All Topics / Overseas Deals / Investing in Japan?

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  • Profile photo of jambvjambv
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    Found this website on this forum with this listing http://foreclosedjapan.com/openrealty/index.php?action=listingview&listingID=1044

    The bid price (converted to AUD) is 54k with rental income of $512 per month making this cash +ve. Does anyone have any experience investing in Japan specifically regarding the language barriers, pitfalls, difficulties etc?

    Profile photo of sam2009856sam2009856
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    Hi Jambv

    I do not know much about Japan however, I do know they went into a recession years ago and are just climbing out of it.

    Predications are that property prices will climb in the next few years..

    I guess when investing overseas, the thing you have to pay particular attention to is the politics…. and how they feel about foreign investors ect.  As far as I know they are foreign investor friendly but make sure you do your research.

    There is no point having a cashflow property with a mortgage on it that the government could cease and you have nothing.   I would not think Japan is like this but something to look into before investing into any overseas country.

    Check out all the usualy stuff, vacancy rates, property management ect.

    Good luck!!

    Profile photo of dreamingdreaming
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    Hi Jambv

    I read an article not so long ago saying that soon every 10th person in Japan will be over 75yrs old. They also went onto say that Japans population will start to decline soon.
    I'm not saying don't invest in Japan because there could be some good money to be made, just make sure you do your homework and buy a product in demand.

    Profile photo of Nigel KibelNigel Kibel
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    I think the chances of making money in Japan are very good. However I do not know a great deal abut it. I know that prices and equal to 1980s prices their,

    I recently read that to maintain the Japanese economy they need 600,000 foreign workers where today they only have around 60,000.

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    Profile photo of TerrywTerryw
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    I've been going to Japan since 1990 and have one house there. I wouldn't invest in property there as the market is totally different to Australia. Firstly it will be very difficult to borrow to buy there unless you are working there with about 2 year employment history. Then it is very difficult to get a loan still, especially if you are intending to rent the place out. Rates are very cheap, however. Approx 1.60% pa.

    The market is different because Japanese houses generally only last 20years or so before they need replacing. So houses depreciate in value very quickly. It is like buying a new car, once you have lived in the house, the value drops immediately.

    The market there had a huge boom in the 1980s and the bubble burst around 1991 with property dropping in value since then. That is 17 years of declining values. Last year when I was there, property rise 0.10% in Tokyo for the first time since 1990 and there was talk about the market recovering. But when I was there last month, it didn't seem to have moved. At least it appears to be still flat. And there does seem to be a boom in new construction with new houses and apartments popping up everywhere.

    But yields are good. I am not sure if you will make money long term as you may only be left with land value in 20 years time.

    Also there seems to be a large number of places up for rent. People are probably snapping up the newer stuff with so much available.

    There are various property taxes too, which are on the high side.

    Also if you intend to invest there you would need to read write and speak the language. Although they study English for 6 years in school, hardly anyone can speak any English at all.

    I wouldn't recommend investing there. Nothing beats Australia with its high capital growth rates and easy lending.

    Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
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    Profile photo of TerrywTerryw
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    I had a look at that link, http://foreclosedjapan.com/openrealty/index.php?action=listingview&listingID=1044

    This property is in Aichi which is a small country province. Looking at the map it is not even close to the city either. Country towns have lower population growth than the rest of Japan, Which is declining, because many young people go live in Tokyo or Osaka.

    The rent seems to be pretty high too.

    There are plenty of cheap places on the site though. Some as cheap as $10,000AUD.

    Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
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    Profile photo of Nigel KibelNigel Kibel
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    If you want to invest off shore I would suggest the United States is a good place to go. Even with the Sub prime you can still get loans. There are a lot of places in the US where you can get positive cashflow but you do need to be careful where you buy and who you buy through.

