00:00:00: Some people love it, some people love hanging out and having a chat.

00:00:02: And other people like you know that's weird that your here.

00:00:06: So let me check in and go away.

00:00:08: Yeah

00:00:09: why are ya hear?

00:00:10: You know so...

00:00:13: Seven other members of my family hiding around the corner.

00:00:16: Well

00:00:17: no but I've spent done a lot investment in security.

00:00:22: well i'm getting subsidies aswell for cameras and security systems.

00:00:43: Either folks and welcome or welcome back to Nippon Trading International's Japan Real Estate Podcast.

00:00:48: I'm your host, Ziv Nakajima again And this podcast is brought you among others by Emil Gorgies of realestate.jp.

00:00:55: He's a Tokyo real estate agent who specializes in serving international or mixed nationality families Who are looking for the perfect family home.

00:01:03: So, Emile is an Australian.

00:01:04: He's been living here in Japan for over two decades now and for about half of that time he has been buying selling and managing real estate properties In Tokyo on behalf his own family And a great many happy clients!

00:01:16: And if you're a regular listener of the podcast, You probably already know him from our JREP The Japan Real Estate Experts Panel Sessions.

00:01:30: Which means that your all ready aware of fact That the man is an absolute fountain Of wisdom on all things related to real estate in japan and In particular to family homes ,the greater Tokyo metropolitan area and mortgages.

00:01:44: Most importantly he's incredibly generous with his time and advice which Is more than happy To provide at no cost or commitment to anyone asking.

00:01:52: So If u've been thinking about buying your home in Tokyo but you've been sitting on the fence for a while or Hi there everyone, and apologies in advance if I'm sounding extra exhausted today as most of you are probably aware the World Cup is now on with matches being played in very outlandish hours of the night.

00:02:21: Japan time?

00:02:22: Very inconsiderate really.

00:02:24: so yeah this me for next month.

00:02:26: a bit get used to it.

00:02:27: Nevertheless we do have an interesting episode.

00:02:31: I got together with JREP members, Emil and Tracy for a chat.

00:02:35: A few weeks ago specifically centered on the topic of short-term stay properties which are of course Tracy's expertise And she filled us in some new developments in the market including stricter compliance checks how compliance now works For various types of short term stays licenses available In Japan How to avoid getting into trouble With authorities who Are getting a bit stricther in their policy and monitoring Of these licences which then led us to a chat about how to work with short-term stay property management companies and how do make sure that they're not getting you, the property owner into all sorts of trouble.

00:03:10: We then rift a bit about which properties work better for short term stay operations?

00:03:14: The current trends in their current guest profiles for the industry hybrid strategies for combining these types of properties And particular the MINPACU Which is more casual short term state license which only covers half year at best With monthly rentals.

00:03:29: We also discussed the difference between hands-on, high touch hospitality versus fully automated properties and what the host's duty of care means.

00:03:39: What are average yields for various property types?

00:03:44: what going for high yield means as far as friction and extra hassles go, how to strike a proper balance between the two really.

00:03:52: And speaking of balance we also spoke about How To Balance Yield & Capital Growth Potential.

00:03:57: Why Different Strategies Work For Different Investor Profiles At Different Stages Of Their Lives Or Investment Cycle.

00:04:03: We Also briefly touched on Migrant Worker Housing As An Investment Strategy the different types of issues that what can expect with different kinds of tenants and also on highly specialized property management companies in services, for example share house operators.

00:04:18: So real nice deep dive on all topics related mainly to short term state property operations but also within outlook on other tenant investment types.

00:04:26: have a listen.

00:04:27: I'll see you again On The Other Side.

00:04:29: Okay All right.

00:04:30: so back Back In The Settle Hopefully With A Bit More Regularity.

00:04:34: The Japan Real Estate Experts Panel.

00:04:36: It's back in session minus Blanka and Matt, but we can't have everything right?

00:04:43: Okay.

00:04:44: No it's like um...it's like trying to get together Like when you have little kids There's always one kid out of the seven or eight that is going to be sick And their household cannot attend.

00:04:52: So I think they're like us.

00:04:54: One of them who has got something else on Is about getting all of us at the same time.

00:04:59: When do door needs six months notice Which ends up being there.

00:05:03: That why i've bought a set menu calendar blockout, and I'm eager to be regularly recording.

00:05:13: So i think yeah... Yeah

00:05:17: we're back

00:05:17: trying because

00:05:19: there's so much happening in real estate right now in Japan um and each of us know what we know in our own little areas.

00:05:26: so it's great to collaborate and that I learn as much from you guys From as hopefully I'm giving value to back.

00:05:36: So

00:05:37: how hell?

00:05:37: yeah Yeah, but speak speaking of that.

00:05:40: what's on your plates this week?

00:05:42: This month

00:05:44: um onboarding a couple new properties And i'm working with so potential client who has had a bad run With A property manager Kandi who's been doing the wrong thing and doing some naughty things.

