Tenants MAKE or BREAK your investment portfolio

Ensuring stable and reliable rental income, (preferably increased or at least consistently maintained throughout an investment property’s life cycle) stands as the cornerstone for a property investor’s portfolio success. Especially for those less inclined toward foretelling, who prioritize monthly cash flow over potential capital growth, stability in rental income holds the upmost importance, given the shake-y nature of capital appreciation.

Maintaining the property at optimal and profitable occupancy levels is therefore crucial. Achieving this entails ensuring the property remains appealing to a broad spectrum of potential tenants for extended periods.

So this begs the question: What are the preferences of Japanese tenants when seeking a potential home?

A few weeks ago, we talked about the importance of proximity to public transport. Today, let’s delve deeper and explore more into exactly what factors influence tenants’ choices in Japan?

Occupancy Becomes Equity

Some factors echo those found in other countries, yet others vary significantly based on location, size, rent, and other variables. Therefore, casual assumptions may prove costly when scouting investment properties.

In Japan, properties primarily for investment, like smaller units in older buildings (targeting low-income earners) are priced based on rental yields alone. Hence, difficulty in tenanting or a drop in rental income post-purchase would invariably slash resale value.

On the other hand, upscale, family-sized, or newer properties in attractive locales may attract owner-occupiers, lessening reliance on rental income and aligning with standard property market fundamentals.

Considering Japan’s rapidly aging population and rising single-hood, targeting the widest tenant base is prudent. Factors like location, amenities, and layout significantly influence tenant appeal.

The Golden “10 Minute Walk” Rule

Proximity to public transportation, especially within a 10-minute walk to stations, holds immense sway over tenant decisions and rental rates.

We touched on this in our previous article which you can read here.

Catering to Singles and Elders

Given the Japanese population’s demographic shifts, investment properties should accommodate single, elderly, and lower to medium-income earners for the highest chance of success. Interesting features that people in these demographics admire are things like secure entry systems and southern-facing balconies.

Functionality and Amenities

An undervalued aspect of an apartment complex is one that allows it’s tenants to do their laundry. Most apartment complexes (especially those found in the city) won’t have a dedicated laundry/washing area, and you rarely ever see one in the unit itself. In often cases, it may be worth using or renovating the lobby/office space found in most apartment complexes’ ground floors for this amenity, tenants not having to travel to a coin-laundry will greatly impact the attractiveness of your property (in an ideal scenario).

Else-wise, proximity to these amenities and including places like restaurants, convenience stores, and onsens can be a great alternative.

Special Considerations

New developments (construction sites), criminal associations, and past incidents like deaths in or around a property influence tenant perceptions and rental values too.

In Summary

While it may seem daunting, understanding these nuances is crucial for effective due diligence in property investment. Whether on behalf of clients or personal endeavors, referencing these insights can inform sound investment decisions in the Japanese property market.