Buying a house in Tokyo - how much can you borrow?

[MikeH]

If you can deal with the commute.....going a bit out of Tokyo is much better...Kanagawa-ken for example.....Tottsuka, Zushi etc..... The Yokosuka line, Shonan Shinjuku line, Tokyo Ueno line gets you in to Tokyo in less than an hour-depending on where.... Prices are much, much cheaper than "inside" Tokyo... Not to mention cleaner air! and maybe you'll be in biking distance to a beach..... I am....

I am renting and paying through the nose but I will also not spend an hour plus on a train each way. So I probably continue to rent until I don't need to go to Tokyo every day and then it will be somewhere like you mentioned.

The problem though is you need to show income as an employee to the bank to qualify for a loan and showing income also means paying taxes. Not a big fan of that.

 

[RIDER 00]

Here's an example of how (and what not to do) when investing in apartment/mansion rooms in Tokyo.
Sorry, the vid is in Japanese, but this kid you're seeing is a multi-millionaire with his own business, if you can believe it.

 

[Hope44]

Thanks for the video. Forgot that you really can learn pretty much everything on youtube these days. Somehow I felt like student rental would be something good to start before watching it as well. Payment before appraisal done, I wonder how serious it is.

I was in a realtor office last time, but he didn't show me the yield, and that's what I asked him, I guess his focus wasn't in investment.
the management fee he shows full service property management should includ getting and handling tenants, right?

It's mentioned earlier that property owner pays land lease to land owner, I wonder if the cash flow would be better being the land owner instead of the condo owners.

 

[TAG Manager]

It's mentioned earlier that property owner pays land lease to land owner, I wonder if the cash flow would be better being the land owner instead of the condo owners.

I don't get involved in those types of deals, there's just more complexity there that I don't want to spend time on. I've got a few friends in the market that do this with one of them being a stakeholder in some significant property in Shibuya. (Something not owned by Tokyu for a change) and it's pretty cash rich, but a very unusual sample given the area.

 

[Hope44]

and it's pretty cash rich, but a very unusual sample given the area.

does the return get better with little to no maintenance/vacancy? Without financing, I guess that's probably not going to make sense, unless I get financing elsewhere.

 

[TAG Manager]

does the return get better with little to no maintenance/vacancy? Without financing, I guess that's probably not going to make sense, unless I get financing elsewhere.

Too many variable factors, starting with location and age of the property. You'll also have to factor in the acquisition taxes (big) and the yearly property taxes (~320k yen for about 90m yen property, avg) out of your cash flow.

I can give you personal experiences privately...

 

[Sweetpotato]

So to get back to the original topic, I've heard standard practice here is to contact an agent representing a property for sale and he/she will do all the negotiations with the bank(s) for you, is that really true?

 

[TAG Manager]

So to get back to the original topic, I've heard standard practice here is to contact an agent representing a property for sale and he/she will do all the negotiations with the bank(s) for you, is that really true?

Most respectable agencies have contacts at the banks and they can pre-qualify you for a loan. Usually, they'll ask the banks they work with just with your basic information as well as the property info and then each bank will come back with a basic offer. Then, you need to pick one and go through the application process.

But in short, they should have someone in their office that specializes in loan origination.

 

[Maxblack]

If you get 5% a year on an investment property you are winning. And it's WORK to get that and keep it. Then again zirp Japan so maybe not a bad return. Depends on lotsa of different things.

 

[Hope44]

If you get 5% a year on an investment property you are winning. And it's WORK to get that and keep it. Then again zirp Japan so maybe not a bad return. Depends on lotsa of different things.

that's quite low. are you talking about cash flow or both cash flow + appreciation?

 

[Maxblack]

that's quite low.

Compared to what? Cash savings will get you 0.002%. Domestic mutual fund maybe 3% with half eaten by fees. Punting on stocks you will, statistically, lose money. What's left...bitcoin maybe? Carry trade?
If you can earn more than 5% on an investment in Japan more power to you!

 

[Hope44]

Well, I'm not in Japan, and learnt that other expensive cities have similar problems, so I'm curious as of what investments people do, but not to hijack @Sweetpotato 's thread, I'll start a new one.

 

[Sweetpotato]

Most respectable agencies have contacts at the banks and they can pre-qualify you for a loan. Usually, they'll ask the banks they work with just with your basic information as well as the property info and then each bank will come back with a basic offer. Then, you need to pick one and go through the application process.

But in short, they should have someone in their office that specializes in loan origination.

That's interesting, thank you!

 

[roots reggae]

So to get back to the original topic, I've heard standard practice here is to contact an agent representing a property for sale and he/she will do all the negotiations with the bank(s) for you, is that really true?

In my experience, true to some extent. I believe it all comes down to each bank's individual policies, which are subject to change at any time.

When I first tried to buy, the agent set up a meeting with a rep from the bank, but I was turned down.

Another agent set up a meeting with a bank that had higher interest rates, but we skipped that meeting when Shinsei approved a loan. My wife and I arraigned the meeting with Shinsei, not the agent.

 

[Sweetpotato]

Another agent set up a meeting with a bank that had higher interest rates, but we skipped that meeting when Shinsei approved a loan. My wife and I arraigned the meeting with Shinsei, not the agent.

The agent didn't mind? I'm thinking of the usual troubles that can follow when things are not done by the book.