00:06:02: And she is uncomfortable with how they're looking after her right now, because I'm by-the-board...I mean i know what rules to break..and I won't do it!

00:06:15: Because its actually quite analog of this system.

00:06:18: but digitization is coming and flying under the radar with doing some sketchy things.

00:06:26: If anyone's listening to this, their property manager may be booking weekdays when you're only supposed to be booking out weekends.

00:06:34: that like... You'll get caught soon.

00:06:37: so just I don't want anybody to be caught but it's coming.

00:06:43: up until now there hasn't been.

00:06:48: I don't think there's been the skill within the ward offices to cross check, um...to cross-check the calendars that have being pushed out by the OTAs and matching it up with reports that property managers are submitting every two months.

00:07:05: And so they're just taking on a system but too many people have been exploiting.

00:07:14: things are going to not be fun for everyone.

00:07:18: So it's tightening down, Toshi Maku have already tightened down and other municipalities are coming along.

00:07:29: so yeah you just have to be on top of the regulations or what is happening making sure that your following the rules And if this happens then find yourself Getting questions or you maybe have made a mistake.

00:07:44: Oops that happens.

00:07:46: They will give you grace if you like Sort of say look my bad I've made a mistakes.

00:07:52: If you ignore it, if you ignore them knocking on your door and saying please explain Then they will cut like You know Uh-you will get yourself into trouble.

00:08:04: And this has happened.

00:08:05: but for this is happen from It's been in the news and i spoke about at last At the at The Last Summit that yeah, it's you are not really You know your buying a compliance pathway.

00:08:19: We're Not just buying real estate if you'll If you're going down the road of short-term rentals.

00:08:23: so Yeah things are things are tightening up Things

00:08:30: are tightening out.

00:08:30: yep A meal I think did we lose a meal?

00:08:32: Oh he's on a call.

00:08:32: He says is on the

00:08:35: call.

00:08:35: all right yes So That's what i'm doing.

00:08:38: i've been onboarding some new customers.

00:08:41: I'm still very bullish about, you know the market.

00:08:44: i'm seeing a lot more people getting licenses in Tokyo but A lot at the lower end and so prices are dropping.

00:08:54: So um I'm pushing my properties to be bigger and better And above-the-fray Um and having a client

00:09:04: demand wise You were always telling us that family or group size properties.

00:09:09: There's just less of them out there, so they tend to perform better.

00:09:12: That's still the case right?

00:09:13: Absolutely and I'm still getting people asking for oh we've got three families traveling together especially around ski season when all the Australians come into town with their three families and grandma or grandpa are tagging along.

00:09:28: So that is a segment.

00:09:33: There's.

00:09:33: I'm seeing a lot more growth in the digital nomad space.

00:09:37: So people who are booking month, more monthly places.

00:09:40: so People that are looking multi-month And you know their strategies in place on how to You know and how to attract that demographic?

00:09:50: Um If you need to know more about that um, you know this i'm available.

00:09:56: i'm not at woman of mystery.

00:09:56: if you want To ask me questions i'm here.

00:10:02: Yeah, so that's what I'm seeing as a broad stroke to the market.

00:10:05: but there are lot more smaller places.

00:10:10: Whole buildings going in with one K, two person... So it is just pushing price down and that's the market forces!

00:10:20: It has

00:10:22: got

00:10:23: to be better!

00:10:26: We got at least a couple of clients, one of them actually you refer.

00:10:29: Thank you for that.

00:10:30: who are looking at exactly that?

00:10:32: it's more one K-one LDK buildings that they can utilize as short term or hybrid shorter monthly rentals whatever the licensing will allow.

00:10:41: yeah

00:10:42: Which city?

00:10:44: One of them is looking in Osaka.

00:10:46: The other one is open to all big cities but would love it to be Sapporo if they could.

00:10:52: so then They use once and awhile when they come over.

00:10:55: Yeah.

00:10:56: No, I think that's a really good... A lot of my places are all over the place right?

00:11:01: So there is an operational cost in supporting guests because we still meeting most our guests.

00:11:08: We're implementing remote check-in option but find high touch hospitality.

00:11:16: Some people love it and some don't.

00:11:18: so having this system where if you can choose They don't want to meet us or they come in at two o'clock in the morning, but we still feel that high-touch hospitality side is a value people do not really appreciate until they experience it.

00:11:38: You have answered all of our questions!

00:11:40: We can help you and like...we feel where there are soft landing in Japan especially if its their first trip.

00:11:51: But yeah, we are moving a lot more to remote check-ins because that's what... We're getting the feedback from people.

00:12:00: It is unusual globally for this to happen.

00:12:04: so there ... People want the option!

00:12:08: Some of you love it.

00:12:09: some people love hanging out and having a chat.

00:12:13: That's weird that you're here.

00:12:14: So let me check in and go away.

00:12:15: Yeah,

00:12:17: why are you here?

00:12:19: You know?

