Management and Leasing of Your Investment Property in Japan

After buying an investment property in Japan, the next important step is to handle the management and leasing of the property. How you handle this step can greatly affect the income you generate from the property.

In this article, we explain the details and general procedure for property management and leasing in Japan. We also give some important points for consideration when choosing a company to handle your property’s management and leasing.

General Procedure for Property Management and Leasing

■Finding Tenants

If you don’t have any tenants scheduled to move in to your investment property, you should advertise the property for leasing to find tenants.

Firstly, you need to set the leasing conditions. This includes the monthly rent, key money, security deposit, and other payment conditions. It is a good idea to know the average rent in the local area as you may find it hard to get tenants if your rent is much higher than the market rate.

After deciding on the leasing conditions, you can now advertise the property for leasing. You can choose to have it listed on general property search sites for tenants (SUUMO, HOME’S, etc.) or on real estate information networks limited to real estate agencies (REINS, ATBB, etc.).

■Screening, Contract Signing, Handover of House Keys

After finding a potential tenant, you will conduct a tenant screening process. If there are no issues, you will sign a lease contract with the tenant. During this time, you will also collect the first month’s rent and other initial payments required from the tenant.

When all the required procedures and payments are settled, you will hand over the house keys to the tenant.

■Tenant Management, Delinquency Handling

While a tenant is occupying your property, you may have to deal with various issues such as fixing the air conditioner or water pipe leaks.

If the tenant is delinquent with the rent, you have to send out a reminder for rent payment, or even take legal procedures if necessary.

■Lease Renewal

The most common lease period in Japan is 2 years. Before the 2-year period is up, you should confirm with the tenant if they intend to renew the contract and continue living in the property. If they intend to renew, you will collect a renewal fee (if necessary) and sign a renewal agreement.

■Moving-out Inspection, Settlement of Accounts

If the tenant decides to move out of the property, you will conduct an inspection of the property on the day of their move. During the inspection, you should check the physical condition of the property and charge additional restoration fees as necessary. You should also arrange for any required repairs and restoration work.

During the restoration work, you should also start looking for the next tenant (see Finding Tenants above).

■Payment of Taxes

You will need to pay annual taxes on the property, such as fixed property tax and real estate acquisition tax. If you are not residing in Japan, you have to assign a management company to be your tax agent who will receive the tax documents and pay on your behalf.

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Pointers for Choosing a Property Management Company

There are countless property management companies in Japan, but their strengths and characteristics as well as the quality of their services can vary greatly. Here we give you three pointers for choosing a good management company for your property.

1. They are good at finding tenants

The ability to find tenants directly affects your income from the property, so it is one of the most important considerations when choosing a management company.

Some of the things you can check to identify if a management company is good at finding tenants are as follows:

・Do they have their own route or method for finding tenants?

・Do they have a competent Internet business strategy?

・Do they have a strength or approach that sets them apart from other companies?

If you choose a management company that is poor at finding tenants, the vacant periods of your property may get longer, leading to less income and other predicaments for your investment.

2. They are highly experienced and knowledgeable in property management

How well the management company manages your property greatly affects several factors directly related to your income, such as the length of vacancy and occupancy, and the cost and frequency of handling tenant issues.

There are many management companies in Japan that actually focus on buying and selling property, putting less priority and effort on property management.

If you want to maximize the income from your property, you should look for a company that specializes in property management.

3. They offer multilingual services

In today’s globalized world, it is becoming increasingly important for a management company to be able to offer services in multiple languages.

For foreign owners of property in Japan, the language barrier can cause miscommunication or misunderstanding that may lead to bigger issues. Using a management company that can communicate in your own language provides for smoother negotiations and transactions, and less worries about miscommunication.

■Summary

In this article, we explained the details of property management and leasing in Japan. We hope it serves as a useful reference and a reminder of the importance of good property management. Choosing a management company who will be a reliable partner for your investment property is extremely important.

wagaya Japan offers a service called “wagaya PM&L”. Through this property management service specialized for foreigners, we have already helped many foreign property owners in Japan.

■wagaya PM&L Website

wagaya PM&L can provide support for property management in multiple languages, an important service especially for foreign property owners residing outside of Japan. Contact us for all your property management needs.