00:00:04: I'm going to wake everybody up by asking one question.

00:00:09: How do you get whatever you want?

00:00:11: Ask!

00:00:12: Exactly, yeah ask.

00:00:14: So ASK is the first step.

00:00:17: so i have been a real investor in the US for many years.

00:00:21: when twenty-two hits The interest rate is skyrocketed The old method which is buy rehab refinance and repeat does not work anymore, right?

00:00:31: Because interest rate alone is already five-six percent and your margins getting squeezed.

00:00:36: that method doesn't work.

00:00:38: So I started by asking myself where else in the world were can still find low enough interests or are the market stable as they're growing?

00:00:48: i can see you get good cash flow and capital gain.

00:00:52: so it's still utilize my burn message.

00:00:55: So searched everywhere then finally found an answer which is Tokyo Japan.

00:01:01: So in twenty-three, I started shifting my focus into Tokyo market mainly by acquiring apartment buildings because those are the great assets can still give me a great cash flow with leverage as well as good amount of capital gain.

00:01:17: Because everybody knows that land price has been rising steadily and also rent.

00:01:25: The rent has stagnated for twenty, thirty years which is true but not anymore.

00:01:32: Inflation has definitely came to Japan.

00:01:35: we have seen the rental rate in japan all over.

00:01:39: it's been steadily going up and so no rent growths are not true any more.

00:01:47: okay when I first moved to Japan Should I buy a place so where it can spend maybe one or two months of the year and rent out the rest at that time?

00:01:59: Or should I just buy something as can be rented all whole-year, and just pure for investment purposes.

00:02:05: So between those two options, I know number one probably is not going to work from me if my buyplace rented out partially as Airbnb.

00:02:14: Probably what happens when everybody else wants to book today's and there are also times that I want use it.

00:02:21: So that does not work, right?

00:02:23: And then the second option if it's for purely investment.

00:02:26: Then I don't get a place to stay.

00:02:28: That doesn't all work from my purposes either.

00:02:31: Just pause you first split-second because using an adapter there The people on this stream can see your slides.

00:02:37: so our option is outside your fault.

00:02:39: It just tech shit.

00:02:40: So the option Is i can either give You my pc to present from or we can just go wide and they'll see both you on the slide in a slightly lower resolution, which do you prefer?

00:02:51: We

00:02:51: use this one.

00:02:54: You want to keep using this one?

00:02:56: yeah okay.

00:02:56: so just go right here.

00:02:58: carry-on sorry

00:02:59: Okay.

00:03:00: So there's two options right?

00:03:01: what is your buy place?

00:03:03: rental partially And stay their one or two months of the year.

00:03:08: The other one it like does full investment property.

00:03:10: you don't get.

00:03:10: state What if there was third option that satisfy my need, then I get to stay there for any time I want.

00:03:18: Nobody else can book it.

00:03:19: and if gets paid for by the rest of the units.

00:03:23: here's what i discovered Get other people to pay per unit which is um buy apartment buildings.

00:03:30: so back then this steel Of course does not exist anymore because just three years ago land price and labor price has gone up a lot.

00:03:39: So when?

00:03:39: on the website This is typical Single family home in Shinjuku, which costs about a million dollars.

00:03:50: So it's one hundred fifty million Japanese yen Which equivalent to somewhere on a million US Dollars you can buy single-family house for About the land is about Fifty eight square meter.

00:04:04: It's about like two out of two SLD keys But for same amount and monies with about a Million Dollar You can buy apartment buildings, give you twelve units and out of the twelve units I can reserve one for myself.

00:04:18: I could use all year long any time i want And also if finance on its own The rest of the eleven unit pays for that one unit.

00:04:27: So here's a comparison they did.

00:04:31: The price is similar.

00:04:32: It has cost about a million dollars.

00:04:35: Closing costs are very similar.

00:04:37: The total investment summarized to about a million dollars and the loan I got is sixty percent, so that down payment will be somewhere around four hundred K US Dollars.

00:04:49: So for four-hundred K US dollars all people get apartment buildings reserved one from myself and have the rest of eleven units.

00:04:58: rent comes in to pay for my unit.

00:05:03: Here's specific math.

