Japan Foreclosed Property 2015-2016 - Buy this 5th edition report!

Over the years, this ebook has been enhanced with additional research to offer a comprehensive appraisal of the Japanese foreclosed property market, as well as offering economic and industry analysis. The author travels to Japan regularly to keep abreast of the local market conditions, and has purchased several foreclosed properties, as well as bidding on others. Japan is one of the few markets offering high-yielding property investment opportunities. Contrary to the 'rural depopulation' scepticism, the urban centres are growing, and they have always been a magnet for expatriates in Asia. Japan is a place where expats, investors (big or small) can make highly profitable real estate investments. Japan is a large market, with a plethora of cheap properties up for tender by the courts. Few other Western nations offer such cheap property so close to major infrastructure. Japan is unique in this respect, and it offers such a different life experience, which also makes it special. There is a plethora of property is depopulating rural areas, however there are fortnightly tenders offering plenty of property in Japan's cities as well. I bought a dormitory 1hr from Tokyo for just $US30,000.
You can view foreclosed properties listed for as little as $US10,000 in Japan thanks to depopulation and a culture that is geared towards working for the state. I bought foreclosed properties in Japan and now I reveal all in our expanded 350+page report. The information you need to know, strategies to apply, where to get help, and the tools to use. We even help you avoid the tsunami and nuclear risks since I was a geologist/mining finance analyst in a past life. Check out the "feedback" in our blog for stories of success by customers of our previous reports.

Download Table of Contents here.

Wednesday, December 28, 2011

Is the DPJ doomed? Not just yet.

I get the sense that Japan is looking at another substantive shift in its political game; though nothing transformational to be sure, at least not at this point. Some 9 members of the Democratic Party of Japan (DPJ) have resigned as a result of the party's decision to increase the GST (consumption tax) to 10%.
I totally agree with their position. There is no question that the Japanese government needs to raise taxes to pay off its 'internal' debts, but taxing consumption is not the way to proceed. It ought to be taxing assets - most particularly land. Probably the best approach would be to totally cut off funding for the provincial governments and allow them to raise local government rates. This would offer some form of competitive pressure, as well as make these governments independently accountable.
It looks like we might be looking at a 'no confidence' motion in the Japanese PM, and thus a new election...unless a new political leader emerges. I'd say we might be looking at a return to the alternate party.
It must however be acknowledged that this could be considered 'posturing' by local party members trying to save face in their local electorates. i.e. Essentially such posturing entails playing musical chairs or erecting Chinese walls, where you resign from one party, set up another, and pretty well function as an pseudo-independent faction. How long can this go on? Well, musical chairs can go on for a long time if you keep changing political candidates at every election. Good luck with that game!
See the latest news at Japan Times.

Sunday, December 25, 2011

Japan public finances still bad

This article in the Japan Times highlights the treacherous state of public finances - in this case in Japan. Whilst on the face of it, Japan's budget deficit might look worse than Europe's, Japan is in a far better position because:
1. Japan has greater income earning capacity
2. Japan's debt is owed to Japanese citizens and corporations, which can taxed at higher rates, i.e. The government retains the power.

The positive news is that the Japanese government has actually managed to stabilise spending. The negative of course is that economic activity is not growing either. Expect Japanese interest rates to remain low for a long time. The flipside is that the Japan's government is between a rock and a hard place; they will soon have to do something about:
1. Raising taxes
2. Cutting spending
The disparity between local and international costs of capital preclude borrowing abroad.

Read more at the Japan Times website.

Saturday, October 1, 2011

Buying property in the USA

Comment by Bring the pain:
"There are plenty of countries offering 8% - do some research. Rest of the world in a bear market - obviously you are a Sepo and think the whole world (America) is in a bear market. American property is in a bear market because you have a retarded financial and banking system flow on effects include high unemployment, low GDP and unsustainable housing market due to dodgy loans. Bear markets are the best time to buy in a business cycle you moron. Having an asset depreciate in value means you lose money benny boy; get a grip on your economics. Again, the quality of housing in Japan is shocking. Who wants to live in a rabbit cage made out of plasterboard. Good luck getting 12% for a 1dk piece of rubish, good luck keeping the piece of rubish standing for more than 2 years. Rather buy a house in Swedan, houses made out of brick, stable banking system, and no earthquakes. If you want to lose money in Japan buy an investment property".
This is not a response to anything I wrote - but its worth answering. It is true that there are countries offering more than 8% yield. Unfortunately, they are outside of my area of interest because it does not make sense as an individual to have property in too many countries because I'd need to employ staff to manage them.
It is a gross generalisation to say that the US market is 'over-priced', as there are many areas in the USA where the affordability index is 2-3, compared to cities where it can be as high as 10x annual income. The trick then is to find those areas which offer a reasonable balance between lifestyle values and affordability, or reliable rental income and adequate yield, if that is important. Good online marketing can make the difference as well.
It is true that Japanese properties do depreciate rapidly; but that's why you buy property which is old, say 10-12 years old, thus 60% depreciated, and its more than offset by a 12-13% yield. This is most particularly the case in Japan where you can get a local loan and the ability to leverage your investment. The reality is that many people want to live in Japan, and for good reason. Personally, I did not by there for the yield, I bought for the lifestyle. But I was happy to help my ex-Japanese GF get a property from which she gets a 13% yield - its paid off now.

