Buying apartment - Not allowed to rent it out? Huh?

[tkyo_guy]

Hi,

I'm interested in buying a place instead of renting (I've been renting for quite some time), and a friend of mine yesterday said that apartments in Japan are not allowed to be rented out unless you have 100% full ownership equity in the unit. If the bank owns even 10%, renting the apartment out is illegal. He said the only exception is if you're leaving the country, then there's paperwork to do & only then is it possible. Any truth to this and what should I know about this?

Thanks in advance !

[KansaiBen]

Hi,

I'm interested in buying a place instead of renting (I've been renting for quite some time), and a friend of mine yesterday said that apartments in Japan are not allowed to be rented out unless you have 100% full ownership equity in the unit. If the bank owns even 10%, renting the apartment out is illegal. He said the only exception is if you're leaving the country, then there's paperwork to do & only then is it possible. Any truth to this and what should I know about this?

Thanks in advance !

BS.


Most apartments the rent paid by the tenant is used to pay the mortgage to the bank and the tenant is the other partner so to speak when paying off the bank loan. Banks ownly care about you making your repayments on time and not about who is living in the security. As your name is on the title you are the LEGAL owner of the property with the loan secured by the asset.

PS how do you think development companies manage to sell apartments off the plan if they dont borrow money for the construction of the apartment in the first place?

[NorthByNorthwest]

It could be that the truth lies somewhere in between.

If you were to indicate to the bank that you wanted to get a mortgage for a home or condo that you intended to rent out for income, I am sure it would differ from the conditions for securing a mortgage for one's principal residence. I am sure there are many who tell a white lie in order to get the financing...

[bitteradjunct]

It could be that the truth lies somewhere in between.

If you were to indicate to the bank that you wanted to get a mortgage for a home or condo that you intended to rent out for income, I am sure it would differ from the conditions for securing a mortgage for one's principal residence. I am sure there are many who tell a white lie in order to get the financing...

I'm going with the above answer. When you get a loan to buy an apt or house to live in you aren't supposed to turn around and rent it out.

I imagine there are other situations besides moving out of the country that would allow you to rent out the apt but read the fine print on the mortgage. You almost certainly would have to inform the bank in writing.

[Scot27]

You have to get permission from the bank to rent it out. They will then probably up your interest.

Japanese banks offer shocking rates of interest on investment property loans. Most banks only offer primary residence loans in fact.

You can always go down the route of not telling the bank of course. Or try an investment mortgage from one of the foreign banks - CBA, NAB or HSBC.

[tkyo_guy]

Japanese banks offer shocking rates of interest on investment property loans. Most banks only offer primary residence loans in fact..

This is the route of my question, because I'm not interested in buying an apartment to immediately lease as an investment. Nor am I speculating since I'll be physically living at the property for several years going forward. I'm most interested in buying an apartment for living/to preserve equity because we've spent more than 10 million yen in the last 4 years renting instead of owning. My thoughts are that if we buy, not only do we preserve equity going forward in a 5+ year stretch, but we'll be able to live in a much nicer area to comparable rent (in the 300k/month range). Renting vs buying would probably see us paying 450-500k/month per my research. That's really at the core of buying, I don't mind selling the property at a slight loss in the future. But if I'm leasing it 5 years from now, everything's got to be on paper to protect my legal interests (so goes the idea of never telling the bank).

So I wouldn't anticipate any date on leasing my apartment, but 5 years from now, I hope to be in a higher income bracket and would obviously want to move up digs. But having to pay off the original mortgage vs renting it (even on a no-profit basis) wouldn't be feasible.

Has anyone purchased an apartment that could share views on this? Is what my J friend said about these rules to curb speculation unfounded?

And property developers don't rent spaces, they sell them, so I guess the point was a little different Kansaiben, no?