MY FIRST OVERSEAS DEAL ZIV MAGEN
Do you invest in certain cities or
What types of real estate investing
neighborhoods in Japan?
strategies (e.g. wholesaling, flipping,
lease options) work or don’t work in Japan?
We drift with the flow of the economy. Since the big
earthquake and tsunami disaster of 2011, we’ve
been seeing a lot of business and family traffic
migrating south-west, to the Kyushu landmass
(equaling about half of Japan’s mainland). This is
the gateway to China, South Korea and Taiwan, to
the west. Core family numbers (couples plus young
children) are on the rise and increased tourism and
other business is coming in from Central Asia. All of
this is evidenced by recent property price hikes.
But, we also follow the deal trail to other areas of
the country. We stick to medium or big cities of not
much less than a million people, whenever
possible. But, we also do “requests” for clients
seeking holiday homes on the ski slopes of
Hokkaido and other similar profiles.
Can these properties be financed, or do you
need to purchase them with all cash?
Financing is not available to foreigners who aren’t
Japanese residents at the moment, unfortunately.
Some of the international banks like HSBC and Citi
occasionally lend against Japanese securities, but
these cases are very rare and have fairly strict
criteria for these arrangements. The vast majority of
our clients are cash buyers, or are those who have
secured their finance in the form of non-secured
personal loans, lines of credit, etc.
But, with
affordability as low as $20,000 and yields as high
as 16% pretax, it’s really a no-brainer for cash
buyers, big or small to invest in Japan.
Japan is mostly a buy and hold market, with tenants
staying 4-5 years on average, and with 15 and 20
year leases quite common. You really want to keep
that reliable cash flow going as long as you can.
With larger portfolios, where you can start claiming
depreciation, purchase expenses, etc., it may make
sense to “cycle” properties every few years, to reset
those claiming cycles. Wholesaling and flipping
does exist, but only if you’re a Japanese company
or local resident. Our clients sometimes buy from a
local dealer of this sort. Owner financing schemes
and other creative lease options are very rare, as
home ownership is also rare. Most Japanese rent
for their entire lifetimes.