Why buy property in Japan?

Comment by The real expert:
Why would I invest in something that has no capital appreciation? Instead of property investing with an unrealistic target of a 12% yield (never heard of a 5 million unit in north Tokyo), why wouldn't I put that cash into a fixed 8% term deposit? No risk and a guaranteed 8% return on investment, no maintenance headaches, no government red tape headaches, no flood headaches, no housing bubble headaches etc etc. Investing in the Tokyo real estate market would have to be the worst investment decision ever. If you buy a house in Western countries you will get appreciation on your investment, i.e the value of your house will go up unlike Japan where prices go down. Erik your article is total rubish and people should never buy houses in Japan for investment purposes.
The reason is because capital appreciate is just one issue - rent expense substitution or rental yield, depending on your perspective is the other issue. There is typically an inverse relationship between the two, i.e High capital appreciation or high yield. That is why Japanese yields are high. If you can find some structural distortion being corrected then you can get both, i.e. Say the Philippines today because it has 8% yield and good capital appreciation. i.e. There is the realisation that Asian labour is rising in cost, so even low-productivity Filipinos start looking appealing as a source of labour; most particularly because they make satisfactory call centre agents. This market does not rely upon the low-productivity ports in the Philippines. These issues will gradually be resolved, and the Philippines will be more broadly an appealing property market.
Japan only makes sense if you are buying a rural lifestyle property, an inner city land rental purchase of house, or suburban house for rent substitution; and even this might only make sense if you are earning Japanese income and planning to live there over 4 years. Since people love Japan, and 'hope' to live there, this can make a lot of sense.
The other issue is inflation and currency depreciation, which I have alluded to above. Bonds paying 8% in Japan? Unlikely - more likely 1% and paid is debased Japanese yen. The USD is also being debased, so need an bond indexed to inflation.

Living and working abroad

There are obstacles to living abroad. But you know, its not as hard as you might think to live and work abroad if you are able to develop relationships in these countries or find forms of work that suit you. In my 'wonderings' I have come across people who find work abroad by doing different things. Consider the following:
1. Selling: I write books about buying property. Such book publishing allow me to live anywhere in the world because my store front is online.
2. Consulting is another activity that allows you to work anywhere in the world if you deal with your clients online.
3. Strategic career opportunities: There are certain jobs like doctors, nurses and teachers who are in strong demand around the world if you have decent qualifications.
4. Service jobs like teaching English, builders, trades jobs and tattoo artistry are also jobs that you can find if you travel. Generally though in these cases you need to tap into the informal economy, but consider this: In a large city like Tokyo, you can be sure there is a need for computer support services for all the English expatriates living there, because there are thousands there looking for a good deal who are getting ripped off because they don't speak Japanese, or have support. In such cases, forums offer support for most, but forums only offer limited support.

Different countries have different rules for staying in the country. i.e. Consider that the Philippines probably has the most liberal immigration laws. You can stay there 18 months before having to leave the country, but you pay around $30/month to extend your visa. Other than that, they care less what you do. In Japan, its a 90-day tourist visa, and hard otherwise to get a business or working visa unless you are sponsored. Having said that, you can fly to China or Korea every 90 days (3mths) if that suits you, or you can commute from another place and just stay the 90 days in gaijin houses (i.e. Short stay accommodation).

The intention of this strategy is to buy accommodation in different countries at the low-end of the market so that I can live a flexible and interesting life as a tourist. This is why a $28,000 dormitory in Japan appeals, with a $300/year rates bill, a $US55,000 house in a depopulating NZ regional city, rates a little pricey at $1700/year, or you can go a house in much of the USA for $80-120K. We also have a place and land in the Philippines.

This is truly a period of great flexibility thanks to technology. I would not equate this however with freedom. No country recognises your personal sovereignty, and no government functions on the basis of rationality as the standard of value. Under democratic tyranny of the 'populist' majority, we spread our assets widely. This is why grasslands are so prevalent. Their spores are basically blowing around the world. We like to travel light in a world of arbitrary government. Yes, that might sound a little tragic, but living a life of slavery to some over-priced, statutorily or artificially priced house is crazy. I don't own a house in Australia, my home country because with the average house costing 11.6x the average income in Sydney, I think I should be living in Japan, NZ or USA, where I can live in a decent place for 2-3 times earnings. Personally, I wish people would think so we can end this tyranny, but since we have a system of wealth extortion based on 'universal ignorance and passivity', I prefer to travel. If you are wondering where this ends up, it is either:
1. A life of repression - Japan is the model we are drifting towards - where you are all zombies entertained by mindless concrete, frivolities like alcohol, sex, etc.
2. A intellectual life - A form of meritocracy which does not yet exist, where economies grow at 16% per annum because they are not constrained by centralised government; which are not overtly materialistic because the people's intellectual sovereignty has been oppressed. In a world where ideas matter because there is a free market for them, as opposed to the statutorily regulated 'parliament' which has political parties act as gatekeepers. But you go on pretending you live in free countries because you are given some pretense of it. More on this matter at our politics blog.

