Please note that this post is not intended to be financial advice but rather my sharing and observations. Please conduct your own thorough research on the Japanese property market and compare with different sources before investing in any real estate.  

We’ve covered quite a few topics on the blog so far, from acquisition costs, concerns that investors have, and how to choose a property in Tokyo, but we’ve yet to cover an important question we get asked at every seminar, which is:

“Can I really expect returns if I buy a property in Japan?”

Now, if you asked every salesperson at a seminar if you can earn money, of course they’re are going to say the affirmative. The agency distributing the company has spent thousands of dollars for the fancy location with fancy tea and snacks for the guest and so you definitely won’t expect for them to say “uhhhh…no there’s always a risk and we can’t guarantee”.

But speaking as a staff handling operations that has looked at months and years of rental income statements of our customers, my observations are, yes, you can expect returns when you invest in our projects, or other properties in Tokyo or other major cities. Today I am going to share a typical example of what an investor sees:

Factors considered for the case study:

1. Residential neighbourhood in Japan (not Shibuya, Minato, Shinjuku, Chiyoda or Chuo ward)

2. A project that is close to the station. In this case, Xebec Kamata Station Exz is just 4 minutes away.

Project Name: Xebec Kamata Station Exz (Ota Ward)

Year of Building Completion: 2014

Unit A (1K, 1 Bedroom + Kitchen)

Unit size: 24.05 sqm

Purchase Price: JPY 26,380,000

Jan	Feb	Mar	Apr	May	Jun	Jul	Aug	Sep	Oct	Nov	Dec
Rent	96,500	96,500	96,500	96,500	96,500	96,500	96,500	96,500	96,500	96,500	96,500	96,500
Lease Management. Fee	-5,211	-5,211	-5,211	-5,211	-5,211	-5,211	-5,211	-5,211	-5,211	-5,211	-5,211	-5,211
Management Fee*	-45,600	-45,600
91,289	91,289	45,689	91,289	91,289	91,289	91,289	91,289	45,689	91,289	91,289	91,289

*The two deductions in March and September are Management Fees and Sinking Fund.

The monthly “Lease Mangement Fee” of 5,211 Yen is calculated at 5.4% of the monthly rent and this fees go to administrative work such as collecting rent, sending this money to your bank account overseas, liaising with your tenant and all paperwork.

Total Income: JPY 1,004,268

Returns: 3.8%

Unit B (1K, 1 Bedroom + Kitchen)

Unit size: 21.80 sqm

Purchase Price: JPY 23,600,000

Jan	Feb	Mar	Apr	May	Jun	Jul	Aug	Sep	Oct	Nov	Dec
Rent	89,000	89,000	89,000	2,697	147,032	81,000	81,000	81,000	81,000	81,000	96,500	81,000
Withholding Tax	-18,173	-18,173	-18,173	-605	0	0	0	0	0	0	0	0
Lease Management. Fee	-4,806	-4,806	-4,806	-159	-3,565	-4,806	-4,806	-4,806	-4,806	-4,806	-4,806	-4,806
Management Fee	-8,000	8,000	-8,000	-267	-5,935	-8,000	-8,000	-8,000	-8,000	-8,000	-8,000	-8,000
66,021	66,021	66,021	2,203	102,967	84,194	84,194	84,194	84,194	84,194	84,194	84,194

For unit B, the tenant moved out in April 2017, but was able quickly secure a tenant. This is not a special case, but is the norm in our experience. Securing a tenant within a month or two is easy for an apartment that is near the train station.

The scheme also changed from Rental Guarantee to Master Lease, and so there is no more withholding tax to be paid. For those who might not know, withholding tax is collected by the government for corporate tenants, and under the Rental Guarantee scheme, the unit is under sublease to our company and thus there will be a withholding tax. However, please note that withholding tax is refundable when you file for income tax.

Total Income: JPY 1,020,796

Returns: 4.3%

Please note that property tax and income tax has not been factored into the calculation, but you can still expect about 3.5-4% of net return.

So, these are just two examples of what owners of the Xebec series can earn. Should you have any questions regarding the calculations or just want to know details of the figures, drop us an email at into-dti@dualtap.co.jp.