00:12:21: so seven other members of my family are hiding around the corner

00:12:26: but I've spent a lot of investment in security.

00:12:30: well i'm getting subsidies as well for cameras and security systems.

00:12:37: The other thing that's coming in is the taxes, so to be boring but I've had to implement a per person-per night tourist tax on my ryokan license places.

00:12:52: So if and this is an icon you know... This is the law we have gone into That.

00:13:00: If You Have A Ryokan Licence And You Are A Registered Tax Collector any stay where per person, it is over ten thousand yen a night.

00:13:14: There's one hundred-yen per person per night tax that is payable and so we have let us just give the example of.

00:13:26: you know I've got places at fifty thousand a night but there are six people staying.

00:13:32: That's not.

00:13:33: that's not a taxable event because per person it is under the ten thousand yen.

00:13:39: So, its only when the nightly rate before the travel agency fee.

00:13:48: so what the guest is paying?

00:13:50: if that is over ten-thousand yen per person per night then there the rate that they pay per person, then the taxable event is two hundred yen.

00:14:11: So it's been a fun exercise to implement that as line items through our system

00:14:18: very polite term to use.

00:14:19: I was thinking of something else raw

00:14:22: years.

00:14:22: and Then you know As per usual in Japan It's a fairly onerous like reporting systems.

00:14:28: so we're now reporting And so we are reporting April the April reports and then it's payable at the end of May, which is when we're recording this.

00:14:38: So anything that's a taxable event that through April is then due at the End Of May.

00:14:47: but fortunately We don't need to fax things in anymore.

00:14:52: It can be done electronically And your payment Can Be Done Electronically as well.

00:14:59: so That'a massive improvement Massive improvement.

00:15:01: so

00:15:04: yet we interrupt this broadcast to tell you about Tokyo family stays.

00:15:08: There are short term rentals company in Tokyo and they offer a home away from home experience which is just perfect for remote working quarantining if that's the thing or if you just need somewhere quiet together way from the world, they offered variety of options for families corporate relocations even if your simply transitioning between homes in Tokyo.

00:15:28: properties super comfortable Tastefully furnished fully equipped with all amenities and they accommodate up to ten people.

00:15:34: So really the only thing you'll need to bring with you is your toothbrush, maybe change of clothes.

00:15:39: They come with fast unlimited wireless internet Dedicated workspaces in fully-equipped kitchens And there just a delight to stay in.

00:15:47: fantastic alternative.

00:15:48: two Japanese business hotels Which if you've ever stayed on one.

00:15:52: You probably know their tiny their noisy Fine for a night or two.

00:15:55: if you're on your own, but longer term.

00:15:57: Or with the family You'll probably feel you are in jail so very quickly in Japanese business hotel.

00:16:03: So If want to give yourself sense of space and freedom by renting real home With comfortable Western beds, including all the necessities like baby bedding children's toys high chairs etc.

00:16:13: You definitely want to reach out to Tokyo family stays.

00:16:16: They've been at it for over a decade.

00:16:18: There are fully licensed mean paku or short-term stay operator and as a special bonus for our viewers and listeners they're also throwing in a breakfast basket upon arrival For anyone who books and mentions that Japan real estate podcast Or NTI?

00:16:31: And not only for guests.

00:16:32: if you're a property owner you've got an investment property That you wanna tweak for higher profit or a holiday home that you want to rent out when you're not using it via short-term stays, drop them online today see how they can help you maximize your property's income.

00:16:45: And again as special bonus to our viewers and listeners there are also offering free audits of your existing short term stay listings without any obligation whatsoever.

00:16:54: so feel free reach out at TokyoFamilyStays.com.

00:16:58: well worth the visit!

00:17:00: And again, if you're in the market for a family home or around the Tokyo metropolitan area.

00:17:04: Emile's your man don't be shy to reach out to him as well at salesatrealestate.jp.

00:17:10: and now back to the podcast.

00:17:13: Good luck

00:17:13: with remote checkings!

00:17:16: I'm usually absolutely fine with remote checking but recently i stayed in Korea not Japan You know, one of those huge high-rise buildings where half the building is kind of segmented off for short term stays completely unmanned.

00:17:31: And then middle of night just two drunk Korean guys were like One AM going at a door with their key obviously in wrong room and we're trying to talk them from behind the door Like hey you are in the wrong room.

00:17:46: they start cursing in Korean.

00:17:49: We tried get some help.

00:17:52: You know took fifteen minutes to get onto the chat with a management company and then they were like sorry we don't have anyone in the building at night.

00:18:00: Hit us up again.

00:18:01: if it happens, I could be killed by that

00:18:04: exactly.

00:18:06: you see that a lot actually with what i was saying earlier in there buildings that are low end so the whole building becomes become a place that is hands off remotely all which is fine until it's not.

00:18:23: Until we do get that problem, so yeah... It is usually sort of private equity companies coming in and doing that like hiring a company with low margins or lower standard care.