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    Profile photo of tpc3126tpc3126
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    Can you recommend anyone Nigel?  I have been looking at foreclosures in the states and can see there may be lots of opportunities there… and even more to come with a recession on the cards 

    Profile photo of bardonbardon
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    Jambvw, good advice from Terry i go up there now and again and if you thought that there was upside in Japanese proeprty and wanted to invest in it then best you invets in a listed proeprty trust.  Some of the young reps I meet up there that are buying firts home in rat race etc are paying much higher than you mentioned.

    I work in engineering and construction and travel Asia quite often and up until recently I thought that the cycle "was different this time" the Us slow down wouldn't have much impact on asia and then oz.  But just looked at some numbers and have changed my opionion and it doesn't stack up ie if US goes down then we will suffer as domestic asian demand is not big enough yet to replace Us demand.  Us spend 9.5 trillion, China spends 1.5 trillion, India spends 600 billion a year not sure how much the rest spend including japan and sth America but if Us demand drops we will feel the impact.  If Asia suffers Japan suffers.

    So back to the post Japan probably not worth the risk to directly invest in property but property trust maybe and as Terry says nothing wrong with oz.

    Profile photo of Scott No MatesScott No Mates
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    Companies like MFS specialise in Japanese ski investments (they own Mt Hotham & Falls Creek in Vic as well as a range of other leisure oriented properties) – good rentals but seasonal, prices have increased/yields decreased over the last few years however skiers other than Aussies are discovering the beauty of the Japanese slopes – snow reliability is very high, their weather comes off from Siberia aparently and produces some of the best snow in the world coupled with decent mountains. Resort facilities still have some way to go however.

    Profile photo of recoverymanrecoveryman
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    Hi Terryw
    who do you have as a PM for your house over in Japan, as I see this as real problem if I do buy over there
    or do you use it yourself
    thanks
    recoveryman

    Profile photo of L.A AussieL.A Aussie
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    Nigel Kibel wrote:
    If you want to invest off shore I would suggest the United States is a good place to go. Even with the Sub prime you can still get loans. There are a lot of places in the US where you can get positive cashflow but you do need to be careful where you buy and who you buy through.

    How can you get a loan for a US property from a US lender if you live in Aus, Nigel?

    Or, do the investors obtain loans from Aus lenders for o/seas properties? Which lenders do that? Not many I'll bet; care to comment; any of the MB's on the forum?

    Not that I want to do it; just curious.

    Because we have been here for over 2 years, no debts, own everything, income of over $90k per year, and because we have no debt, we have no credit score. Have been with the same bank the whole time, and even they won't give us a credit card (we don't want one, but we applied just to see what they'd say). Threy would, however, give us a "secured" credit card. In other words, a debit card that needs funds in it, but the spending is treated like a credit card so you can get a credit score. Yeah.

    We can't even get a department store credit card (don't want one of those either, but recently I bought a new jumper, and the check-out person said if I signed up for their store card I'd get another 40% off the price. I thought; what the hell; let's do it. I was knocked back in 2 mins by the voice on the phone from upstairs when the check-out person made the enquiry for sign-up.

    No explanation, but I did get a letter in the mail from the store a week later saying I didn't have a good enough credit score to qualify for the card. read: NO credit score).

    Good luck getting a housing loan.

    Profile photo of Scott No MatesScott No Mates
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    The problem with getting a loan in AUD for a US loan is currency fluctuations – as farmers saw in the 1980s, many loans were financed offshore without the disclosure of the effect a weakening of the dollar. It sent many people broke. Borrowing in the us for a us loan will reduce the currency risk as you are paying & recieving USD.

    http://www.yipmag.com.au/articles/1848/default.aspx

    Profile photo of L.A AussieL.A Aussie
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    Scott No Mates wrote:
    The problem with getting a loan in AUD for a US loan is currency fluctuations – as farmers saw in the 1980s, many loans were financed offshore without the disclosure of the effect a weakening of the dollar. It sent many people broke. Borrowing in the us for a us loan will reduce the currency risk as you are paying & recieving USD.

    http://www.yipmag.com.au/articles/1848/default.aspx

    I appreciate that Scott,

    but I want you or Nigel, or anyone, to tell us how to get around the problem of obtaining finance to invest there, as the question gets raised by peope here fairly regularly.