00:05:06: The total amount of loans equals nine million Japanese yen which Somewhere around six hundred K and the interest rate back then was a lot lower.

00:05:18: It was about two point Two percent three years ago.

00:05:22: right now somewhere it's somewhere around two point seven percent And the term is about thirty years so very similar to the US Mortgages, Thirty Years.

00:05:34: So in the monthly payment comes out to Three hundred and sixty five K Japanese yen, which is equivalent to only twenty-four hundred US dollars.

00:05:46: That's your monthly payment for like either a single family or further twelve units of buildings.

00:05:54: and then let us look at the monthly income so far on this typical single families.

00:06:00: you can probably run it for two hundred fifty K Japanese yen with just equivalent maybe somewhere around eighteen hundred US dollars.

00:06:11: Whereas for eleven units, assuming each one only gets you fifty-five thousand yen per month because we have eleven units here I did not count for twelve units it's only come from eleven units.

00:06:23: this is how much i'm going to get.

00:06:25: so its a big difference when you have multiple units compared just to one unit and then spread out annually uh... equaled around twelve months which gives me This is the monthly income and I times into twelve And in the end it gives me the Income.

00:06:48: so if by owning this twelve units only right now eleven units.

00:06:53: It gives me a monthly income of seventy Japanese seventy K Japanese yen.

00:06:58: Whereas, If i own just one unit?

00:07:01: I still have to put in The negative.

00:07:03: I had to putting cashing every month.

00:07:06: So that's really math.

00:07:07: I did to realize okay maybe by multiple apartment buildings, or in Australian English as a block of units will help me achieve my dream.

00:07:22: Okay so everybody knows how warm buffet bought into Japanese stock market right back in twenty-twenty when the pandemic happened but not many people know how he financed his deal.

00:07:37: does anyone know?

00:07:40: So our answer is here Warren Buffett raised a lot of Japanese yen debt.

00:07:46: Basically, he used his credit line to just borrowed from the Japanese bank at very low interest rate which is between one and two percent And then he uses borrow money To turn it around by dividend paid stocks.

00:08:04: He's getting in return for four or five percent The result that he was creating positive carry meaning he's using very low cost of debt and getting paid five percent in cash, which he just gains indefinitely over time.

00:08:23: As long as you have the debt and then as long as a stock is earning your dividend, you create the gap that you keep earning this three to four percent interest.

00:08:36: So what essentially we can utilize in real estate is I would borrow from the bank at a very low percentage.

00:08:43: And we get good yield from the renters, then create gap in terms of carry so that essentially utilize strategy Warren Buffet had as individual investors.

00:08:59: So let's look why to invest in Japan.

00:09:02: Like I mentioned earlier that Japan has really been weakened for the past few years and it hit a very historical low point in dollar.

00:09:15: If you have dollars, then right now is the best time to probably convert your dollar into Japanese yen.

00:09:21: So not only can get steady cash flow and capital gain.

00:09:25: on top of that You could probably get potential currency gains as well depends how the yen goes.

00:09:36: And next we look at new market updates from JLL.

00:09:40: So GLL is a leading commercial real estate broker.

00:09:43: They publish this kind of report every single quarter to compare all the big cities in the world, and if course Tokyo has been winner in his past quarter Q four In comparison to the big city's.

00:10:00: From the rest of the world Tokyo had whopping at sixty sixteen point five percent growths in terms of rent.

00:10:10: Sorry Okay now it's back.

00:10:17: Yeah, so the growth rate has been leading among all of the international biggest city in the world.

00:10:24: That's a very healthy and stable market.

00:10:27: In terms of rent growth And also in terms of transaction volume.

00:10:32: Tokyo is second right after New York City.

00:10:37: The inflow for from the whole year was about twenty eight billion US dollars.

00:10:45: So that's a good trend to follow.

00:10:47: All the biggest investors in the world, they're pouring money into Japan because it knows that Japan has a good market.

00:10:53: if you look at the trajectory is going upward so meaning its already going through this bottom and starting keep growing.

00:11:05: And also as landlord we know one of the headaches are you have deal with tenant whereas in japan One my favorite part was that you had this rent guarantee insurance where it's hard to find anywhere else in the world, meaning the tenant has to buy insurance.