Japan - why rent property when you could buy?

Just a recommendation for anyone who thinks they will be living a long time in Japan; whether because:
1. They have a good job
2. They love the place
3. They are married to, or intend to marry a Japanese partner

You might want to consider saving yourself a great deal of rent expense by buying a home. Google 'buying foreclosed property in Japan" for more info, but some basic advice:
1. The Japanese prefectural law courts are tendering the sale of discounted properties way below market prices
2. The yields on Japanese property can be so high that renting is crazy. For instance, I paid just Y2.8mil for a 5br dormitory on 400m2 of land at Hanno, west of Tokyo. Its just 1hour from Ikebukuro, and I always get a seat on the train (Y420). There are better properties for less in depopulated rural areas.
3. Buy a house & land in suburbs to avoid apartment management fees, which are usually a rip-off.
4. Buy an old house with land lease if you insist upon living in the central city areas because the land rent can be extraordinarily low.
5. If you intend to stay more than 4 years in Japan, it would make more sense to buy there; particularly if you are earning yen, as all the major currencies are being debased.

The appeal of foreclosed property is that its a huge market; the Japanese investor is generally ignorant and risk-averse. The educated elite in Japan are more interested in office and residential complexes, not in managing houses, so you are really competing against real estate agents and home handymen who have limited resources.

Monday, September 26, 2011

The morality of buying foreclosed property

Question: "I'm interested in buying foreclosed property, but isn't it making money out of someone else's misfortune".
I don't regard buying foreclosed property as making money from others misfortune; that is what governments do. They create the recessions and structural imbalances through their monopoly over the use of coercion. A power they use to distort rather than to protect. It is not the responsibility of a buyer to protect the interests of the seller. If the seller thought they were going to get a better price, they would not sell. If they subjugated their rights to sell their property in case of default, then they made inadequate provisions to protect themselves, nor to understand the market into which they bought. If you buy property from a distressed seller, and encounter some angst from them, it would be nice to be able to communicate your empathy to them. Aside from that, you can only regale them of the hazard of government arbitrary power. They should direct their anger towards their nearest federal government. Market participants merely act within the law, the problem is 'arbitrary law' created by governments which distort markets and in the process place participants in a position of unnecessary vulnerability.
If you want to know more on the flaws of government; we do a great deal of writing on that issue on our politics blog. Nope, I'm not a conservative or a liberal; though I understand your confusion. That's how people lose money on property.
It is true that the Japanese system of selling favours the buyer in several respect, but again that is because of government, or silly Japanese suspicions about yakuza. The reality is that many foreclosed properties sell close to market price in the inner city areas. In the rural areas, they sell at huge discounts because of embarrassment and depopulation. Should buyers stop buying in these areas? No, that would reduce the dollar price recovered, and the banks would probably benefit anyway. In any case, its a market, which entails buyers and sellers taking advantage, or so they think, at the expense of others. There is a greater issue of responsibility here.

Friday, September 23, 2011

Tourism in Japan

Local and international tourists flock Japan countryside to explore the rich culture of the Japanese people.
I absolutely recommend that you visit Japan. It is, in a very positive sense, a DIFFERENT experience.

NZ Property Guide Philippine Real Estate Guide Japan Foreclosed Guide

Monday, September 5, 2011

Trade deals likely to boost Philippines property market

The prospects for Philippines property look very good, and are getting better, after the Aquino government negotiates a $60 billion trade deal with China, after similar agreements with Korea and Japan. This is of course all very positive for the Philippines because this country is on the doorstep to these very large markets. Japan, Korea of course already have high cost labour, and in a decade, the Chinese labour cost, at least on the coast, is going to look a little scary. So the Philippines can expect to benefit from trade, tourism and investment. I expect a lot of these Asians to retire in the Philippines as the nation's standard of living improves. The Philippines has one of the most generous visa conditions in the world. I routinely go there for up to 18 months without having to leave the country. Learn more about the Philippines property market and these trade deals.

Thursday, June 9, 2011

Noda emerges as likely Kan successor | The Japan Times Online

Noda emerges as likely Kan successor | The Japan Times Online
This could be good news for Japanese property investors. We will watch the news or background about this prospective new PM in coming weeks, to see if we can get some idea of his impact.

Monday, May 9, 2011

Updated Japan Foreclosed Property report

Hi all, I have just completed the 4th edition (2011-12 fiscal year) update of our Japan Foreclosed Property Report. We had already written a great deal about the earthquake risks in different parts of Japan, and in light of the recent safety issues related to the tsunami and nuclear reactors, I have also included details on those issues.
I used to be an energy/mining analyst, and I studied geology, so I am happy to include those subjects to allay any concerns about living in Japan. The death of thousands of people might discourage people as to the safety of living in Japan....but then Japan adapted to living with earthquakes years ago, and it will now recognise the need to adapt to tsunamis. In any respect Japanese beaches are the least appealing aspect of life in Japan, so its a false economy to buy close to the beach. Mostly they are rocky and depressingly grey. Japan's charm is in the cities and mountains.

