I would be interested in hearing from other people who have bought foreclosed property in Japan, for the benefit of readers. Good or bad experiences welcome. Any insights. Risk is managed, not avoided. You can use the feedback form. I just searched the internet and I don't see many people posting info about their experiences. A lot of interest though. More questions than answers.
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Andrew Sheldon www.sheldonthinks.com
Buying Property in Japan, Foreclosed Japan Real Estate, Philippine Real Estate, NZ Property
Japan Foreclosed Property 2015-2016 - Buy this 5th edition report!
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.
Tuesday, April 29, 2008
Friday, April 18, 2008
What are the risks buying foreclosed property?
There are always risks whenever you do anything. In fact there are risks attached to not doing anything - they are called 'opportunity costs'. Having bought property I think the greatest risks are:
1. Buying the wrong type of property
2. Buying in the wrong areas
You might wonder how could anyone buy a property without looking at it. The reality is that you do see inside. You do rely on the court photos to offer an accurate depiction of the houses condition. In my experience, and the house reports will support me, I dont think there is evidence of the court misleading buyers. On the contrary I think the information is representative. They provide a lot of photos. The risk is small that the condition of the property would have changed in the 6 months since it the photos were taken. Unlikely since its the same occupants, if they have not already left.
------------------------------------1. Buying the wrong type of property
2. Buying in the wrong areas
You might wonder how could anyone buy a property without looking at it. The reality is that you do see inside. You do rely on the court photos to offer an accurate depiction of the houses condition. In my experience, and the house reports will support me, I dont think there is evidence of the court misleading buyers. On the contrary I think the information is representative. They provide a lot of photos. The risk is small that the condition of the property would have changed in the 6 months since it the photos were taken. Unlikely since its the same occupants, if they have not already left.
Andrew Sheldon www.sheldonthinks.com
Monday, April 14, 2008
Why Japanese property is so cheap
The reason that Japanese property is 'soooo cheap' goes way beyond the issues of rural depopulation and foreclosures. Certainly there is negative population growth outside the major cities, but you could not accuse Japanese banks of engaging in a 'fire sale'. This process has gone on for over a decade, and there are still alot of properties. It seems they have left the residential properties to the end in the interests of social harmony.
Really the more important reason the property is cheap is cultural. I see this impacting in 2 respects:
1. Opportunity: Japanese salarymen don't have the opportunity to go tracking down properties and still less time to enjoy them. They have 2 significant weeklong holidays a year, and they are structured around visiting their traditional family home. Weekends present an opportunity but transport costs for Japanese people is expensive. They can't get the Japan Rail pass, and few of them have the flexibility to work from home.
2. Priorities: Japanese people place a greater sense of value on obligation to others, first employer, then family, so they are inclined to work very hard for their sake. That's HARD, but not SMART. There is a pride is suffrage in this country. "I am great because I suffered so hard for my country". An example is an acquaintenance of mine called 'Sugi'. He is the son of the owner of a construction company. The family spent $400K building a VERY nice holiday house in the mountains outside Tokyo. But they never use it. They probably keep it only as a matter of pride because they built it, and also because they can afford it. But they go there just twice a year and he lives just half an hour away from it. Its a lovely mountain retreat, just a walk away from a restaurant with fantastic scenic views over Chichibu. The place was designed as a place to entertain. It has accommodation for guests, a sweeping verandah looking over the mountains, a bar room, a pool room. A legacy of the 1980s - but its never used.
Instead he spends his time working 10 hours a day, 6 days a week, he is single and he spends his evenings alone for the most part drinking whiskey. Occasionally he dates a gorgeous girl because he's loaded, but maybe they reflect on him and think he's too pathetic to be worth it. He eats bar meals all the time because he has no mother to take care of him. Probably a candidate for suicide. But he'd probably be knocked over by salarymen rushing to catch a train on his way to the station - except that he is too well-heeled to catch a train, and its 5AM and they are too polite to knock you over. But trust me I've seen them run at 5AM in the morning to get to the office....as I was coming back from an all-nighter in Roppongi.
That's your market for property in Japan. If only he could be interested. So he sits on cash. Falling property prices has greatly escalated the disparity in wealth between the rich and poor in Japan. Sugi is the Vice President of the company, but his wealth is very much a legacy of his father's generation.
3. Retirees are not interested either: You might think these retirees are a market for foreclosed property, but a lot of them are loaded too, or at least comfortable, and they are so risk-averse they dont want to 'gamble' on a foreclosed property, as if buying through a court could pose any unquantifiable risk. Anyway, they want to live in the 'big city' because that is where their family is, and that's where the services they are accustomed to are located.
