If you have a bit of extra money on your hands and are looking for new investment possibilities, you should consider the possibility of real estate investment in the Kobe area. Now is a prime time to invest in the Kobe area where the prices are relatively low compared to real estate investment in other countries and the ROI can be relatively high.
Foreign real estate investment in Japan has soared in the past few years. Real estate deals in Japan in 2014 totaled JPY 5.6 trillion, representing an increase of 16% over 2013. One reason for this unprecedented level of foreign investment was the 14% plunge of the value of the yen against the dollar. In addition, the size and scale of property purchases by international investors have increased as well.
Purchasing property is one of the biggest and most difficult investment decisions to make, more so in a foreign country. Below is a list of items you should consider.
1. What type of property should I look at?
In the Kansai, your best bet is to consider small residential units, such as studios and 2LDK apartments in buildings that were built after the adoption of earthquake-resistance regulations in the 1980s and thereafter. Residential units that are located within 10 minutes of the train station are particularly desirable. In the Kobe area, the Kasuganomichi area has many attractive investment units. Neighborhoods closer to Shin-Kobe station also have units that attract tenants looking for a more suburban ambience.
2. Do these residential units already have tenants in them?
Generally, yes. This means that after you purchase the unit, the tenant will stay. The only change will be the change of owners. Before buying the property, you should check the following:
- Whether a rent increase is permitted at the end of the current term. Check out http://suumo.jp/ for a general idea of rents in the area you are interested in. This website lists average rental rates in various areas.
- Ask around to see if the management company is reputable. (Your real estate agent should know.)
- Check out the history of major repairs on the unit and the building.
- Confirm the management fees (管理費) and common fees (共益費）and make sure that the repair fund is adequate for anticipated future repairs and maintenance.
- Look at the lease for any tenant in residence and do a background check of the tenant. (Note: You will not be able to view the inside of the unit itself, so please rely on your real estate as the best source of available information.)
3. How much do I need to invest? What kind of ROI can I expect?
As a general matter, you should be in a position to invest at least JPY5 million for a residential unit. Additional fees that you will need to pay include a 3% purchase fee, plus JPY60,000 and fees for the services provided by a shihou-shoshi law (司法書士, a judicial notary public), and stamp tax.
Although this will vary depending on the property, the ROI of return for a studio or 2LDK generally ranges from 6%-8%, which is slightly higher than the average national rate.
4. Are there any restrictions on ownership by foreign nationals?
Although there are no legal restrictions on the ownership of real property by foreigners, obtaining a mortgage from a bank may be somewhat problematic. However, recently some banks are becoming more flexible about lending to foreign buyers. Purchasers can be either a foreign individual or a foreign company.
5. What is the role of a real estate agent?
The real estate agent can help you locate potential investment property, negotiate with the owner, and provide you with information about the property, the building, or the management company that may not be publicly available. Please note that the level of required disclosure in real estate transactions in Japan may be lower than that in other countries. Whatever information is available is available only through real estate agencies. Independent sales are very uncommon in Japan.