【For Foreign Owners】Important Considerations for Owning and Operating Rental Properties in Japan

For those residing overseas and owning rental properties in Japan, there are advantages such as generating stable income. However, it is crucial to be mindful of the different laws and cultures present in a country other than your own.

For foreign owners who do not have a residential registration in Japan, it is common to entrust the management of their rental properties in Japan to a Japanese property management company. However, not all property management companies can accommodate foreign owners. In fact, companies that can are limited. This is because many property management companies are reluctant to handle tasks that only arise when managing properties owned by foreign owners. This article will introduce why some companies are hesitant to deal with foreign owners.

Reasons Why Many Japanese Property Management Companies Are Reluctant (or Unable) to Accommodate Foreign Owners

The scenarios considered for overseas residents owning rental properties in Japan mainly include the following patterns:

• Purchasing real estate in Japan while already residing overseas
• Purchasing real estate in Japan while living there and then moving overseas
• Overseas residents inheriting real estate in Japan

In these cases, when managing rental properties in Japan, various tasks need to be performed, from tenant recruitment and screening, contract initiation, during tenancy support, to rent collection in case of arrears, and restoration after tenant departure. However, handling these individually from overseas is practically unfeasible. This is where Japanese property management companies come into play. However, when managing rental properties, several additional tasks arise for properties owned by foreign owners, such as:

Foreign owners Remittances Collecting monthly rent from tenants is a standard operation for property management companies. However, for foreign owners, the collected rent needs to be remitted to a bank account abroad. In recent years, due to anti-money laundering measures, financial institutions have implemented stringent checks on overseas remittances, which can involve several verifications and inquiries during the remittance process. This risk avoidance and the time-consuming nature of remittance processing are reasons for reluctance.

Tax Management The payment of property acquisition tax for the following year of purchase and annual property tax requires payment via payment slips. These slips are typically sent to the owner themselves, but in the case of foreign owners, they are sent to a tax agent in Japan, who then makes the payment. Other proxy payments include management fees and repair reserve funds for condominiums, water bills, etc., if the owner does not have a bank account in Japan.

Due to these unique management tasks for overseas-owned properties, many property management companies refuse to or are reluctant to provide services.

Registration of a Domestic Emergency Contact Required from April 2024

With the increasing number of cases where unidentified properties and land hinder real estate transactions, the Real Estate Registration Law will be amended in April 2024. If the acquirer of real estate in Japan does not have an address in Japan, it will be necessary to register the name and address of a domestic contact.

This contact can be an individual or a corporation, but since the address is also registered, it is challenging for individuals to agree to be an emergency contact. Realistically, this role is likely to be assumed by a property management company or a tax agent.

Similar to the abovementioned overseas remittances and tax management, it is especially true for large companies that they are often reluctant to handle such responsibilities.

This amendment to the registration law is explained in detail in another article, so please check that out as well.

【Link to Article on the Amendment to the Real Estate Registration Law】

In Conclusion

To generate stable income from real estate investment in Japan, not only is it important to buy or sell under favorable conditions, but “management of rental properties” is also a crucial factor.

Especially for overseas owners operating rental properties in Japan, it is essential to entrust management to a property management company capable of handling the various unique management tasks mentioned above.

Furthermore, if the overseas owner has difficulty communicating in Japanese, being able to support multiple languages becomes a necessity.

Solving these challenges is where ‘wagaya Japan’ excels.

With a management track record of over 17,000 rooms within Japan and capable of providing support in English, Chinese, and Vietnamese, ‘wagaya Japan’ has been entrusted with the management of numerous properties by overseas owners.

【wagaya Japan’s Specialized Rental Real Estate Management Service for Overseas Owners】

■wagaya PM&L