00:18:41: So some municipalities don't allow this to be unmanned right?

00:18:46: Ryokan, you do need it and again depending on the coup I've just done this exercise in Taitoku.

00:18:52: For Taito-ku if you have a ryokan license You do need someone.

00:18:57: twenty four seven for Minpaku It...you Do not monthly rentals?

00:19:04: So yeah monthly rent also no.

00:19:07: but So a building that has it depends on the licensing, right?

00:19:13: If everything is a mimpaku in the building then there's no need for twenty four seven.

00:19:18: But if its classes of Yorkon which again you get three sixty five There are all different rules and so this It's a different law.

00:19:26: It's covered by a different part of The build to different Building Code And You know You know, in different restrictions on recycling bathwater.

00:19:40: Different restrictions on gas, you know, gas, yeah, gas kitchens so it's at all comes down to fire and duty of care.

00:19:52: So that all of these regulations the sort of thing oh what's this about?

00:19:55: Why is it so?

00:19:56: why as its so finicketing then when boil it down.

00:19:59: It's all about duty of care and something has happened that they need to regulate for, so sometimes...

00:20:10: The rules in ... it sounds like a lot.

00:20:12: those rules you're mentioning about Minpaku and short-term stay seem quite similar even at earlier days when I had a bunch of properties.

00:20:23: but definitely the Policies came out for the hundred eighty day rule.

00:20:33: It's each platform will cap you at a hundred eighty days on their system.

00:20:36: But people get away with it by put doing in an Airbnb and booking comm and then they stack days.

00:20:42: So one platform may say your limit, but another platform.

00:20:45: We'll still take the bookings.

00:20:47: Um, but yeah I think now we're And it used to be very much manual.

00:20:51: if you would get complaints Then there were manually The ward office would mainly look at your data.

00:20:58: so what?

00:20:58: You're reporting what Airbnb is reported, what bookings.com has reported and say oh actually there's a mismatch you've gone over the limit.

00:21:07: but that is definitely I think coming to an end

00:21:11: Definitely Coming To An End

00:21:12: because it has been self-reporting

00:21:13: Yeah It Has Been Self-Reporting And so yeah.

00:21:18: So i run a hybrid strategy with my data tools.

00:21:23: Actually have full time revenue manager.

00:21:24: now who does this for me?

00:21:26: cause its complex Anything that it changes the availability.

00:21:31: So if someone is looking at dates, four months hence they're only able to see availability of a monthly stay.

00:21:40: so They book them on please say but then I've got some special rules Some rules based in to say well If there's less than a monthly day available and those days become available for shorts, under thirty-days.

00:21:56: And then of course if it's closer to the date and there is still availability in their calendar There are changes.

00:22:05: so what I really do Is try get monthly bookings first.

00:22:12: That a growing segment.

00:22:14: The prices For monthly booking that you get on Airbnb So thats a licensed property Is nearly about You know, fifty percent more than what you would get if you ran it.

00:22:26: If he tried to get private monthly bookings through a website for example so I the yield on monthly stays.

00:22:40: So monthly stays are way less work than short-term, for sure.

00:22:44: But if you have that monthly stay then it's not counted in the hundred and eighty days.

00:22:49: And so this my strategy has been let get those digital nomads in first.

00:22:54: Let's walk them because they usually book well in advance.

00:22:59: These are professors Those people I get their min and lock em'in Then fill into gaps with a hundred and ninety days.

00:23:08: That is my strategy Of course, anything I can get on a real car license.

00:23:12: So i'm going to do because it's still It's high much higher yield for short term than it is even for hybrid monthly.

00:23:18: so We're all that year don't we?

00:23:23: Oh

00:23:24: I Don't know.

00:23:24: no manageable manageable hassle free yield.

00:23:27: Yeah

00:23:28: Yes yeah are you hit the nail in my head someone who knows exactly what like What High Yield Comes with Higher management overhead.

00:23:37: and Yeah, I'm

00:23:39: learning that as i'm scaling more like let's remove reduce some of this complexity shall we?

00:23:45: and i've got a lot have.

00:23:46: Got a lot of tools but i'm working with.

00:23:49: to

00:23:50: my perspective it's the case.

00:23:51: so.

00:23:52: You know, I can try to aim for seven eight percent.

00:23:55: Yeah We normally do long term rentals.

00:23:57: so yes i can try To aim four seven eight-percent yield but then?

00:24:01: I need to factor in the amount of time that i'll be spending every month to deal with it.

00:24:05: and you Know fine tune it and troubleshoot It and deal With things where i could spend that time.

00:24:11: Just looking For The next five Percent Deal right?

00:24:14: Is

00:24:14: That Seven Percent Yield on On Your Things or What your what you're getting for your Clients?

00:24:19: Both okay because our clients Clients get charged, you know a fixed amount per month if everything is routine and going according to plan.

00:24:28: But every time we have to deal with the special issue.