00:11:25: if they ever stop paying.

00:11:27: The insurance company will pay landlord.

00:11:30: so this almost looks like a guaranteed payment for an insurance policy.

00:11:34: make sure our landlord gets paid no matter what?

00:11:38: So that as a landlord you're very assured whereas on US If You've Ever Been A Landlord Yeah!

00:11:46: Sometimes even your tenants stop paying you.

00:11:49: You still have to pay them, move out of their house and even more to just leave.

00:11:59: That's that Alright.

00:12:01: next Where do I find deals in Japan?

00:12:05: In terms of locations or websites?

00:12:09: Here it is The rule of thumb is don't buy anything that you heard the name such as Shibuya or Shinjuku, those are super-super central Tokyo area.

00:12:21: Those probably not cash flow anymore because it has become too expensive.

00:12:26: so what we need to do is buy something that in somewhere the Tokyo twenty three word name you never heard of such as Katsushikaku or Adachiku or Otaku.

00:12:40: those areas outskirt of the Central Tokyo Area still have some land that's available and also at reasonable price you can purchase.

00:12:50: And still cash flows, as well has potential good capital gains.

00:12:57: So those are the Oscar area we should be looking if your goal is for looking for investment property.

00:13:03: But of course If you look for a primary then it doesn't really matter right.

00:13:07: just where or what do they want to live?

00:13:15: Also as to website When I first started looking, I went through all the websites.

00:13:20: like at Homes or Sumo there are Nifty's and Home.com And also as well for apartment building investment There is a couple of major website like Cambia or Lakumachi.

00:13:32: Those are all areas that you have to go on every day To look for deals.

00:13:37: In the end it got really tired.

00:13:38: so i asked my friend to build a website For me which combined All of the website into one.

00:13:44: So whenever its No matter if you want to look for your personal or vacation home, our investment homes.

00:13:54: I have it all in the one website right here, Sequoia Real Estate.

00:13:59: So we divide into two sections.

00:14:02: One is if you're for a personal or like vacation house use this as one section.

00:14:07: Or If You are looking for an investment property there's another section For only rentals.

00:14:21: Next, what type of property we should be investing in Japan?

00:14:24: There are so many different types properties like standard loan homes or condos.

00:14:30: Some houses doesn't even have ownership.

00:14:32: you just own the building and don't own a land So What type should I invest it?

00:14:38: Or should i invest in long term rentals or short-term rentals ?

00:14:42: I think Shu already covered this in his presentation whereas if Investing Airbnb short term you have to be really Looking through all the rules, especially for Tokyo.

00:14:54: There's so many different rules For a different ward.

00:14:58: some word only limit to one hundred eighty days operations and Only on weekends.

00:15:05: So we really have to call the municipal office To look up whether this is a good place to operate Airbnb or not.

00:15:13: Whereas compared to short-term A long-term and monthly rental could be very simple.

00:15:18: There's no restrictions on where you can do a long term rental or midterm rental, as well.

00:15:25: there is no tax on the total rental income so that's one of the benefits for having a long-terms rental whereas short-term rentals have to pay all sorts of taxes such as hotel taxes and also sales tax consumption tax in the short-termed rental income.

00:15:45: Next will be management need.

00:15:47: For long-term or monthly rentals, the management needs is very minimal if you have a good property manager.

00:15:53: usually don't even spend like twenty minutes per month Whereas for short-term rentals, even though you have a good property manager sometimes you had to manage the manager because there are so many decisions that need to be made.

00:16:06: Like what if your tenants has some noise and they were complaining?

00:16:10: They call it police officer?

00:16:11: then you'd have to deal with them when they come to complain or something broke or an incident happens on site.

00:16:19: as owner would decide those things on behalf of managing their property managers.

00:16:26: Also, from cash flow purposes long term and midterm is more stable whereas short terms can be very variable.

00:16:35: And also for particular areas the government still has ability to decide even though this area they allowed Airbnb.

00:16:44: They can ban Airbnb just by implement municipal policy.

00:16:49: so there's a risk Even though as Airbnb short-term rental is operable now, it can be stopped by the government tomorrow.

00:16:59: You just never know.