NZ Property Guide Philippine Real Estate Guide Japan Foreclosed Guide

Sunday, April 17, 2011

House for rent in Shimomaruko, Ota-ku, Tokyo

This place is currently not available....currently rented.
I am doing a favour for a guy who purchased my Japan Foreclosed Property report. He has purchased a foreclosed property and wants to rent it out for Y115,000 per month. It is a 2-storey, 2br house in Shimomaruko, Ota-ku, Tokyo. It is partly furnished, with a living room, kitchen, laundry space, bathroom, 2 restrooms and a big balcony facing south. There is a white leather couch, a bed, chairs, chests, a high-end fridge, washing mashine and dryer. The house is located between Shimomaruko Station and the Tamagawa river. Along the nearby rivers, you can engage readily in relaxation and exercise, i.e. running, cycling or play tennis.

The house is close to various stations:
1. Five minutes walk to Shimomaruko Station
2. Sibuya Sta. in 21 minutes
3. Shinagawa Sta. in 21 minutes
4. Tokyo Sta. in 31 minutes
The house is currently under a minor reform, but will surely will be ready by May 2011.
Pets are OK. If you are interested in renting this house in Tokyo you can contact me through my website and I will refer you to the landlord. Anyone interested in buying foreclosed property in Tokyo might be particularly interested in this opportunity for two reasons:
1. This is a foreclosed property so you can get a sense of the commercial returns on renting foreclosed property
2. This landlord would probably be happy to give you advice (aside from the book I am selling) on how to buy foreclosed property in Japan...since he is the embodiment of the opportunities available.
3. Some buyers who have not lived in Japan might want to avail of this opportunity to rent before you buy. The house is well-located close to central Tokyo.

Wednesday, March 23, 2011

Feedback on our Japan Foreclosed Property ebook

Here is some feedback on our Japan Foreclosed Property eBook which I did not list sooner...
“I would be more than happy to help you out for your marketing. I just recently got start in the real estate investment business focused primarily in the USA and one of the question that I routinely ask myself is where do I want to own property? After spending 8 weeks this winter in Okinawa, Japan and absolutely loving it, I felt that a few justifiable business trips to Okinawa a year would be a great perk. So I have start the research process of starting a profitable real estate investment business in Japan, focusing initially in Okinawa”.
“I found your ebook being discussed and bashed on jref.com site which I stumbled upon through a Google search. Being familiar with some people just not understanding a good opportunity when they see it, I dismissed the naysayers and sought to purchase your book. I felt that it would be better to get the information in an organized format that trying to piece it together myself. If you have any information specific to keibai bukken in Okinawa I would love to hear it. Thank you and best of luck in all your endeavours”.
James Boydston
Boydston Enterprises

Okinawa is of course a long way from the Fuchushima nuclear reactor, but it does not escape the perils of tsunamis. This is where is better to be on the West Coast, or in the mountains. The mountains are less susceptible to earthquake damage.

Friday, March 11, 2011

Chinese interest in Tokyo/Japan property

Today's Japan Times documents increasing interest in Japanese property buy Mainland and Taiwanese Chinese buyers. The Chinese property market is fully-valued at the moment, so it is unsurprising that they should show interest. Interestingly, there is little sign that Chinese buyers are very discerning in their acquisitions, as most are inclined to buy high-priced Azubu apartments or ski resort accommodation in Hokkaido.
Many of the investors are buying for diversification, some so their students can study in Japan, and others for business or lifestyle purposes. Irrespective of their motives, clearly there is a growing demand for foreign property from Chinese buyers, and countries like Japan, the USA and the Philippines will feature highly. I would however draw their attention to foreclosed property, which trades at a significant discount to the private property market.
See the Japan Times article here.

NZ Property Guide Philippine Real Estate Guide Japan Foreclosed Guide

Tuesday, February 22, 2011

Equity markets and property opportunities in Japan

The Japanese equity market is offering a lot of promise according to the NY Times. See this article. Japan is a little more dependent on imported oil than other countries. Not a good thing when these is the prospect of a political crisis in the Middle East; and yet Japan's oil consumption per capita is far less than other Western nations, so overall this is not so significant.
Any chance of reform in Japan? Well, its looking less likely, but the market is still cheap. I think the property market looks far better because the government regulation is actually making opportunities, and its an otherwise less regulated market. The yields are high too. One of my favourite old stocks was KDDI. There was another setting up a Wimax network, but I think its since been acquired by KDDI.

