserve fund will be deducted from the rent before funds are wired to you.
6. What tax and insurance matters should I be aware of?
Every owner is legally required to have a homeowners insurance policy that includes fire and optionally earthquake insurance. Tenants are also required have a renters’ insurance policy before living in your property. Most PMs can introduce you to an appropriate insurance agent.
Overseas owners who are master leasing their property will be subject to Master Lease Withholding Tax on rental income. For tax matters, we recommend that you engage a tax accountant who will help you with filing your yearly returns.
If you are interested in learning more about Tokyu Housing Lease’s PM services, please fill out the form below, and a representative will contact you shortly.