00:24:30: We have to charge them by the hour.

00:24:32: So of course whether it's my time that I'm spending on it or clients time That he's paying for its same story.

00:24:39: Yeah, I think Tracy i think what zip was referring to when they said When he said his properties this I think once he owns himself Yeah You want to get about that.

00:24:50: seven, you know I'll give you some numbers.

00:24:52: in Tokyo We have a property now for sale.

00:24:55: It's it say tenanted is basically a zero headache building.

00:25:00: its in Azabu Higashi Azaba right today Maybe eight year old building?

00:25:07: It's a twenty six square meter studio apartment the one room apartment.

00:25:14: Its on assembly.

00:25:15: so the company bought at I'm sorry a company rent and they just care.

00:25:20: so the rent is almost guaranteed, and They have leased it out to other

00:25:26: Master.

00:25:26: It's a master list around.

00:25:28: yeah

00:25:28: exactly Yeah The masters are determined that they use And That gets?

00:25:33: Its about of four percent.

00:25:35: three point eight percent yield Is what we're trying to sell it at and that's Just.

00:25:39: you buy like one You can get about fifty percent financing on her even if your non-residents Like again loans for example um...they would Finances property.

00:25:48: they've already assessed it.

00:25:49: They give about fifty percent financing.

00:25:51: It's a think we're looking at about forty five I Think like forty-five million yen.

00:25:57: and that And

00:25:59: the master list of their pants, so it's an arbitrage right?

00:26:01: So there The someone who has got the master lease what are they then doing with it?

00:26:06: Are

00:26:06: you subletting

00:26:07: into

00:26:08: this?

00:26:08: Yeah Yes how it looks right is the The owner whoever buys it.

00:26:13: he's going to get about one hundred twenty five thousand yet a month.

00:26:16: That's their lease agreement with the Marsalis holder, right?

00:26:20: The Marsalis Holder I think is renting it out for about a hundred and forty-hundred

00:26:24: and forty five thousand

00:26:26: in a month.

00:26:26: As a furnished... No no just standard rental.

00:26:28: Standard Japanese rental Right!

00:26:33: It's not for any short term stay or anything like that.

00:26:37: its purely regular lease.

00:26:40: Okay thats

00:26:41: interesting i've never heard

00:26:46: of.

00:26:46: I'll explain what's very common.

00:26:47: I was playing with where this happens a lot

00:26:50: now.

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00:27:42: In japan it very common for salaried employees to come up Again, no longer in central Tokyo because they don't have the capacity for them and their building luxury.

00:27:50: But you've heard of like that one room property in apartment investment strategy to reduce your taxation for salaried employees?

00:28:01: The salary on a one-room mansion shut up as a Thai sucker.

00:28:04: So

00:28:06: it's basically... Like a salarying employee buy an apartment or one room apartments And depreciation would offset their income tax, right?

00:28:17: So they're in a financially better position.

00:28:19: It's an income tax reduction scheme and

00:28:24: it means you're sort of locked into working for that company forever.

00:28:28: though yeah oh no this is like because even if you change your salary employee Even If You Change you still get the tax benefits cause you getting employed.

00:28:35: so the income tax.

00:28:37: sorry do...you have an investment asset that's losing money on paper through depreciation.

00:28:42: yes

00:28:42: That depreciation reduces your income tax.

00:28:46: Yes,

00:28:47: that's how it works.

00:28:48: even if you change jobs the mechanism is still in place as long as you're earning income.

00:28:54: but It has a standalone asset Is not great.

00:28:58: because they say look we guarantee like If you buy this and be new building bought up And I built with just a bunch of one room studios designed exactly for this investment strategy.

00:29:09: Um,

00:29:10: and so if you buy it they'll say we guarantee the income at a hundred twenty five thousand in a month.

00:29:14: You're guaranteed that for at least five years.

00:29:16: So even if no one's there or et cetera There's no risk to you.

00:29:20: So it's really attractive for a lot of people And it can make sense for certain salaried employees.

00:29:24: However Now what do you have with these properties?

00:29:27: is because they are on a master lease?

00:29:29: That's fixed at that particular rent and you Can't kick the person out.

00:29:35: It's forever gonna stay kind of capped at that and this.

00:29:39: If you want to resell it for someone, the next person as well just has to accept the same conditions that is currently tenanted.

00:29:47: And because their small properties are not so attractive they don't really get much capital appreciation and they're sold at a higher yield.

00:29:55: You know now in Azabu usually this area A two percent rental yield Is what things were going for.

00:30:01: But these particular property like three point seven to almost four percent What do have to sell?

00:30:07: that kind of price in order to attract an investor, even though it's fifty percent financed.

00:30:12: But that's a headache free one.

00:30:13: if you just want to sign your name up and get three point seven two four percent rental yield on an asset that gets, you know, fifty percent finance, sixty percent finance then You can do that for someone who may be earning a lot of money and wants some depreciation expense over the next five years.