Wednesday, February 16, 2011

Business opportunity for foreclosed properties

Many of you living in Japan might be looking for opportunities to stay there, development a business or build an investment portfolio. We have a suggestion for how you might do this. In the main cities of Japan there are a great many 'gaijin houses', i.e. Houses converted into share accommodation. Foreclosed properties subject to lease are perfect for this purpose because you buy the house, renegotiate the lease agreement, and you renovate the house, so its suitable for short term rentals.
Now, the appeal of this suggestion is that I can help you develop a website very cheaply using Filipino programmers who work for my partner. She managed 50 staff at a US call centre in the Philippines, and she is a great project manager. Her team have a range of skills for doing this; sadly no Japanese-speaking skills if you wanted to target this market. You could of course provide the content. The opportunity exists for a person to develop their own string of rental properties, or for some of you to team up. Either way, we are only interested in facilitating the opportunity. We are not business brokers or property agents. Here are examples of the quality of her work - my website and another for no more than $1000. She can set up online payment systems, databases, etc.
Gaijin properties rent on a weekly or monthly basis. Some have a better reputation than others. Clearly land leased foreclosed property are great properties for upgrade to rental properties for these purposes because:
1. They are down-market rentals
2. They are well-located properties
3. They are low-cost property entries - both in capital and (land) rental terms
4. They offer surprisingly good protection for renters. You might want to get free legal advise from your local prefectural office to ensure that the protections applying to tenants apply to business operators of land leases. I have no experience with those issues.

I was planning to do this years ago but I broke off from my Japanese GF, so those plans collapsed. If you are interested in sharing a website with multiple property owners, we can set up a website 'brand' for all concerned, and just collect a fee. Either way, we are interested in helping people get into business, make great investment decisions.

Land leased houses can be bought for as little as $10,000. The question is whether your property has sufficient appeal to foreigners to rent on a medium term basis. Clearly foreigners love cheap accommodation in nice places, even if it is rural, and if its in a depopulation zone, it matters little for Japanese people who cannot find work there. So this is a good opportunity if you find the right property, in the right 'depopulation' zone, which foreigners can use their Japan (East) Rail Pass to visit. That is the packaging you can do. I think the Japanese hinterland has a lot of promise for tourism, whether its specialist tour groups like hikers, skiers, kayakers, etc. You can offer greater appeal of course if you lease out such sports equipment. It might be as easy as finding second hand bikes at a recycling depot. That is what I did. Damned good bike too.
We offer such suggestions in our Japan Foreclosed Guide. It is a very big market.

Monday, January 24, 2011

Renovating a foreclosed home in Kyoto, Japan

It seems there are a few buyers of the Japan Foreclosed Report who are prepared to come out and describe how they are doing it. Understandably not everyone wants to speak. Having said that, the market is huge. We need to remember that Japan did not have an unemployment problem until fairly recently, so unemployment is a potential source of 'fairly new' foreclosures. I think asset deflation would have been a bigger concern for the banks years ago as they sought to clean up their balance sheets. I see in the latest employment statistics that only 65% of new university graduates secured jobs last year - the lowest uptake in decades. We need also to remember the depopulation of rural Japan has resulted in the vacating of properties in those areas. With no tenants, they lie vacant, and are the first assets to be sold off by stressed buyers, who might have ‘over-encumbered’ themselves buying a more expensive 2nd home. i.e. Westerners are accustomed to renovating homes. Japanese people simply tend to build new ones. I don't know why. The old ones are probably not as structural sound, but they work ok by my estimate. It is not the land of financial literacy, so don't expect any of that.

The latest person to give us a description of his experiences buying foreclosed property is a New Zealander married to a Japanese national. He bought a foreclosed house & lot in Kyoto at auction last year. He spent 5 weeks renovating it, presumably whilst holidaying in Japan, since he lives in Auckland. He has placed the property up for auction. He has offered to provide more information, so I look forward to that. Meanwhile, some of his feedback on the Japan Foreclosed Guide ebook:
“The information you supplied was a good indicator of what to expect”.
“I plan to repeat this process this year and purchase a second property”.
"I agree with your opinion that there is great potential in this market which is more than I can say for NZ".
If you are interested in John’s experiences renovating his property, I suggest going to his Japan blog. I also describe my renovation insights in the book, but his were more extensive.

Tuesday, January 18, 2011

Strategy for profiting from leased property

In my last post I described the experiences of a Japanese and foreign national who bought a property on the southern edge of Tokyo. This was a particularly interesting transaction for several reasons:
1. It was a very cheap inner city property
2. It involved the purchase of a 2-storey home on land leasehold

There are a number of reasons why you ought to consider such a proposition. Normally, I would not be particularly interested in leasing land, but this is different...the terms are very good. There are a number of appealing elements:
1. If you are buying a new apartment, you are buying alot of building value, which is destined to depreciate a great deal over coming years. In the case of these buyers, they were paying a nominal Y500,000 (USD5,000) for the 3br house, which if they spent a little money might rent for Y125,000 a month, given its proximity to Tokyo City.
2. They are not paying a huge about for land. Now, owning land in Tokyo might be considered an appealing idea because whilst Japan's population is falling, Tokyo's is increasing, and some areas more than others. The problem as I see it is that those new residences are moving into new high rise apartments, and there is plenty of room for more. Future buildings might even be cheaper to build due to the development of new high strength TiV-based steels. This could greatly reduce the materials needed to construct a home. The old homes will not have the features of the new homes, however given the steep discount in the price of the older homes, its worth considering the 'low-cost' property option. Its a different issue of course if money is no object. You can expect those new 'high priced' homes to depreciate significantly in value.
3. Saving money on capital allows you to place the bulk of your capital in better performing asset classes like gold stocks - and if you are an Australian or New Zealander, than there are few better places than my recommended explorers. ASX gold stocks with upside. Canada, the USA and Britain of course have similar opportunities. Some years ago I projected a gold price of $2400/oz. We are still some way off based on a DowJones/gold ratio of 5.