00:17:01: Also in terms of vacancy risk long term rentals are very stable.

00:17:05: Very low vacancy typically in Tokyo twenty three.

00:17:07: worse The vacancy is only around like five percent or so whereas for a short term the vacancy varies a lot really depends on season and if there's any Sorry Okay here he's back Okay.

00:17:31: So for next, when we think about long-term rentals there's like different type of properties right?

00:17:37: Do you want to buy a single unit studio or do I wanna by one bedroom or two bedrooms three bedrooms?

00:17:44: those are the options that we have to look at and also in terms of deciding which room type has best profitability.

00:17:53: if they had to look other geographic how it fares into decade or so.

00:17:59: So here's a chart published by the Japanese government, there is a trend for single person household.

00:18:07: it's growing quite a lot in terms of absolute population and also in terms if their percentage off the household.

00:18:17: both of them are on an upward trend.

00:18:20: that tells us the single occupancy studio type probably be one of the room type has most demand in next ten years.

00:18:36: Also, Tokyo had seen net influx of six to five thousand people mainly young workers.

00:18:43: they're from regional perfectures for corporate jobs.

00:18:47: also a lot foreigners come into Tokyo looking at jobs usually services industry.

00:18:54: so we can see huge demands for studio-type units And those are the types that's easy to get bank financing as well.

00:19:09: Okay, next we're going talk about financeable properties.

00:19:12: not all properties of financeable.

00:19:14: so number one The easiest to get financing is long-term rentals.

00:19:21: It could be condos or apartment buildings.

00:19:25: Bank really prefers a long term rental because it gives them Stabilities So they can underwrite based on their income if the property is gonna bring in.

00:19:34: And next, the building itself has to be young enough meaning under ten years or younger.

00:19:42: If it's too old then book value for wooden structures is only twenty five years.

00:19:48: if its too old a bank would not give you much value than wouldn't get any financing out of that building.

00:19:56: and third It had probably been near major stations meaning less-than-ten minutes walk or fifteen minutes walk with bigger terminal station.

00:20:05: There's another requirements.

00:20:08: Lastly, it has to be rebuildable located in the major metropolitan areas with a stable rental demand.

00:20:15: Those are basic requirements.

00:20:17: The bank will look at their property.

00:20:20: So we want make sure that your property fits this description.

00:20:25: Then would easy to get back financing because not all properties are finance-able Alright.

00:20:33: lastly I think everybody is very interested.

00:20:35: how do you get along as a foreigner?

00:20:38: In addition to the property itself, we also-the bank will look at your income level.

00:20:46: So from a foreign source income that annual income should be somewhere above fifteen million Japanese yen.

00:20:55: or if you don't meet this income test You can make these liquid net assets requirements.

00:21:03: usually is If you can produce bank statement or any liquid as stock brokerage documents showing that we have more than fifty percent of the purchase price in your bank account, then a bank will also be willing to loan it.

00:21:19: And off course.

00:21:20: come up with forty-percent down payment.

00:21:23: That's one of our biggest hurdles for most foreign nonresident borrowers.

00:21:30: Lastly We need local person and representatives because the bank requires that.

00:21:37: it's not required by law.

00:21:38: You can still be local directors for your own company, but you need a local person as representative so the banker could call them and have this local person come into office to sign documents on their behalf.

00:21:53: So all of the loans in Japan loaned foreigners are based off property itself meaning they're non-records.

00:22:02: If anything happens with you don't pay back The bank will just focus on the properties and you don't own anything.

00:22:15: All right, next I'm going to talk about why do we use copper entity?

00:22:20: What's the benefits of using a copper entity?

00:22:22: structures?

00:22:24: Number one is biggest for inheritance tax plannings.

00:22:28: so if used copper entities whatever happened to you can pass it out very easily to your children especially have multiple of them, whereas if you're holding a personal name then your going to be in trouble because Japanese inheritance tax could very heavy.

00:22:48: And next is off course for text saving.

00:22:51: If use the corporate entity You've got very broad business expenses are allowable Whereas hold it under your personal names only the expense related to your property itself such as property tax or any acquisition cost can deductible Nothing else.

00:23:11: All right, Dave just told me that I want to get five minutes left.

00:23:16: so here's what we can help.