00:30:31: but That just shows that they're probably one Like, so it's stable headache free.

00:30:39: One of the highest rent you'll get in central Tokyo is about almost four percent and that's gross.

00:30:46: before anything then Anything less attractive from now which is an older building or further away?

00:30:52: I'm sorry.

00:30:53: No, anything That's more attractive because these one-room mansions are not overly attractive.

00:30:58: anything Which Is a bit larger or two three ldk It's gonna be under Three Under Two Percent.

00:31:05: So now a nice property that's forty fifty square meters is not going to be getting you over three percent rental yield in something like Iminatoku unless it's an old dump.

00:31:14: It's falling apart down, but yeah the The

00:31:19: new guys talk about Tokyo numbers all.

00:31:21: with three percent You're not gonna get over two percent.

00:31:23: We don't even have customers who come to Japan if its under five exactly.

00:31:27: so Like you think they do?

00:31:30: Think the riches isn't he?

00:31:31: uh the riches is in their ditches outside of Tokyo.

00:31:37: Sorry, not the riches or the niches is like.

00:31:39: I'm just trying to think about in the suburbs rural.

00:31:45: yeah if

00:31:46: i think anyone who's made lots of wealth from real estate it's all from capital growth

00:31:52: right?

00:31:53: In Tokyo for sure

00:31:55: absolutely!

00:31:55: Yeah in Tokyo right.

00:31:57: well anyone whose made significant money Without having to do a crazy value add themselves

00:32:07: without like, you know

00:32:08: Anton's good example.

00:32:09: Like those big they spend all their time and energy Renovating in doing the proper value ad.

00:32:14: That's different because your basically working at slave labor that you're working out right?

00:32:19: But in terms of be stand back and do very little Mm-hmm.

00:32:23: significant wealth has been in capital gains.

00:32:25: Thank You buy place for hundred is now worth two twenty

00:32:28: mm-hmm

00:32:29: Because I

00:32:34: was never.

00:32:35: you know you

00:32:37: know, for twenty

00:32:37: odd years that was never the case in Japan.

00:32:38: But it depends

00:32:38: on your definition of significant wealth too.

00:32:41: I mean we have a lot of customers who are coming here and they're happy with the passive five six percent before tax.

00:32:50: because um...you know..it's just a diversity play equity market or whatever they got in their home country.

00:32:58: It's not significant worth building, but it is definitely a stable and steady income stream.

00:33:03: Yeah I'm talking about sort of what the net dollar figure at end-of-a-decade right?

00:33:09: And capital growth where there are significant.

00:33:12: The top ones will be people who get from capital growth.

00:33:15: Yeah, I'm

00:33:18: more cash flow.

00:33:19: That's the thing i'm all like.

00:33:20: this is yeah it's a different and where i am It's all.

00:33:23: you know how much can i cash?

00:33:25: Like but that But the squeeze is worth to juice.

00:33:29: so because uu.

00:33:29: its not passive

00:33:33: at all.

00:33:33: So no your running in business.

00:33:35: But i know for myself For example um i would like You know i don't need the cash flow right now.

00:33:43: i have enough employment income that i can.

00:33:45: I don't need extra passive income on the side.

00:33:48: But if i know that's going to double in value, I can hold it for near zero cost or even comes out ten thousand and twenty thousand a month of out-of-pocket from me.

00:33:56: but I expect

00:33:58: yeah they

00:34:00: capital gains

00:34:02: then

00:34:03: I'm okay doing that.

00:34:05: And look this is not an unusual model.

00:34:07: This what most Australians are doing.

00:34:09: They're trying to abolish sales right now In Australia talking about abolishing their negative gearing.

00:34:13: Yeah, I

00:34:13: heard that there's a lot of big changes happening.

00:34:16: So

00:34:18: yeah for those who don't know about negative gearing it's when your loss from real estate investment can be carried over to employment income and reduce your employment income.

00:34:29: so if you are now interest rates is so high almost like most properties in Australia are cash flow negative because interests are higher people losing ten thousand dollars a year net On their property because of extra costs and the payments, but if they aren't earning a hundred thousand dollars a year income Then it goes down to ninety thousand.

00:34:51: So they are using They uh getting that tax break.

00:34:57: So it's actually very common.

00:34:58: Why do they do that?

00:34:59: Because in Australia commonly real estate values increase.

00:35:03: so then we need to take the negative hit If The negative cash flow because they expect capital growth on top of it.

00:35:11: And so the concept is not Strange.

00:35:15: and also if you're right on a if your ride on the tax bracket losing ten thousand could actually save You more than ten thousand in taxes.

00:35:22: If you write sit, if you sitting right on the edge of text bracket

00:35:25: That's exactly what they do in Japan.

00:35:27: Yeah

00:35:28: that why there are lots of property or in Tokyo at least?

00:35:31: That's why there aren't.

00:35:32: as I said This is exactly the mechanism for these one-room mansion.