One of course has to remember that its good to use others money...but remember that does not always hold. Its been good for the last 15 years because of low interest rates. A pertinent issue is your capacity to access those low-interest loans in Japan. This might not be as easy for foreigners. Nevertheless, I would caution against the appeal of these loans because Japan will need to finance its deficits in future, so they are looking at a higher interest rate environment as their savings rate falls and their debts rise.

Today Japan has a public debt of 200% of GDP, requiring a combination of taxation, national income growth (immigration???) and monetary debasement to repay it. That is going to cause a rush into tangible assets like property or a shift of money offshore. I would suggest Japanese accustomed to foreign markets will buy assets in places like Australia, NZ, Thailand and the Philippines. I am surrounded by Japanese retirees as I speak in this apartment complex in Queenstown, NZ.
For most people however, they will more realistically stay in Japan to be close to family. Most will buy property given the high yields. But they have to buy the right property. Apartments are not going to appreciate in value....least of all the over-priced premium property off-the-plan. You are buying a box in the sky. If you are getting a box, better an old box on ground floor, and 30minutes from the city centre. Why?
You might pay as little as Y3,000 for a land lease, having paid just Y6mil for the house. Even if you have to pay Y5,000 per month under a new lease, its a far better deal than sinking money into a high priced modern apartment which can only depreciate. Given the prospects of inflation in coming years, and I think Japan will be as bad, if not worse than the USA and Europe, you will want to hold property. The reason is that Japanese property is not over-valued. It is very cheap, so higher interest rates are not going to compel people to sell. In fact cash savings will be rush into property. What are they waiting for? I have no idea.
The problem is Japanese are buying the wrong type of property. They ought to be buying fringe properties in lifestyle locations, or leaseholds in the inner city. There are issues to consider:
1. The lease term - you want to negotiate with the owner before you buy at foreclosed property tender. Nice to do before....but in fact buyers have rights. Since there is leasehold owing, and the property rights of leasees is solid, there is a good chance to extend the lease....albeit at higher rates. Short of a revolution, this situation is unlikely to be resolved by legislation I think. In any case, the terms are pretty sound.
2. The cheapness of the lease payments - it is staggering that they are as little as Y5,000 and fixed for 20 years. After 20 years of inflation without adjustment (remember they might not expect inflation after 15 years with none), that is quite a financial benefit
3. Your use of the property - What do you do with a leased property if you decide to move to the USA? You have several options: (a) You can sell the land, which might be difficult as people like to own the underlying land in Japan (b) You can rent it out, but that might be more difficult if the house is 46-55 years old. (c) You can negotiate to sell back the lease...the owner might ask you to pay reparations, i.e. money for cancelling the agreement, or more likely to demolish the old house that no one wants to live in. (d) You can turn the place into a 'gaijin house' for people who care little about the quality of the place where they live. This at least requires a strategic long term plan.

Wednesday, January 12, 2011

Experiences of Tokyo foreclosed property with a land lease)

