I’m considering investing in Japanese real estate

Investing in Japan real estate

In the search of diversification and performance, I have decided to consider other global markets than Australia.
I have had people contacting asking for some more details about my investing approach so I have made the decision to cover more of hard figures, not only theory. Last article about my  personal experience seem to get more people interested…

If you’ve been researching on personal finance for a while, you will now know that it is important to diversify. Diversification comes into two flavors: Asset class and geography.

It appears to me that it is very important, when you invest in real estate, to get exposed to different markets. In Australia, many people would invest interstate as an example, but, to me, this is not enough: You’re still applying your risk to one economy which represents only more or less 2% on a global scale.

Why Japan?

When I started to research for the next investment in real estate, I wanted the following criteria:
– Safe large economy
– Regulated economy
– Rental demand
– Highest possible returns
– Minimal risks with vacancies, tenants, etc..

Japan appealed to me as the third largest economy, with a population driven to move to big cities (sustaining long term demand), with low rate of ownership (around 60%). The Japanese culture makes it a real safe investment: Japanese people are stable in nature, would stay in the same unit for 10 – 15 years. Lastly, the returns (around 8% outside Tokyo and Osaka) and low entry tickets (around $40k to $80k AUD per unit) helping me to make Japan in the target list.

Few issues arose with language barrier, the impossibility to open local bank accounts, exchange rate, quakes, etc… And due diligence is once again key to find local contacts you can count on – More on this as I progress.

We also traveled there last year and it appealed to me that there is a potential and that the language barrier would stop many foreigners to invest there. I saw this as an opportunity.

Where am I at now?

I’ve found a local agent, Australian background, who’s been running his business for a few years now. I have done extensive research and connected to many reference clients.

My strategy is to buy one or two full tenanted units, for around $30 to $40k each. I don’t plan to buy more as I consider this still as high risk and you shouldn’t put more than 10% in risking investments.

My plan is to keep no more than $5k AUD equivalent in Japan in case, and transfer half the funds to secure the first unit and the other half on settlement. Again, this would help me feeling more confident not having $100k out of the bank at once!

What is next?

Now that I have found the agent, I’m comparing his fees with other local agents and listings.
I’ve narrowed down my research with 3 regions in Japan, and I will also ask the help of a japanese colleague on what he believes on the regions and the deals.
I have concentrated my efforts on tier 2 and tier 3 cities with long term growth, and no more than 3 hours by bullet train from Tokyo.

I will continue to monitor the region at suburb level and then start to make my research on deals, using local websites and/or realestate.co.jp.

More on this soon,

See y’all!

6 thoughts on “I’m considering investing in Japanese real estate

  1. Senthil

    G’day

    Stumbled across your site after reading your thread in Mr MM and you have couple of nice posts. One thing that caught my attention was your interest in RE in Japan. Has there be any further progress on that that you care to share please?

    Thanks
    Senthil

    • Grogounet

      Hi Senthil
      I m writing an article on this very soon. money is aside to be transfered when ready and i need to sign power of attorney..
      so tracking well.
      are interested in investing in japan yourself?

      • Senthil

        Hi Grogounet

        Didn’t have a thought until I read your article. After doing some light reading, I figured out you can expect a 7-8% returns after all deductions and this is assuming you have tenants throughout the year. This is not a bad return and also the investment amount is not too high…..you can get a decent 1BR for ~50k AUD.

        Not sure about the appreciation and also the frequent earthquakes does bother me. I will wait for you to write an article.

        Thanks
        Senthil

        • Grogounet

          Hey Senthil,
          I believe that, as everywhere, and every investment, Japan RE will have some down points. I’m actually more concerned by the Australian RE bubble than earhquakes in Japan… Because Japan RE has been built taken into account these. We can’t really say the same thing for Australian RE and its bubble :-))

    • Grogounet

      Thanks Urbanomics.
      That s the reason I’m looking at investing in tenanted units. How is your project going with professional japan real estate?

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