Key money, called reikin (礼金) in Japanese, is a payment that you make to the landlord as part of your move-in fees. It will not be returned to you when you vacate your apartment.
It is often explained as a cultural custom or as a relic of the era of rapid post-war economic growth, when Japan experienced acute housing shortages in urban areas. Prospective tenants would pay key money to landlords to get to the head of the line.
Are you required to pay key money?
No, at all! The majority of apartments in Japan do not require key money.
In the Ministry of Land’s 2020 Residential Housing Market Trends report, about 41.6% of people surveyed said that they did pay key money when they moved in to their rental home, and about 66.8% of those who paid key money said that they paid one month’s rent.
How much is key money on average?
Renters nationwide pay on average about ¥77,400 in key money, according to the Ministry of Land.
Why do landlords charge key money?
If key money isn’t required, why do some landlords charge key money and why do some renters willingly pay?
Desirable properties that are in demand are more likely to charge key money. These include newer properties with high-end equipment and amenities in great locations, for example. Landlords usually have no difficulty renting these kinds of properties, so they can charge key money and can still expect to lease them out. Also, some renters are very particular about where they live or how many rooms they have or what the kitchen is like, for example. If you are strict about what your home should be like, you may be willing to pay key money to get it.
Some landlords charge key money as a way to try to attract tenants with very stable finances. The thinking is that people who are able to pay key money are more financially stable and less likely to default on their rent.
Another rationale for charging key money is to make the monthly rent look less expensive. A landlord might reduce the stated monthly rent by a certain amount, for example, but then charge one month’s rent as key money to more than cover the difference.
For example, if the stated monthly rent is ¥78,000, with a standard lease contract of 24 months and one month’s key money, the landlord’s income for the period would be (78,000 x 24) + 78,000 = 1,872,000 + 78,000 = ¥1,950,000. However, if the monthly rent is ¥80,000, with no key money, the landlord’s income would be 80,000 x 24 = ¥1,920,000. The landlord makes an additional ¥30,000 over the two-year lease term by charging ¥2,000 less in monthly rent but adding one month’s key month as a move-in cost.
So, as a renter, how do you avoid paying key money?
How to avoid paying key money
1. No key money apartments, only please!
The easiest way not to pay key money is to make it part of your search criteria. On Real Estate Japan, when you’re looking for properties, just check the “No Key Money” box!
If you walk into a bricks-and-mortar real estate agency or are working with one of our partner agents after making an inquiry on Real Estate Japan, tell them that you don’t want to pay key money. If this is part of your search criteria, they won’t recommend key money properties to you.
2. Stay in a share house or short-term rental
Almost all share houses and short-term rentals do not charge key money. Many also don’t require a deposit, agency fee, or guarantor fee, so they are a great option for those looking to lower their move-in costs.
Click here to see all short-term apartments currently on Real Estate Japan.
3. Negotiate a discount
It’s possible to negotiate a small discount on key money or even rent.
It is easier for your agent to negotiate on your behalf at certain times of the year and for certain kinds of properties. In Japan, most people move in March because the business and school year starts in April. The low season is during the summer months. Landlords and property managers do not want their properties to sit empty and are sometimes willing to offer a small discount if the property was not leased out during the peak season.
Properties that have been vacant for an extended time, older properties, and those that aren’t well priced (meaning that there is a non-negligible difference in move-in costs or monthly rent) compared with similar properties are candidates for negotiation.
How much of a discount can you expect? No matter how long a property has been vacant, it’s not realistic to expect the landlord to offer a huge discount. It’s more realistic to think in the range of ¥5,000 to ¥10,000, but of course, you should ask your agent to try for as much of a discount as possible.
For some properties, however, it is unlikely that you’ll be able to negotiate on the monthly rent or key money. These include newer properties with great amenities and those in highly desirable locations.
To see a complete list of no key apartments currently available on Real Estate Japan, please click here: No key money apartments
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Lead image: Short-term apartment available for rent in Takadanobaba, Tokyo, image: Matsuri Technologies
Source: Ministry of Land, 2020 Residential Housing Market Trends (PDF in Japanese)