In this article we give an overview of the average yield that investors can expect for income properties in Japan.

With the yen depreciating against the US dollar by about 20% since the beginning of this year, on Real Estate Japan, we have been seeing very strong year-on-year growth in inquiries from people interested in buying homes and investment properties in Japan, especially from overseas.

One of the more frequently asked questions from buyers is how to approach comparing different properties for investment purposes. Yield is only one of the indicators that buyers should consider but can be a useful starting point for understanding whether a property is a good value.

Gross yield v. net yield

Gross yield is calculated by dividing the annual expected rental income by the property purchase price and multiplying by 100 to get a percentage. In Japanese, gross yield is called hyoumen rimawari (表面利回り) or literally, “surface yield”.

When you look at an advertisement or listing for an investment property in Japan, the estimated yield is almost always going to be gross yield. This is also how our partner agents report yield on Real Estate Japan.

Net yield is calculated by deducting expenses from annual rental income, then dividing by the property purchase price and multiplying by 100 to get a percentage. In Japanese, net yield if called jisshitsu rimawari, (実質利回り) or “real yield”.

Expenses will, of course, reduce your expected yield, so they are an important consideration when you are penciling out whether a particular property makes sense for your investment objective. Here are the main expenses you should consider:

• Building management fees
• Repair reserve fund contributions
• Fixed asset taxes (property taxes)
• Property management fees (if you choose to use a property manager)

Please note that building management fees are paid to the building management association, in the case where you buy a building that has a management association. Building management fees are different from property management fees, which are paid to a property manager (PM), which is a company that manages an investment property on the owner’s behalf; this can include sub-leasing and collecting rent. Many overseas rental property owners choose to use a PM to reduce the inconveniences of managing a property from outside the country.

We highly recommend that you consult with a local bilingual real estate agent if you are considering buying an investment property in Japan. They will be able to help you better understand what expenses you can expect so that you can have a realistic idea of how you can expect your investment to perform.

It’s also important to point out that, as with any investment decision, “chasing yield” should not be necessarily be a main consideration.

We provide the gross yield charts below to give our users a general idea of what to expect from different property types and the age of the building, as well as in different parts of Japan. Please use these as general guidelines as you are researching investment properties in Japan.

Average gross yield by property type

What is the difference between an apato and a manshon?

Apato are generally two-story multi-unit residential buildings that are constructed of wood or light-gauge steel. Residents do not have individual ownership rights to their unit.

Manshon buildings are multi-family residential building that are at least 3-stories high and constructed using steel-reinforced concrete (SRC), reinforced concrete (RC), or steel frame. The individual units in a condominium are owned by each resident. Each unit owner has ownership rights to their individual unit as well as the right to vote in the Building Management Association (similar to a Homeowners’ Association), which makes decisions on the day-to-day operation of the building.

Manshon are considered more desirable by renters because they use higher-grade materials, finishes, and fixtures and generally offer a better living environment.

As can be seen from the chart above, yields on apato buildings tend to be higher, primarily because the average purchase price is usually much lower than for manshon, but it’s important to consider that renovation and maintenance costs can eat into profitability, especially for lower-priced properties.

Yield by major city and age of property

A good rule of thumb to know is that the older the property, the higher the gross yield tends to be. This is true across property types (whether they are single-unit condos, apato or manshon buildings) and location.

Properties outside the Tokyo 23 Wards tend to offer higher yields, but may be more difficult to re-sell when it comes time to exit your investment.

Single-Unit Condominiums

Whole Apato Buildings

Whole Manshon Buildings

Search for investment properties in Japan

Click the links below to search for investment properties in Japan by prefecture. Our agents upload new properties daily, but some prefectures may not currently have properties for your particular search.

Popular Searches

Tokyo investment properties

Osaka investment properties

Fukuoka investment properties

Sources:

• Income property market trends, annual report for 2021, Kenbiya.com (in Japanese)

Photo credit: iStock/kokouu

Bilingual Agents

All of the agents who list properties on realestate.co.jp are bilingual in Japanese and English. Some agents can also handle inquiries in Traditional Chinese, Simplified Chinese, and other languages. Please click on the links below to see their listings: