Every few weeks someone sends me a listing for a guesthouse in Japan that’s already running, with a line like “turnkey, 12% yield, fully booked.” I understand the appeal. The furnishing is done, the first season with no reviews is behind you, and cash comes in from day one. You may also inherit a compliant physical setup. The right to operate still has to be checked, though. Under minpaku, a change of operator usually needs a new notification. Under 旅館業, you can only succeed to the license if the business transfer gets prior approval. Almost every time, the number in the headline is the most generous possible reading of the property’s history.
This post covers how I check the seller’s numbers before I believe any of them. It’s not about whether to buy. It’s about making sure you’re looking at the business as it really is, not the one in the brochure.
The first time a landlord’s agent handed me a lease for a property I wanted to run as a guesthouse, I noticed the contract was labeled 定期借家契約 (teiki shakuya keiyaku) — a fixed-term lease — instead of the standard 普通借家契約 (futsu shakuya keiyaku), a regular lease. I’d signed regular leases for offices before and assumed this was the same paperwork with a different name. It isn’t, and the difference matters enormously if your business depends on holding that lease for years.
Everyone talks about entry: how to find the property, how to finance it, how to get the yield numbers right. In our experience, far less gets said about the exit, and that’s a problem, because in Japan the tax bill on selling a short-term rental can swing by more than 19 percentage points depending on a single number — how many years you’ve owned it.
I’ve been through this calculation for our own properties and for owners who ask us to help them think through timing a sale. The short version: the exit is not a footnote to your investment plan, it’s a variable you should be modeling from day one.
Every foreign investor I talk to gets the property search part figured out reasonably fast — agents, listings, even negotiating price isn’t the hard part. The hard part is the phone call that comes after: “Congratulations, now how are you paying for it?”
Financing is where a lot of otherwise-solid deals for foreign buyers in Japan quietly die. Not because the numbers don’t work, but because the loan never materializes on the terms the buyer assumed going in.
A few years back, we were evaluating a small wooden house in a Tokyo suburb — decent location, ten minutes’ walk from a station, priced noticeably below comparable units nearby. The gap felt like margin. Then we looked harder at the listing details.
The building was from 1975. That six-year gap — 1975 vs 1981 — turned out to change the entire investment calculus.