00:35:41: The depreciation of the building, the net loss operating loss on the building will reduce your employment tax.

00:35:51: And that might be forty-fifty percent.

00:35:55: So you're saving forty fifty percent for every loss or that you make On their investment property.

00:36:01: But when you sell they invest in.

00:36:02: probably after five years Your capital gains taxes only twenty percent.

00:36:07: So he made fifty percent savings underloss And then pay only twenty percent taxation on the game.

00:36:13: That's their disconnect and that's where they make it which is why There you think who would buy a property at two percent yield?

00:36:21: Right.

00:36:21: It doesn't make sense when you can get five six seven percent in different prefecture.

00:36:27: Because for people whether tax benefit is higher, it's a no-risk risk Is purely on paper.

00:36:33: They get that benefit and he's very easy to resell a property in other right or in Minato coup or inshiotaku.

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00:38:37: so that I mean, i

00:38:50: love these conversations because they're like it shows you that there is no one right way to do anything.

00:38:55: Right?

00:38:56: It's

00:38:57: depending

00:38:57: on from where your perspective is Like.

00:38:59: You know its start.

00:39:01: Where are at?

00:39:02: well what the magic formula for making

00:39:06: a whole bunch of money?

00:39:09: Every conversation I have with a new potential client, it's what are your goals and exactly.

00:39:15: What should i be buying?

00:39:16: But what do you currently hold?

00:39:17: What are already invested in is more speculative or stable?

00:39:21: Is it diverse?

00:39:22: not... Yeah yeah

00:39:25: well what I find the common transition?

00:39:28: when people go from negative like It's okay to be at loss so they want it to be cash flow positive as they get close retirement.

00:39:36: I've built my net wealth And now that has a certain value.

00:39:40: But, I'm going to retire and stop working.

00:39:45: my income is gonna stop.

00:39:47: so i've got some stock in pension but also need cash flow positive.

00:39:53: I have

00:39:54: been talking with people who are exactly this position.

00:39:57: they're like okay well im kind of wanting to retire or even semi-retire a lot more money just

00:40:09: on the monthly basis.

00:40:11: On

00:40:11: a monthly basis, so I know in Australia.

00:40:15: but they co-living arrangements because of their housing crisis and everything.

00:40:23: that's actually very interesting asset class which is sort of similar to share houses here.

00:40:34: That's a very interesting model.

00:40:36: I have a client who has short term with me, but also he does make significant passive income from setting up this co-living, share housing mainly for migrant workers.

00:40:50: And it's a very good segment because he has a Very Good Property Manager who keeps that full and then... Because there tends to be little enclaves of communities or people from the same nationality.

00:41:01: It is a very safe clean and everything just ticks over.

00:41:05: so That an interesting asset class under the radar here.

00:41:11: It was a bit

00:41:13: of

00:41:15: boom.

00:41:16: There was a bit of boom pre-COVID, but I feel after that everybody is trying to avoid co-living shared areas again.

00:41:22: No it's because there are so many migrant workers coming in and the migrant workers have very difficult visa situations.

00:41:29: So they come here on low wages And also usually can't bring their families until we've actually been through training programs.

00:41:40: They're almost bonded with agencies for for twelve months to two years, and so they can't afford even go into a fifty thousand yen per month apartment on their own.

00:41:56: They've been banking illegally in some of our apartments like seven to a room!

00:42:01: Oh no, but actually setting up properties that are safe and clean.

00:42:08: There's a near the places where they have training programs or all of their factories working is an interesting prospect because you can buy big old house for good price, then you can spend a little bit to renovate.

00:42:29: To make it fit for purpose get a good property manager in and people like their month-to-month leases.

00:42:36: It's very good passive business.

00:42:42: You say that

00:42:43: I know

00:42:45: the word passive And i think myself The potential management over here...I have properties in Australia Like one of the, there's no lock to the front door.

00:42:58: There is not key to a front security door and this never been on like.

00:43:04: what are you talking about?

00:43:05: This has Never Been One like.

00:43:06: how can just now after fifteen years of having it You tell me that there was No Key To The Front Door?

00:43:13: The Secure On The Front Like And We've Had Tenants Walk In Like This Is Not New.

00:43:18: Where Along The Way Did It Get Lost?

00:43:19: I Like Find Stuff That Send Someone Out For Two Hundred Bucks To Go In put a kid like fixed in place to barrel, but it's not headache free or there is mold on the back of thing that needs to get from wash basin.

00:43:35: For some reason as an owner now I'm responsible for they're allowed after two years and mold has built up on their backs.

00:43:42: whereas i think though first example was saying this place in Higashiyazabu with master lease you are going And then in five, six seven years time whenever you're going to sell it on paper.

00:43:55: You never gonna go past that?

00:43:57: Never gonna look at this is a master lease holder who's never gonna bother about the single thing.

00:44:03: property manager like that takes care of their and give them permission too do what they need to do.

