There are three main reasons why investing in Japan makes sense today. First, Japanese real estate is, as a whole, a lot more affordable than in other developed countries. There is a global housing crisis where home affordability is at a historic low in many countries, including the US and Australia.

On the other hand, Japanese real estate hasn’t experienced that kind of inflation. After the bubble burst in the early ’90s, the country has gone through three decades of stagnation, called The Lost Decades. Japanese homes also have a shorter lifespan; homes in Japan depreciate in 20 to 30 years.

So, the structure of your property will literally be worthless in 30 years or so. It’s the land that tends to hold value, and this is why most people in Japan have a strong preference for newly built properties. In other words, the Japanese don’t value used homes, even if they’re in decent condition.

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For an American or Australian buyer, a 30-year-old house might sound kind of new, but for a typical Japanese buyer, that’s considered old. This is why you find cheap used homes all over Japan.

The second reason is the weak currency. The Japanese Yen almost hit its 33-year low against the USD earlier this month, making it favorable for foreign buyers who are earning in stronger currencies to get into the Japanese real estate market.

The third reason is the low-interest rates, and this applies to those who can qualify for loans in Japan. In general, if you don’t live in Japan, it’s very, very difficult to get a mortgage through a Japan-based bank.

Anyway, you have access to some of the world’s lowest interest rates. If you’re buying a primary home, you’re looking at somewhere around 1%, for investment properties, it’s between 1 and 2%. Money is cheap in Japan right now.

Sure, real wealth is built by owning something valuable, and Japanese real estate as a whole isn’t known for long-term appreciation. But I want to challenge you: name one housing market in the developed countries where you can find cash-flowing deals as easily as in Japan today.

So if you’re stuck in a job you hate and want to build a steady income from real estate investing, I think Japan is a great market. Of course, not in every part of the country, but in general. If you’re looking to spend more time or retire in the countryside of Japan, you can get a very nice Japanese-style house on the cheap as well.

Most frequently asked questions.

Before I get into the how part of buying a house in Japan, let me answer some of the most commonly asked questions. Is it possible to buy real estate in Japan as a foreigner? The answer is yes. Contrary to popular belief, Japan allows anyone, regardless of nationality, residency status, or visa type, to buy both real estate and land in the country.

And there are no extra taxes on the Japanese side when a foreign national buys property in Japan. In fact, foreigners have the exact same buying and ownership privileges as Japanese investors and are subject to the same rules on inheritance and taxation.

things you must know as a foreigner in Japan.

Number one: buying real estate in Japan will not give you residency here. There is no real estate investor visa available, as in other countries. But don’t worry; there are many ways to get a long-term visa in Japan.

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Number two:  in general, Japanese real estate prices do not appreciate. I briefly mentioned this earlier, but in many countries, people buy houses as an investment asset with the expectation that they will appreciate in value over time.

One major difference between the Japanese housing market and those of other countries is that the value of houses in Japan, on the whole, tends to depreciate with time, and that is even truer outside of Japan’s major cities.

With that said, if you’re looking for capital gains, Japan as a whole will probably not get you the kind of returns you want. Japanese real estate is good for cash flow.

Number three: you will likely have to pay cash if you’re not a resident of Japan. As I said earlier, as a non-resident or a temporary resident, you probably won’t be able to get a loan from a Japan-based bank. So be sure to have cash ready in Japanese Yen.

A lot of people use apps like Wise or Revolut for a quick currency exchange. If you know when you want to buy your property in Japan, you might want to take advantage of the weak exchange rate. Now, according to a strategist at Morgan Stanley, the Japanese Yen will probably make its way back to around 133 Yen per USD by mid-next year.

Now that we went over some of the most commonly asked questions, let’s go over another critical point: how you will buy real estate in Japan.

How to buy real estate in Japan.

There are mainly two ways. You either buy it under your own name or through an entity like an LLC. It’s very straightforward, but let me tell you why this is very important. It’s going to impact the timeline and the initial cost of your purchase.

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In short, if you’re buying a vacation home for you to stay, you won’t need to form an entity; you can just buy under your name. But if you’re planning to build a rental portfolio, you would probably want to form an entity like a GK, which is the American equivalent of an LLC.

How to search for a deal in Japan.

After figuring out how you’re going to buy the property, let’s talk about how to search for a deal. There are several ways to find your next deal: through online sites, city auctions, banks, and real estate agents.

There are pros and cons to each of these, but if you’re starting from scratch, using online sites is a great first step to finding your first or next deal in Japan. There are plenty of good deals online; you just need to know what a good deal looks like and take action right away.

How to read a property listing: When I look for property listings, I usually use these three websites: At Home, Sumo, and Homes. Thanks to today’s technology, you don’t have to be able to read Japanese; you can just get these sites translated in web browsers like Chrome using built-in translation functions.

