Vacant houses in Japan, opportunity?

Question

Im travelling in Japan for the first time and I love it. Ive been reading about the high rate of vacant homes (http://www.japantimes.co.jp/community/2015/03/06/how-tos/cheap-rural-homes-come-price/#.VkBWc6WmrbV) and am wondering what opportunity there might be. It seems to me if there is a lack of local demand there might be a market to buy and hold as rentals for foreigners visiting or moving to Japan, or affordable 2nd homes. Id love to hear thoughts from members in japan and international investors.

Account Closed · Answer

There are a few areas of Japan real estate (most stable tenants in the world, insanely low interest rates, steady cash flow, big time tax loopholes, very cheap and reliable property management) which if taken advantage of properly can yield you big returns, but I don't think abandoned houses are one of them. These are generally older rundown houses outside of the cities, and with the population here dropping the future for those locations looks pretty bleak. The airbnb play works in the bigger areas but would be a stretch in these places.

Dmitri L. · Answer

As one of my friends likes to say, "there is no steak falling from the sky". If no one wants to buy up the cheap homes locally, there is a good reason for it..

It's the same as a CA investor getting off the plane in the midwest and thinking everything is a killer deal because they're being offered homes for 60k instead of 600k. With some more experience they may learn that those homes were actually worth 30k, and there was a good reason that no one local was buying.

In general, prices in a local market will adjust to reflect a reasonable return that investors will want based on the prevailing conditions. As @Bill Baldwin mentioned, interest rates as well as expenses tend to be lower. However, so are the cap rates - it's typical to see 5-6% gross for a recent building in a good area - on an NOI basis, that would be a cap rate in the 3-4% range. Yes you have very low interest with potential for 30-35 years fixed at 2%, 1%, or maybe even lower. But the building will also depreciate over time.

As with anywhere else, you need to learn what is a good deal within the local market - the truly great ones are just as rare here as they are in the US.

That being said, there are some potential uses for older homes in the countryside. If you're looking for a good place for early retirement for example, that could be an option - cheap homes will also be accompanied by relatively lower cost of living compared to the big cities.

Enjoy your time in Japan! Truly an awesome place to be. Just don't by any houses ;)