So it goes without saying in a large market like Japan, there is a huge market opportunity for foreigners with different lifestyles, different priorities, different risk sensitivities, with a hankering for an adventure or a lifestyle change to buy what most Japanese people consider unreachable because they burden themselves with responsibilities to others. So for those that dont take pride in suffering - read on!
---------------------------------------------Really the more important reason the property is cheap is cultural. I see this impacting in 2 respects:
1. Opportunity: Japanese salarymen don't have the opportunity to go tracking down properties and still less time to enjoy them. They have 2 significant weeklong holidays a year, and they are structured around visiting their traditional family home. Weekends present an opportunity but transport costs for Japanese people is expensive. They can't get the Japan Rail pass, and few of them have the flexibility to work from home.
2. Priorities: Japanese people place a greater sense of value on obligation to others, first employer, then family, so they are inclined to work very hard for their sake. That's HARD, but not SMART. There is a pride is suffrage in this country. "I am great because I suffered so hard for my country". An example is an acquaintenance of mine called 'Sugi'. He is the son of the owner of a construction company. The family spent $400K building a VERY nice holiday house in the mountains outside Tokyo. But they never use it. They probably keep it only as a matter of pride because they built it, and also because they can afford it. But they go there just twice a year and he lives just half an hour away from it. Its a lovely mountain retreat, just a walk away from a restaurant with fantastic scenic views over Chichibu. The place was designed as a place to entertain. It has accommodation for guests, a sweeping verandah looking over the mountains, a bar room, a pool room. A legacy of the 1980s - but its never used.
Instead he spends his time working 10 hours a day, 6 days a week, he is single and he spends his evenings alone for the most part drinking whiskey. Occasionally he dates a gorgeous girl because he's loaded, but maybe they reflect on him and think he's too pathetic to be worth it. He eats bar meals all the time because he has no mother to take care of him. Probably a candidate for suicide. But he'd probably be knocked over by salarymen rushing to catch a train on his way to the station - except that he is too well-heeled to catch a train, and its 5AM and they are too polite to knock you over. But trust me I've seen them run at 5AM in the morning to get to the office....as I was coming back from an all-nighter in Roppongi.
That's your market for property in Japan. If only he could be interested. So he sits on cash. Falling property prices has greatly escalated the disparity in wealth between the rich and poor in Japan. Sugi is the Vice President of the company, but his wealth is very much a legacy of his father's generation.
3. Retirees are not interested either: You might think these retirees are a market for foreclosed property, but a lot of them are loaded too, or at least comfortable, and they are so risk-averse they dont want to 'gamble' on a foreclosed property, as if buying through a court could pose any unquantifiable risk. Anyway, they want to live in the 'big city' because that is where their family is, and that's where the services they are accustomed to are located.
So it goes without saying in a large market like Japan, there is a huge market opportunity for foreigners with different lifestyles, different priorities, different risk sensitivities, with a hankering for an adventure or a lifestyle change to buy what most Japanese people consider unreachable because they burden themselves with responsibilities to others. So for those that dont take pride in suffering - read on!
Andrew Sheldon www.sheldonthinks.com
Monday, March 31, 2008
Cheapest property in the world
Here is a candidate for the cheapest home in the world, and its no demolition site either. This is a very good quality house near Kisakata town in Akita Prefecture, in northern Honshu, Japan. You might be wondering how you can buy a house so cheap in Japan. There are several
reasons:1. Few holidays: The Japanese embrace universal suffrage. Nope, nothing to do with voting, though that is hardly a stretch. The Japanese don't believe in recreation that goes beyond a weekend. So if they can't get there in a weekend, then they dont do it. Few Japanese people have holiday houses because they either can't afford it, they work so hard, or they just are scared to depart from routine. I dare say I have seen more of Japan than 99% of the population, and I've been there just 3 years.
2. Depopulation: This property lies in the northern provinces of Japan which is subject to depopulation. For this reason there is excess housing stock. Parents are dying and children go off to the city for work. This trend might diminish in the next 5 years as food prices increase, but dont count on it, as there are lifestyle reasons for leaving as well.
3. Financial literacy: The Japanese generally dont get much financial literacy
education so they are reluctant to take risks, even those which are 'manageable'. Risks are avoided rather than overcome. Safety first.4. Foreclosed property: This is a foreclosed property, so its particularly cheap. The natural market for this property is local people, but they are not so aware of foreclosures. Owners and family are too ashamed to talk about such things, no one has any money, and no one wants to live here as there are no jobs.
So why would a foreigner want to live here?