00:44:10: That pretty passive

00:44:12: but I've got a good property management Australia But still um...you know i think Japanese ones where You don't really take care of model like unless something breaks.

00:44:20: Like the air conditioner or even wallpaper damage things like that.

00:44:24: people you replace.

00:44:25: it's coming to a place after someone moves out, right?

00:44:28: We do the wall paper It's new and then after wear and tear he can charge them for etc.

00:44:32: if necessary Or depends on whatever damage has been caused.

00:44:36: but I think the idea Of when we say passive in Japan Japanese traditional Japanese rental agreements are A lot more passive.

00:44:45: And then when you go to a house share Anything that gets away from that.

00:44:50: and in group, a house share of migrant workers who are here temporarily or on training.

00:44:59: That looks like it has to be really high

00:45:03: yield

00:45:04: for me to want adventure at the level potential risk.

00:45:06: And

00:45:06: they're good specialized property manager?

00:45:09: Absolutely!

00:45:09: They out there.

00:45:11: So yeah, we have

00:45:17: one of those clients that I mentioned was looking into a building.

00:45:20: He was you know suddenly midway through exploring it he was like hey actually share house.

00:45:26: i'm against sharehouse okay but if good short-term stay property managers are hard to find specialized share house property managers in any particular city or even rarer to find then if one of them does a bad job and we have to replace The

00:45:48: specialty.

00:45:49: So one thing I think Tokyo, I don't know about other places in Japan but Tokyo does that's...I can really only compare with Australia.

00:45:56: But in terms of building regulation at Japan has the Australia doesn't like is You can build a ten square meter apartment in Tokyo by regulation.

00:46:07: That's okay It's acceptable.

00:46:10: so this share house.

00:46:12: you don't really need shareholders because you can find a ten square meter, like basically one little studio.

00:46:21: that's going to be sixty or eighty thousand yen per month even less.

00:46:25: Whereas if you go to Melbourne and Sydney by even out in the prefectures there is no thing that allows you have a ten-square metre private apartment.

00:46:35: so you have to do the share house propo-

00:46:37: living.

00:46:37: yeah how could

00:46:38: we call it?

00:46:39: And thats why its strange when you got Australia any two bedroom apartments.

00:46:44: We'll have one bedroom, One bathroom and then another bedroom with an en suite.

00:46:52: It's designed for co-leaving at the outside.

00:46:55: you know two bedrooms or two bathrooms that's a bathroom per bedroom.

00:47:01: That's big Aussie maybe American thing whereas in Japan it is.

00:47:06: And so thats why we had to do share house because A one bedroom is really expensive

00:47:12: Yeah.

00:47:13: So you just pay a bit more for two-bedroom and split the cost, whereas in Japan there are one bedroom for individual people at one bedroom prices...at half of price over to bed room because you paid per square meter.

00:47:26: so The only people who end up doing share houses Are people.

00:47:31: either they cannot go get a guarantor company to sign off on them

00:47:36: or

00:47:37: They have some kind of visa issue Or they have some employment issues.

00:47:41: So they're the ones that are a bit more of a risky kind of tenants by Japanese standards.

00:47:50: The arbitrage is in going with the more riskier tenant, That's why you get the higher premium because the tenant class is riskier and I know any of my clients who looking to buy in Tokyo Are happy within no-risk

00:48:07: option

00:48:08: of that.

00:48:08: But yeah, I think as you go through the whole spectrum, you know, Central Tokyo master lease is like a low risk but then they're lower yield with higher expectation capital gain and further away you go.

00:48:23: I know people.

00:48:24: maybe ten or fifteen years ago there were lots deals talking about...I think Sharuga Bank was really involved in getting out among some others to buy these full buildings for two Oku or three Oku in Osaka and Nagoya, Fukuoka and stuff like that.

00:48:40: The major cities most people I know now that are sort of close to exiting.

00:48:46: maybe they bought three or four.

00:48:48: one has broken even ones at a bit of a loss.

00:48:52: One might be little bit up but it's amongst the portfolio is kind of almost break-even.

00:48:56: They had some tax benefits over the years But none of them have really shot out being significant.

00:49:04: Yeah, I've heard of that too.

00:49:07: You have to get going Ziv is it right?

00:49:09: Yes!

00:49:10: I had about five minutes and you took off.

00:49:12: sorry

00:49:13: yeah

00:49:13: no but let's continue on with

00:49:17: the conversation

00:49:18: next week.

00:49:19: so yeah all

00:49:21: right guys see you

00:49:24: soon.

00:49:24: thank you thank you like and subscribe.

00:49:29: So there you have it.

00:49:30: real pleasure as always to hear from our experts on what they know best and Tracy is the absolute authority On all things related too short term stay in hospitality properties some real openers eye Openers in their I thought hope.

00:49:42: It brought as much value to you, as well.

00:49:46: Now we can't let you go without telling you all about.

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00:50:49: And that's it from us for this episode.

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