If you happen to buy a property report from us, we are pleased. What we love even more is when customers take the time to send us some feedback on their success or failures. One of my customers bought our Philippines report, so I was pleased to have the opportunity to ask him about his progress buying a foreclosed property in Japan.
They bought an old house near Oota station, in Tokyo-ward. He bought this house 18 months ago (Jun 2009) for Y6 million ($US60,000); Y5.5 million being the nominal value of the land lease and Y0.5 million for the old house. The house is 75m2 in floor area, on two floors, and occupying 40m2 of land. This close to the city residential lots are significantly smaller because land values are far higher. They bought the property with a 20-year land lease due to expire in just 5 years at a fixed lease fee of Y3,000 per month. They were able to extend the lease for a further 20 years at a fixed lease rate of Y4800/month. i.e. Just 5% of the rental cost for such a property. This is a good deal for 2 reasons:
1. The lease rate looks like a significant mark-up but it was fixed for the last 20 years
2. The new lease rate of Y4800/month is fixed for 20 years, which is very attractive when you consider the prospects of inflation in Japan. People are so accustomed to low inflation, they have forgotten how savage inflation can be.
3. Rather than absorb a Y200-300,000 lease renegotiation/contracting fee, they agreed to incorporate the fee in the monthly lease rate.
Buyer: "We would have preferred to own the land, of course, but houses (including land) are rare in this location and expensive in the foreclosed market. The Japanese consider land ownership as very important. So competing for house and land packages in good areas is not an appealing deal".
"The lease rates [for land] are cheap and the rights of the the leasee are very strong. We could destroy and rebuild, and rent the house without asking for permission".
The auction required a minimum bid of Y5.5 million, and they won with a bid of Y6.0mil. They were the only bidder. They believe they would be able to rent the house for Y125,000/month, at a nominal yield of 25%. The place did need some minor improvements, like fixing the drains and repairing wallpaper. Some of the floor boards are not properly leveled, and there is a ventilation problem as a result of a neighbour's extension to their house. These issues would cost Y1.2 million to fix. This would reduce the effective yield to 20.8%, however they are happy to live there in the interim. In the West, properties so close to the city will sell with a yield of 2-5%, and yet in Japan, they were able to buy a place with a yield of 20.8%. This will mean rental income (or 'rent replacement') will pay the house off in 4-5 years. The house is 46 years old, and was valued at just Y0.5 million ($5,000) in the auction documentation. Of course many Japanese are prepared to pay Y30-35 million ($350,000) to build/buy a new home. Such is the premium paid for new homes with land. Of course they offer a nicer, modern ambiance, but many people spend their day outside, so they might question this price premium given its value depreciates. Some would prefer to pay just $5,000 for a house. The issue is whether the house is livable for not just the five years (until to pay off the house cost), but for the lease period, as the owner could require you to destroy the house (Y2mil perhaps in the city) at the end of the lease period. The lease period is therefore very important. These buyers were able to extend for 20 years at the new lease rate. You need to decide whether you are there for the long term. Does the lease term justify building a new house? Or will you be stuck in the short term potentially with a house you don't want to live in, that is too old to rent or which you cannot afford or justify fixing up. The lease period and your capital are the critical issues, however your relationship/visa status and language skills might also be issues. Professional people are much more likely to speak English. I met a Building Project Engineer who spoke English in my local pub.
They are 4.3km from Tamagawa Station, which is a 25 minute train ride from Shinjuku Station in central Tokyo. Their house is just 400m from a smaller train station, as well as a small supermarket, and 100m from a convenience store. They have a large open area along the river several blocks away, suitable for riding a bike or jogging. There are also tennis courts and baseball facilities there. This buyer seems very happy with his purchase and is now looking at the Philippines.
The house does not come with any car space, however they can be leased if required close to home. Many Japanese living in the inner city go without cars for this reason.
Small old houses on small lots offer economy buying. They looked at buying house and land for a nominal price of Y10mil, but after bidding it sold for Y28 million because of the competition. The moral of this story is that in Japan, its sensible to simply do something different from everyone else. There are many Japanese people who are prepared to pay too much because they are not commercially astute.
Buyer: "Japanese people are stuck to what they think is the proper normal lifestyle; graduating university, finding a girl, buying a new home. They don't consider alternatives. So its easy for people who have a different view of things".
And his feedback on the Japan Foreclosed Property report:
"I highly respect and appreciate your [the author's] lifestyle. I am impressed by the amount and accuracy of your research about real estate and foreclosed property".

Major cities of Japan

資料:各都市の推計人口(ホームページ) Japan's major cities:
札幌市 Sapporo 仙台市 Sendai さいたま市 Saitama 千葉市 Chiba
東京都区部 Tokyo-23 横浜市 Yokohama 川崎市 Kawasaki 新潟市 Niigata 静岡市 Shizuoka 浜松市 Hamamatsu 名古屋市 Nagoya 京都市 Kyoto 大阪市 Osaka 堺市 Sakai 神戸市 Kobe 広島市 Hiroshima 北九州市 Kitakyushu 福岡市 Fukuoka

Cities and towns of Tokyo

競売物件購入 keibai buttsuken kounyu 千代田区 Chiyoda-ku 八王子市 Hachioji-shi 羽村市 Hamura-shi 中央区 Chuo-ku 立川市 Tachikawa-shi あきる野市 Akiruno-shi 港区 Minato-ku 武蔵野市 Musashino-shi 西東京市 Nishitokyo-shi 新宿区 Shinjuku-ku 三鷹市 Mitaka-shi 文京区 Bunkyo-ku 青梅市 Ome-shi 郡部 Towns and villages 台東区 Taito-ku 府中市 Fuchu-shi 瑞穂町 Mizuho-machi
墨田区 Sumida-ku 昭島市 Akishima-shi 日の出町 Hinode-machi 江東区 Koto-ku 調布市 Chofu-shi 檜原村 Hinohara-mura 品川区 Shinagawa-ku 町田市 Machida-shi 奥多摩町 Okutama-machi 目黒区 Meguro-ku 小金井市 Koganei-shi 大田区 Ota-ku 小平市 Kodaira-shi 島部 Islands 世田谷区 Setagaya-ku 日野市 Hino-shi 大島町 Oshima-machi 渋谷区 Shibuya-ku 東村山市 Higashimurayama-shi 利島村 Toshima-mura
中野区 Nakano-ku 国分寺市 Kokubunji-shi 新島村 Niijima-mura 杉並区 Suginami-ku 国立市 Kunitachi-shi 神津島村 Kouzushima-mura 豊島区 Toshima-ku 福生市 Fussa-shi 三宅村 Miyake-mura 北区 Kita-ku 狛江市 Komae-shi 御蔵島村 Mikurajima-mura 荒川区 Arakawa-ku 東大和市 Higashiyamato-shi 八丈町 Hachijo-machi 板橋区 Itabashi-ku 清瀬市 Kiyose-shi 青ケ島村 Aogashima-mura 練馬区 Nerima-ku 東久留米市 Higashikurume-shi 小笠原村 Ogasawara-mura 足立区 Adachi-ku 武蔵村山市 Musashimurayama-shi 葛飾区 Katsushika-ku 多摩市 Tama-shi 江戸川区 Edogawa-ku 稲城市 Inagi-shi