I can think of a number of reasons why foreigners would want to live in this area. If they have a tourist visa its easy to get here and travel around on a Japan Rail pass. The cost of the home is just Y0.874 million ($US9,000) - at least that is the minimum bid, and I suspect there will not be other bidders. You can stay in Japan 3 months before you have to leave the country, or go to Korea for a weekend to extend your holiday. I did that for a year.
So you want the details?
So you want the details?
This foreclosed property comprises 955m2 of land and a 2-storey house with a floor area of 56m2 downstairs and 35m2 upstairs. Its a small house, but surprisingly modern looking at the photos of the interior. What an idyllic location. I can just imagine Mary-Loo Taylor coming out the front door in dance & song to pick the strawberries and milk the cow. In addition there is a storage shed as well. More remarkable is that this house has no immediate neighbours - a rare feat in Japan. Probably one of the few places you can play your Van Halen CDs and not get arrested - as Mary Loo unfortunately was.
So how to buy?
This foreclosed property is sold through the Akita Prefectural Court through a tender system. If you need further information consider buying the Japan Foreclosed Property Report 2008 above. It describes my experiences buying foreclosed property and the information I gathered in the process. I am also offering population charts in the Saitama & Tokyo area for those who are interested. I do believe this is likely the cheapest property in the world. Its a paradox that it should be found in Japan given that its so hard to escape civilisation in the country. A great place to live if you are not a local.
---------------------------------------------So how to buy?
This foreclosed property is sold through the Akita Prefectural Court through a tender system. If you need further information consider buying the Japan Foreclosed Property Report 2008 above. It describes my experiences buying foreclosed property and the information I gathered in the process. I am also offering population charts in the Saitama & Tokyo area for those who are interested. I do believe this is likely the cheapest property in the world. Its a paradox that it should be found in Japan given that its so hard to escape civilisation in the country. A great place to live if you are not a local.
Andrew Sheldon www.sheldonthinks.com
Monday, March 24, 2008
Japanese housing prices rise in 2007
You may not have heard any good news lately but actually land prices in Japan rose in 2007 for the 2nd year straight according to Yahoo Finance after continuing to recover from the "lost decade" of weak growth and deflation.
Residential land prices rose an average of 1.3% over the year to January 1 on average, after a 0.1% gain in 2006. This is the 2nd rise in 16 years. When you consider that Japan is mostly suffering from depopulation these are impressive growth numbers. Commercial land prices rose 3.8% in 2007, after a 2.3% gain in 2006. The property market is however showing signs of cooling. But it seems counter-intuitive to think a market that has collapsed the bottom of a credit crush is going to collapse further. The problems in the USA might dispel growth prospects, but they are not going to undermine the yields on Japanese property in a hurry. In recent years construction activity has returned to Tokyo and the other major cities.
Residential land prices rose an average of 1.3% over the year to January 1 on average, after a 0.1% gain in 2006. This is the 2nd rise in 16 years. When you consider that Japan is mostly suffering from depopulation these are impressive growth numbers. Commercial land prices rose 3.8% in 2007, after a 2.3% gain in 2006. The property market is however showing signs of cooling. But it seems counter-intuitive to think a market that has collapsed the bottom of a credit crush is going to collapse further. The problems in the USA might dispel growth prospects, but they are not going to undermine the yields on Japanese property in a hurry. In recent years construction activity has returned to Tokyo and the other major cities.
The 2007 statistics show major cities such as Tokyo recording sharp rises in land prices whilst many rural areas continued to decline. This disparity is not likely to continue much longer, particularly given the prospect of stronger food prices offering rural farmers a reprieve from high labour costs. Also the cities have always lead the way in trend changes, so it seems reasonable to expect rural prices to bottom soon, particularly in those areas closest to the major cities.
In the three biggest urban regions, residential land prices rose 4.3% while commercial prices surged 10.4%. In Tokyo-23 wards, the average residential land prices rose 10.4%, although that was slightly slower than 11.4% in 2006. Prices in rural areas dropped for the 16th straight year, though the pace has fallen to just 1.8% for residential land and 1.4% for commercial land. Again we need to consider the disparity in land prices between regions, and the positive impact that higher food prices could have on land prices in future. The increase in land prices does however suggest that inflation has returned to Japan.