Thank you, Google. Here, let me share some relevant Japanese terms you’re likely to come across in real estate:

• Hudan: Real Estate
• Hud: Real Estate Agent or Firm
• Bucand: Property Title or Deed
• Chintai: Rent
• Ka: To Rent

You can ignore terms like “rent” since we’re talking about buying properties here. To buy is what you’re after. As for the types of property you’re likely to see: Mansion or Ap to indicate apartments, Toi for land, and Iya for houses.

Renovation means renovations on the property, but if you see Sui at the end, it means they have been done recently, and Miko means none have been done, with the implication that it needs doing.

There are two indicators for the interior: floor plan and size. One is the number, which indicates the number of bedrooms plus the acronym for LDK (living, dining, and kitchen). For example, 2 LDK refers to two bedrooms and a living/dining room with a kitchen.

The other is the size of the rooms in tatami mats. It doesn’t matter if the rooms are Japanese style tatami mat rooms or Western style rooms; in Japan, we still use the tatami mat as a unit of measurement rather than square meters.

• Genkan: The front entrance hall where you take your shoes off before stepping into the house
• O or Shuno: Closet or storage space
• Balconi/Terrace: Balcony or Terrace
• Niwa: Garden

How to analyze real estate listing in Japan.

Now that you know how to search for and read listings, let’s move on to how to analyze them. This is probably the hardest part when buying a property, whether you’re looking to buy a house for you to live in or a rental property. You’ll need to put in a lot of reps to know what a good deal is. Here are the main things I look at when analyzing a deal:

1. Condition of the House: The current condition of the house and if there have been any renovations. The newer and better the condition, the more valuable it is.

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1. Size of the House and Land: Nowadays, people are getting married later and having fewer kids, so the average size of a household is getting smaller. As a rental property, you want something like a 2 LDK or 3K. For the house size, aim for something around 50 to 80 square meters.

1. Location: Most people prefer living relatively close to a train station in Japan because that’s the main form of transportation. A distance of 15 minutes or less is great for walking, but it’ll cost you more the closer you get. It’ll also be easier to rent out. For a rental property, consider a maximum of 30 minutes away for a bigger house in a quieter neighborhood.

1. Potential Rent: In Japan, there’s no website like rentometer.com where you can find out comparable rents in a particular area. You need to figure this out manually. Go to the rent section of online sites and start looking at how much similar properties in the area are being rented for. Aim for the classic 1% rule—rent divided by the property value. For example, if you buy a house for 10 million yen and rent it out for 100,000 yen per month, that’s a 1% rule.

How to make an offer when buying real estate in Japan.

Now, let’s move on to making an offer. The best part about making a cash offer is that you tend to have more negotiating power than a buyer using leverage. You’re the only decision-maker, so things can move very quickly. Making the right offer is knowing your numbers—the asking price plus the potential renovation cost versus the potential rent.

Ask yourself if the asking price is fair. If not, how much does it need to come down before making an offer? Always have a backup number in your back pocket. When you make an offer lower than the asking price, the seller will most likely counteroffer. Prepare for the counteroffer with a backup number. If the seller comes back to you with a reasonable offer, be prepared to negotiate further.

Negotiating is a skill that comes with time, experience, and understanding all the people involved. It’s about knowing the property condition, the interest from other potential buyers, the property listing date, and how badly the seller wants to sell.

The best type of seller to negotiate with is when they don’t know the true value of the property and set the asking price much lower than what it’s worth. With time, they will find out, and if they’re interested, they will most likely counteroffer.

Congratulations, you got your offer accepted by the seller. Now what? If the seller accepts your offer, you have to fill out an initial contract form and prepare a 10% deposit in cash as earnest money.

It’ll be deducted from the final price on the final contract day. Once the initial contract is signed, you and the seller decide on the date to finalize the sale. This can be as quick as two weeks from the initial contract date or can take as long as months. Usually, it takes about a month or so between the initial contract and final contract days.

The seller will send you the breakdown of the costs, including the title fees, judicial scrivener fee, stamp duty, broker commissions, and taxes. On the final contract day or the closing table, you will need to bring your ID, registration proof of address or juminhyo if you live in Japan, or the original copy of the notarized affidavit to show your residence outside of Japan.

You’re expected to make the final payment on that day, mostly done by bank transfer. Make sure you have all the Japanese yen you need and the method to transfer it to the designated bank account. If you take all of these steps, it’s very reasonable for you to buy your first or next property in Japan within 90 days.

90 days is very doable, especially if you’re not forming an entity in Japan to buy your next deal. Imagine owning a property in Japan three months from now. How would that make you feel? Homeownership in the country you love is very exciting because it’ll give you a sense of happiness and fulfillment if it’s your dream house or a new stream of passive income from your first rental property.