Real Estate Investment in Japan

My wife and I invested in property, apartments to be specific. I don’t like the idea of buying our own home, we would probably be tempted to max out our credit allowance and then on the hook for rent every month (heavily dependent on both of us retaining our jobs and we’re not getting any younger). What we did instead was to invest in old, small apartment buildings in Japan where yields are still at a premium compared with many global markets.

Here are a few of the reasons we did this:

• The properties generate cash flow.
• The properties provide liquidity.
• The properties lower our taxable income because we can depreciate them.
• You are paying equity on the buildings on a monthly basis.
• Although the Japanese population is declining, the rate of divorce is going up. For example, many older couples are divorcing (often after the husband stops working), the couple split and see out their days in two smaller apartments. In addition to single folks, there should be enough demand in the coming years.
• I like the idea of aged buildings (post earthquake regulations in 1983). They have already been significantly devalued and have only so much downside (I don’t think the tenants could pay less rent). When buying a new property you always run the risk of property prices fluctuating, this is often out of your control.
• Although it’s a significant investment of your time, you can try to be creative with your properties and for instance, turn them into airbnb apartments (as I've done), raise the rent over time (as I've done), repair the property yourself etc.
• You’re mitigating the risk of monthly payments across many different tenants instead of yourself (and your wife) for instance. Single point of failure.

Our plan is to sell the properties after 5 years when the capital gains tax has moved from 40% to 20% and buy a home outright in cash. No loan, no bank.

You can always downsize from a rented property. Defaulting on a mortgage in a house you own is not ideal, especially if you have kids.

Please note, before you considering purchasing property like above, it will take up a significant amount of your time. You are taking significant risk, make sure you do proper due diligence.