Japan's central bank is expected to refrain from raising interest rates for the foreseeable future because of growing concerns about volatile markets and the weak outlook for the global economy. It seems unlikely that the Bank of Japan (BoJ) is unlikely to cut interest rates further since they are already at 0.5 percent - the lowest among the OECD countries. The fact that the BoJ has raised interest rates in the last couple of years seems to suggest that the BoJ has no desire to stimulate real estate speculation like in the 1980s. Given that business confidence reports released Monday show Japanese business confidence slumped to the lowest level in 4 years suggests that the Japanese economy is not going to be resuscitated by anything other than substantial reform in Japan, or broader global recovery, which is a long way off. Business sentiment fell to -9.3% in the Mar-08 quarter, down from +0.5% in the previous quarter.
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Andrew Sheldon www.sheldonthinks.com
Friday, March 21, 2008
Investment apartments (4 units) in Nagano
I see there are 4 apartments or mansions in Nagano for sale each with a floor area of 185m2, packaged together for Y12million minimum bid, oe $USD120,000, thats $US30,000 per apartment. The court documents suggest the mansions are in good condition, polished floor, but also with a traditional tatami mat room. Based on a rental of Y55,000 per month, and they could rent for Y60,000 per month, you are looking at a gross rental income of Y2.64mil or a gross yield of 22%. But that's assuming you get them at minimum bid. You need also to consider the other costs associated with mansions, and buying a property of course. The good news is that you can get alot of leverage by buying such a property, and there should be a stable revenue because you will have multiple rental unirs and the location is close to the main road. So lets say after costs you have a net
yield of 15-17%, if we assume 70% bank financed, 5% interest rate on the debt, thats a 45% return on your equity. Worth holding them a few years, wait until the capital gains tax rate 
falls, then sell them off for a capital gain. You just need to come up with Y3.6mil and bank finance for the rest.Andrew Sheldon http://www.blogger.com/www.sheldonthinks.com
Search for the cheapest property in Japan
Farmstay in Japan anyone?
This property must at least be a runner-up for the title of 'Cheapest property in Japan' and I dare say 'the cheapest property in the world'. Such a paradox that it should be found in Japan. I did compromise somewhat, I had to head into snow country to find it. Though I'm not about to give up on finding a better located property. Actuallt this property has some impressive credentials.
Andrew Sheldon www.sheldonthinks.com
This property must at least be a runner-up for the title of 'Cheapest property in Japan' and I dare say 'the cheapest property in the world'. Such a paradox that it should be found in Japan. I did compromise somewhat, I had to head into snow country to find it. Though I'm not about to give up on finding a better located property. Actuallt this property has some impressive credentials.
The price is a nominal Y1.116 million, which means you can bid a minimum of Y0.8928 million, which based on current exchange rates of Y97 is still less than $US10,000. This is
definitely a buy for those Americans struggling to save a $US. Happy ski holiday in Matsue! It must be about 18mths ago now that I travelled around this area. Very beautiful - but very remote. I believe the snow gets pretty think in winter. But this property is big. It actually includes a good part of the forested hill behind the building. More impressive still is the house is 284m2, thats 228m2 downstairs and 56m2 upstairs. There are 3 lots attached to the property - a 471m2 lot, a 136m2 lot and a forested lot of 2757m2, giving a total of 3364m2. But I guess its rural Matsue. See Google Maps for the location.
definitely a buy for those Americans struggling to save a $US. Happy ski holiday in Matsue! It must be about 18mths ago now that I travelled around this area. Very beautiful - but very remote. I believe the snow gets pretty think in winter. But this property is big. It actually includes a good part of the forested hill behind the building. More impressive still is the house is 284m2, thats 228m2 downstairs and 56m2 upstairs. There are 3 lots attached to the property - a 471m2 lot, a 136m2 lot and a forested lot of 2757m2, giving a total of 3364m2. But I guess its rural Matsue. See Google Maps for the location.I actually think this property might suit a person interested in developing a backpackers in Japan. I considered this as a business idea before, but it doesn't really suit me. I'm not so tied to one place. I like to move around. But the house is huge. It looks modern from the outside. I dont know what Toyama's attractions are. But I justr think rural homestay in Japan makes alot of sense because everyone who goes to Japan is likely to have a JR pass, which means getting to this remote place is part of the adventure, which wont cost a great deal.
The building appears to be mostly in good condition. The kitchen and toilet area look pretty cruddy, the rooms are in good condition, just they are very untidy with the current owners rubbish. The bad aspect is that there are holes in the roof panels, exposing the roof. Dont know why this is the case. Maybe the snow has frozen causing the melting water to seep into the house and cause damage to roof. No idea. But I tend to think its a small issue when you look at the price and land included, not to mention the size of the house. At $10,000 I guess some of you wouldn't even need to blink! The biggest issue might be getting there to lodge a bid.
------------------------------------------Andrew Sheldon www.sheldonthinks.com
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