00:23:21: Okay Yeah So here is how it can help.

00:23:24: We can help you source a deal and then we can also help your finance in it And we could also help you manage the property and That's really a successful way to become passive real estate investors okay?

00:23:39: That's it.

00:23:40: Thank You everybody.

00:23:45: Thank you, Alicia.

00:23:47: We will now have a

00:23:57: few minutes of Q&A.

00:23:58: so if you raise your hands... Go ahead.

00:24:00: So this is for questions okay?

00:24:02: If you want to introduce yourselves or your projects there's the break room for that.

00:24:09: Real quick

00:24:10: There's no difference.

00:24:21: Sorry, could you using this make for the Q&A because that one is not connected to the stream?

00:24:28: Okay So can you just repeat her question?

00:24:31: oh yeah for other people thanks

00:24:32: okay so I'll repeat The questions.

00:24:34: so the question was Is there any difference between the borrowers who are already residing in Japan or the boroughs residing overseas and never come To Japan?

00:24:44: but answers if there's No Difference It doesn't matter whether you live overseas, never come to Japan or if your living in Japan already.

00:24:51: The requirements is going be the same.

00:24:56: My question is

00:24:57: Sorry I think this gentleman was first sorry about that.

00:25:00: This is

00:25:01: the microphone.

00:25:07: Alright she said.

00:25:10: She said If you're a foreigner You pay forty-to-forty five percent down payment.

00:25:17: Japanese person pays zero.

00:25:22: Okay, okay yeah the question is Is it fair for us to pay forty-to-forty five percent?

00:25:29: For foreigners to be forty four or fifty five percent and The foreigner at end of Japanese pays zero down payment?

00:25:36: But we why white?

00:25:38: is that Fair?

00:25:39: is not a law?

00:25:41: Yes That's a lot.

00:25:42: is that fair?

00:25:43: is that discrimination To Us Foreigners?

00:25:47: Oh, that's a great question.

00:25:48: I think it is not distribution

00:25:50: at all because

00:25:53: those are different types of loans right?

00:25:55: As Japanese residents you can borrow on your credit meaning you have in-country income and also your credit as source for the payment whereas foreigners we don't even have any foreign income to Tokyo.

00:26:12: All the bank can rely on building itself where.

00:26:16: that's why they require you to put more down payment.

00:26:18: This is a totally different loan product,

00:26:20: so... Exactly

00:26:27: yes

00:26:28: yeah okay folk Alicia has moving through the breakout room.

00:26:30: if you want have a more interactive discussion we can do it there later.

00:26:43: folks we get.

00:26:44: can we please give Alicia her time to answer questions here and We Can Have The Discussions In Another Room After The.

00:26:49: After The Presentation Please

00:26:53: All right, we good.

00:26:55: Okay awesome Thanks.

00:26:56: Hey.

00:26:56: so Alicia I just want to refer.

00:26:58: I'll be quick.

00:26:58: i wanna refer you.

00:26:59: slide okay?

00:27:00: So you mentioned

00:27:00: long-term rentals.

00:27:02: simple not tax for the rental income.

00:27:04: can You elaborate on that and how Long is a rental need To Be rented in order to be qualified as their long term over?

00:27:12: Oh yes, thank you for the great question.

00:27:14: Thirty days or longer that will be qualified as midterm long-term rentals and those rental incomes don't have to pay consumption tax on it whereas short term rentals need to pay a consumption tax.

00:27:27: You had to collect from whoever books in then remit them into government which is another cost.

00:27:37: It's sort of been my understanding that the standard form of contract for a tenant is once they're in, they can live there their life.

00:27:46: They kind have this guaranteed right to be able continually renew at not much of an appreciated rate.

00:27:53: Do you see changing in Japanese tenancy laws?

00:27:58: Are property management companies now able write different contracts and allow for increasing rent over time?

00:28:06: Yeah, that's a great question.

00:28:07: It has been the assumption in Japan once you're in your locked with old rental and landlord cannot raise rent which is not true anymore especially this smaller single studio type we have.

00:28:21: People tend to move every four or five years also because they're young and single.

00:28:27: Once you have a girlfriend, they want to move into like one-or two bedroom right?

