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A listing comes across your feed: “Tokyo guesthouse, ¥35M, gross yield 8%.” That number sounds reasonable — maybe even good by Japanese real estate standards. You start running mental math.
Here is the problem: gross yield is almost always the wrong number to base a decision on.
If you’ve been looking at buying a small hotel, guesthouse, or minpaku property in Japan, the yield numbers in the sales brochure probably looked pretty good. Maybe 8%. Maybe 12%. Maybe someone used the word “cap rate” and your eyes lit up.
I’ve been operating hospitality properties in Japan for several years, and I can tell you: the number on the brochure and the number that hits your bank account are often very different. Not because anyone is lying — though some are — but because the gross yield calculation that gets thrown around leaves out a significant chunk of real operating costs. Here’s how to think about it properly.