Who owns short term rentals in Japan?

Question

Aloha!

I'm currently in process of purchasing a home in Kyoto, Japan and wanted to connect with other US Citizens who also own investment properties in Japan. I'd love to hear your feedback on success or struggles and anything I should expect. We live in Hawaii currently and have no ties to Japan. We just love the country and plan to visit often and figured why not expand our business into Japan. We currently own/manage properties across a few states including Hawaii so we aren't new to managing short term/mid term rentals. We plan to do a little remodeling and then will need to fully furnish the home so it is ready for guests. I do understand the Japan market does not see the kind of appreciation we are used to in the West. I'm investing mainly for cash flow and the ability to have a home base when we come visit and possibly will turn into longer term stays in Japan in the future. We have two young boys who also enjoy Japan and hoping we can all begin to learn the language and possibly enroll them into an International School during the summers. My wife and I have moments where we think maybe we should just cancel this but then we get excited about the new adventure and path it could put us on if we do move forward with this. Hoping to connect with some great people here on this topic!

Charles Roberts · Answer

Hey John! What part of the island are you on? I'm over on the north shore Haleiwa. Would love to connect. Send me a message with your email or Instagram details! I'm in "escrow" on a property in Kyoto which handoff should be completed by the end of next month. We are set to head back to Kyoto in a few months to start prepping the property ready for guests. The process has been difficult and stressful and we almost gave up a few times. We already have a few mid-term booking requests so just as I thought, my vision of what's possible is coming to reality.

Charles Roberts · Answer

You are right. People should stay away from investing in Japan! Not even one good investment opportunity over there! Much too difficult!

Michael Borger · Answer

Mike Lambert above is correct about house values in Japan. It's not like here in the states. I go to Japan almost every year -- the demographic future is not positive. I see abandoned, teardown houses everywhere.

John Rankin · Answer

Hi Charles, I'm also based in Honolulu with young kids and in a similar situation to you, have also thought about buying an investment property in Japan that we could use part-time and rent out at other times. I used to live in Tokyo for 6 years and would like to find a reason to go back more regularly but let me know if you want to connect!

Mike Lambert · Answer

Hi Charles,

This is probably the fastest way to the poor house, mainly because, in Japan, houses are like cars as in their market value depreciates and goes to 0 over time. To make matters worse, the horrendous demographics mean that there's going to be a huge surplus of properties, accelerating the depreciation. This also probably ensures that they will continue to depreciate against the US dollar over time. What's the point of getting cash flow if you lose all your capital?

Of course, there is the lifestyle aspect. You might decide that you absolutely want to own your own residence there and I assume you can afford it since you already own properties elsewhere, likely in beautiful Hawaï. If you don't have to own your own residence though, why not invest the money in a profitable investment elsewhere and rent in Japan? It could even be (more) interesting from a lifestyle point of view as you'll get to stay in different cities/houses every time you go. And your net worth will thank you.

If you still want to go ahead, you'd be better off buying a house than an apartment because, while the value of the building itself will go to 0, you'll still have the value of the land, bearing in mind that the land might actually lose value too given the depopulation and the yen depreciation.

Sorry if I'm pooping a party but make sure you understand what you're getting into (which you're already doing by asking the forum) and then make the decision that's right for you according to your objectives. Hope this helps.