00:28:31: So with this type of studio people tend to rotate a lot faster than the bigger units.

00:28:36: that's why we prefer these kind smaller units where as soon as the one tenants moved out We are going raise rent immediately Because currently in market The rent has been growing up pretty steadily And at a pretty big percentage, so sometime we can see like even ten percent of jump when one tenant moved out and the next tenant move in.

00:28:55: That has been the norm in Tokyo.

00:28:57: now

00:28:58: It's also not entirely correct.

00:29:01: They have legal leg to stand on if they want say that you're unreasonably raising their rent or unreasonibly asking them to move out because laws are tenant oriented.

00:29:10: But there is justified reason for either then option definitely To avoid this entire situation, you can also offer them compensation of what it'll cost to move out which is normally somewhere between six-to ten months worth rent.

00:29:24: We've done that many times and we haven't had that many issues.

00:29:26: Do we have other hands?

00:29:28: Other questions in the room?

00:29:29: Yes?

00:29:33: Pardon Hillel I think for information For people who already have loans with real estate How does that affect the ability buy additional buildings like?

00:29:41: how many Can actually acquire And how do banks look at that?

00:29:47: Yeah, so the first one I would like to ask is do you have income in Japan?

00:29:52: Okay yeah.

00:29:52: So your are one of the exceptions.

00:29:55: If you have incoming in Japan it really depends on how much income and assets ratio, right?

00:30:01: That's a different category.

00:30:03: And you have a lot more options to get financing.

00:30:05: You can get probably one hundred percent financed if your debt-to income ratio or debt asset ratio are good.

00:30:12: Different banks have different underwriting standards But we're only talking about non resident loans.

00:30:18: It is pretty much limited.

00:30:21: Only borrow sixty percent of the purchase price.

00:30:26: the max amount you can borrow would be somewhere around, so a hundred million Japanese yen.

00:30:31: Oh of course yes!

00:30:36: We could move over to the next

00:30:44: room yeah?

00:30:45: Great presentation.

00:30:47: I like your idea of living in the twelfth unit place but i don't want to live on one K with my family at four and a dachiku right now.

00:30:56: So do ever see since you've researched it Do You Ever See Like A Big Unit On Top Of rental Units Or that kind of a thing?

00:31:04: Yeah,

00:31:04: definitely.

00:31:05: We have one of the deals we currently have is it has twenty-four units.

00:31:11: Those are bigger units and owner can combine two or three units together And you could live there for free and they'll have the rest of the twenty units.

00:31:19: in finance.

00:31:24: No breaking walls because all the deals we do is ground-up development.

00:31:27: if you early enough We can talk to the developer.

00:31:30: You just customize it for your.

00:31:34: Sorry, what was the other course?

00:31:35: somebody with us and can I ask a question here?

00:31:37: Was that some lady?

00:31:38: yes

00:31:41: We are resident here but i have four property.

00:31:45: they come income okay And business too different.

00:31:48: They can work with their bank.

00:31:50: that yeah definitely If he's all paid All cash, right?

00:31:55: Yes all cash.

00:31:56: Yeah definitely yeah we can do.

00:31:57: it's like a take-out loan basically Like my property could be warranty for there.

00:32:03: Exactly yeah collateral for the loan.

00:32:06: Let say your properties are worth one hundred dollars.

00:32:09: then typically bank may not be willing to loan you fifty percent of the kind value of the property.

00:32:16: It really depends on the proper locations and... I get five hundred thousand yen per month.

00:32:23: The rent.

00:32:26: It's less on the rent is more like value of property itself, if you want to use it as a cloud room.

00:32:33: So there are different really underwriting standards we can talk about later in the breakout room.

00:32:39: Okay okay thank-you Thank-you for each bank has their own underwriting standard.

00:32:45: Thank

00:32:46: you.

00:32:47: Alicia will be in the breakout room following this presentation, just about a few minutes.

00:32:52: One more question we can take.

00:32:54: I saw another hand here somewhere.

00:32:55: no any questions?

00:32:56: In the stream.

00:32:58: Let me just have a quick look Just to quit one.

00:33:02: sorry Alicia No okay thank you very much Alisha.

00:33:11: We've got five minute.