 

[Sweetpotato]

Browsed around the big broker sites you see advertisement for on TV, can't help getting the feeling that what's available there is what the agents couldn't sell through their regular channels (one house, when you read the details, turned out to be build 4 years ago and no one's ever lived in it, been empty since). There doesn't seem to be much available online and most of it is multiple listings for the same place. Guessing either the supply really is low in Tokyo or they usually sell before the agent bothers putting it online.

So need to narrow down some areas, go to the local agents, introduce oneself, tell them what you're looking for and ask them to call you when something's available. Don't have a lot of fond memories dealing with real estate agents in Japan but can't be helped I guess.

 

[roots reggae]

The agent didn't mind? I'm thinking of the usual troubles that can follow when things are not done by the book.

Not really, since that ended our relationship.

We located land on our own, two years later, then got a builder lined up, and got the loan from Shinsei. There was a small window in time when Shinsei was more liberal loaning to foreigners, back in 2007. They gave me a 23 year loan, since I am so old. The land loan came first, for ¥ 24 million of ¥30 million land price and six months later, after the house was built, the bank loaned us ¥ 13.5 million of the ¥ 23 million house price.

We paid off the house loan first, over a year ago, and will have the land loan paid off before this summer.

I am sure there is a standard procedure, but with persistence, and the right bank, a good agent will go along-at least they did with us.

By the way, I live in the Zushi/Hayama area.

 

[Maxblack]

Note that in Japan it is ILLEGAL to do a real estate purchase WITHOUT an accredited agent. There are various disclosure requirements etc that can only and must be done by an accredited agent.
Obviously the agent only gets paid a fee when the transaction closes, and so is motivated to help you find financing so that you can do the deal. They know all the banks.
Also, banks trust that agents won't waste time on hopeless cases, so take intros from known agents seriously.

Alternatively, you can find the loan yourself and the agent won't (shouldn't) care, but stay away from "owner direct sales" ; there are very good reasons why the law requires you to have an agent. Not wanting to pay fees and taxes is a great way to get yourself really properly screwed.

Tldr; do your homework, use an agent

 

[MikeH]

Tldr; do your homework, use an agent

Also as always be careful when selecting the agent. I have been contacted by a couple of agents concentrating on foreigners to sell them investment properties and offering to negotiate the deal with the bank too and as they say "with no fee from you".

Well, nobody lives without eating so when digging I found out they were only offering properties owned by the banks themselves and so they had build all the fees already inside the property price. It might be great to get a low interest loan but when the rest of the interest is already hidden in the buying price it's suddenly much less attractive.

 

[TAG Manager]

Also as always be careful when selecting the agent. I have been contacted by a couple of agents concentrating on foreigners to sell the investment properties and offering to negotiate the deal with the bank too and as they say "with no fee from you".

Well, nobody lives without eating so when digging I found out they were only offering properties owned by the banks themselves and so they had build all the fees already inside the property price. It might be great to get a low interest loan but when the rest of the interest is already hidden in the buying price it's suddenly much less attractive.

Bingo.

In some cases they will ask if you want to roll all the fees into the loan, but that just causes extra bloat. Pay all your fees in cash and don’t let the loan exceed the purchase price of the actual property. The more cash, the better.

 

[Hope44]

Not really, since that ended our relationship. We located land on our own, two years later, then got a builder lined up, and got the loan from Shinsei. There was a small window in time when Shinsei was more liberal loaning to foreigners, back in 2007. They gave me a 23 year loan, since I am so old. The land loan came first, for ¥ 24 million of ¥30 million land price and six months later, after the house was built, the bank loaned us ¥ 13.5 million of the ¥ 23 million house price.

When purchasing land/building separately, did you need to pay 5% agent fee for both land and builder transactions?
Are there two agents per transaction - one representing the buyer and one representing the seller?
Is there a separate/neutral party that verifies the title/ownership of the property being the seller, or is that public information?

 

[veryniceguy]

Are there two agents per transaction - one representing the buyer and one representing the seller?
Is there a separate/neutral party that verifies the title/ownership of the property being the seller, or is that public information?[/QUOTE]

Commission is paid to the agent FROM the buyer and the seller. 3% each.... Agent usually helps with all the paper work to verify the title, plot size etc....and thee's a LOT of paper work to do and confirm with the city office where the place is located.

 

[TAG Manager]

Agent usually helps with all the paper work to verify the title, plot size etc....and thee's a LOT of paper work to do and confirm with the city office where the place is located.

And there's also a separate specialist involved that helps with this part. They take care of the registration documents and provide you copy of everything once it's done. This is usually about 200k if I recall correctly.

 

[Hope44]

Commission is paid to the agent FROM the buyer and the seller. 3% each....

This is contradicting with http://www.globalpropertyguide.com/Asia/japan/Buying-Guide
do you believe the website is inaccurate?

 

[veryniceguy]

This is contradicting with http://www.globalpropertyguide.com/Asia/japan/Buying-Guide
do you believe the website is inaccurate?

My experience when buying land was as I mentioned above. There was an agent for the seller, and my agent.... they both got 3%..... But that was 2 years ago, so perhaps the commission rate increased? The Tag Manger mentioned a 3rd party for doing paper work. But that was not my experience. Perhaps different regions like Tokyo or Kanagawa have different rules?