Cities & Towns of Saitama

競売物件購入 keibai buttsuken kounyu 西区 Nishi-ku 北区 Kita-ku 大宮区 Omiya-ku 見沼区 Minuma-ku 中央区 Chuo-ku 桜区 Sakura-ku 浦和区 Urawa-ku 南区 Minami-ku 緑区 Midori-ku Cities (-shi) さいたま市 Saitama-shi 川越市 Kawagoe-shi 熊谷市 Kumagaya-shi 川口市 Kawaguchi-shi 行田市 Gyoda-shi 秩父市 Chichibu-shi 所沢市 Tokorozawa-shi 飯能市 Hanno-shi 加須市 Kazo-shi 本庄市 Honjo-shi 東松山市 Higashi-Matsuyama-shi 岩槻市 Iwatski-shi 春日部市 Kasukabe-shi 狭山市 Sayama-shi 羽生市 Hanyu-shi 鴻巣市 Kounosu-shi 深谷市 Fukaya-shi 上尾市 Ageo-shi 草加市 Souka-shi 越谷市 Koshigaya-shi 蕨 市 Warabi-shi 戸田市 Toda-shi 入間市 Iruma-shi 鳩ケ谷市 Hatogaya-shi 朝霞市 Asaka-shi 志木市 Shiki-shi 和光市 Wako-shi 新座市 Niiza-shi 桶川市 Okegawa-shi 久喜市 Kuki-shi 北本市 Kitamoto-shi 八潮市 Yasio-shi 富士見市 Fujimi-shi 上福岡市 Kami-fukuoka-shi 三郷市 Misato-shi 蓮田市 Hasuda-shi 坂戸市 Sakado-shi 幸手市 Satte-shi 鶴ケ島市 Tsurogashima-shi 日高市 Hidaka-shi 吉川市 Yoshikawa-shi 北足立郡 Districts (-gun) 伊奈町 Ina-machi or ko 吹上町 Fukiage-machi 大井町 Oi-machi 三芳町 Miyoshi-machi 毛呂山町 Moroyama-machi 越生町 Ogose-machi 名栗村 Naguri-mura

Cities &Towns of Kanagawa

競売物件購入 keibai buttsuken kounyu 県計 市部計 郡部計 横浜市 鶴見区 神奈川区 西区 中区 南区 港南区 保土ヶ谷区 旭区 磯子区 金沢区 港北区 緑区 青葉区 都筑区 戸塚区 栄区 泉区 瀬谷区 川崎市 川崎区 幸区 中原区 高津区 宮前区 多摩区 麻生区 横須賀市 平塚市 鎌倉市 藤沢市 小田原市 茅ヶ崎市 逗子市 相模原市 三浦市 秦野市 厚木市 大和市 伊勢原市 海老名市 座間市 南足柄市 綾瀬市 三浦郡葉山町 高座郡寒川町 中郡 大磯町 二宮町 足柄上郡 中井町 大井町 松田町 山北町 開成町 足柄下郡 箱根町 真鶴町 湯河原町 愛甲郡 愛川町 清川村

Cities & Towns of Chiba

競売物件購入 keibai buttsuken kounyu 県計 市計 郡計 千葉市 中央区 花見川区 稲毛区 若葉区 緑区 美浜区 銚子市 市川市 船橋市 館山市 木更津市 松戸市 野田市 佐原市 茂原市 成田市 佐倉市 東金市 八日市場市 旭市 習志野市 柏市 勝浦市 市原市 流山市 八千代市 我孫子市 鴨川市 鎌ヶ谷市 君津市 富津市 浦安市 四街道市 袖ケ浦市 八街市 印西市 白井市 富里市

Cities & Towns of Osaka

競売物件購入 keibai buttsuken kounyu 総 数 府 保 健 所 計 池 田 池田市 豊能町  箕面市  能勢町  豊中豊中市  吹 田 吹田市 茨木摂津市  茨木市 島本町 枚方枚方市  寝屋川 寝屋川市 守口 守口市  門真市 四條畷 四條畷市 交野市  大東市 八 尾 八尾市  柏原市  藤井寺 松原市  羽曳野市 藤井寺市 富田林 大阪狭山市 富田林市 河内長野市 河南町  太子町  千早赤阪村 和泉和泉市  泉大津市 高石市  忠岡町  岸和田 岸和田市 貝塚市  泉佐野 泉佐野市 熊取町 田尻町  泉南市  阪南市  岬町 大 阪 市 堺市 高槻市 東大阪市  

Cities & Towns of Hiroshima

競売物件購入 keibai buttsuken kounyu 県計 広島市 広島市中区 広島市東区 広島市南区 広島市西区 広島市安佐南区 広島市安佐北区 広島市安芸区 広島市佐伯区 呉市 竹原市 三原市 尾道市 福山市 府中市 三次市 庄原市 大竹市 東広島市 廿日市市 安芸高田市 江田島市 府中町 海田町 熊野町 坂町 安芸太田町 北広島町 大崎上島町 世羅町 神石高原町