    Nigel is always saying "come on in; the water is fine" but, you have to get the money first, and from my limited experience, it doesn't seem that easy, and I reckon it's misleading people.

    I think if people are gunna spruik on about the US, they need to also put forward a footnote about the finance hoops that need to be jumped through as well.

    Profile photo of jambvjambv
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    Gents,
    Thanks a lot for all your comments. I wasn't seriously considering Japan, I was more interested in the variables people consider when investing o/seas. Apart from the obvious language difficulties, who would have thought you'd need to replace the whole house every 20 years or so?

    Regarding investing in the USA, it seems to me there is opportunity to make money & even more opportunity to lose your shirt! I wouldn't seriously consider the USA unless I spent a few weeks there.

    Profile photo of C2C2
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    JAMBV,

    As Terry said the market in Japan is very different to OZ.

    There are quite a few good bargains but getting a good property manager can be extremely difficult.
    The real estate agent holds power over both land lord and tenant.
    It is very difficult to negotiate rent rise or increases. (I lived in a place that has had the same rent for 25 years).
    It is not uncommon for a tenant to have to pay up to 10 months bond which is broken up into 1 month present money for land lord and 1 month present money for agent, 5 months is kept for who knows what and they may get the rest back if the place is spotless.

    In regards to investment properties.

    An example of a property I'm currently looking at in Japan which will cost around 150K not sure of the age of the building.

    It has 8 x 2 BR that should rent for around $400 per month each giving a combined $3200 per month.

    The property should depreciate at around 2-3% per year until it reaches a base figure and shouldn't go down any further.

    The key factor is whether the loan will be in Yen or AUD or no loan at all.

    I will let or the number crunchers out there work out the best scenario and if it's worth doing.

    Profile photo of TerrywTerryw
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    ????C2

    That works out to be a yield of around 25.6% pa. How far do you estimate the value to drop? And what is the land value?

    If you could borrow in Japan, it may be a marginal deal. But if you are going to be using an Aussie LOC or similar, then you must factor in the opportunity cost of what else you could have done with the money.

    There are also various property taxes in Japan – which seem very high.

    I personally won't be buying any more property overseas. Nothing beats Australia for property.

    Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
    http://structuring.com.au/
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    Profile photo of C2C2
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    Hi Terry,

    Long time no chat.
    I'm more incline to pay cash.
    Land is probably around 75K which should put bottom base price around 100K after about 20 years of depreciation.

    Eventually will keep one apartment vacant for rellies & and ourselves etc when we want to visit Japan.
    BTW expecting the first bub in about 3 weeks.

    Cheers

    C2

    Profile photo of L.A AussieL.A Aussie
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    dreaming wrote:
    Hi Jambv

    I read an article not so long ago saying that soon every 10th person in Japan will be over 75yrs old. They also went onto say that Japans population will start to decline soon.
    I'm not saying don't invest in Japan because there could be some good money to be made, just make sure you do your homework and buy a product in demand.

    1 in 10 over 75?

    The rest of the (younger) population must be all on tourist holidays, based on everywhere I go around the USA. They are everywhere.

    Profile photo of TerrywTerryw
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    Hi C2

    Hisashiburi.

    The return seems good, but at the end of the day you will be left with a depreciating asset, and have you factored all the taxes in? ANd considered the other opportunities you could be pursuing in Australia. Cashflow won't make you rick, capital gains will. (I had  a client today who sold his property for more than 4 times what he paid for in in just 4 years!).

    Congratulations on the baby too.

    Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
    http://structuring.com.au/
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    Lawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://Terryw.com.au/

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