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  • Buy vs. Rent

    If I have the cash to buy outright, am I better off buying a small used condo or something instead of renting?
    I plan on staying for more than 2 years, and thinking I can rent out or sell it if or when I leave.

  • #2
    That depends on so many factors, such your long-term plans, your long-term view of the Yen and the Japanese real estate market and how your cash is currently invested. One thing often neglected is earthquake risk, especially on a 20-30 year scale. Can you insure your property with a foreign insurer or are you happy to write it down if the building needs to be re-built ?

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    • #3
      Originally posted by crazydee View Post
      If I have the cash to buy outright, am I better off buying a small used condo or something instead of renting?
      I plan on staying for more than 2 years, and thinking I can rent out or sell it if or when I leave.
      Try this: http://www.nytimes.com/interactive/b...alculator.html

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      • #4
        With the way the Yen is going, combined with the deflation of property prices here, it may not be a good idea.
        Add to this the costs associated with buying, insuring, and also selling, and i wouldnt be surprised if it ends up costing more than the 2.5-3 mil that you might have spent on rent during the 2 years (average apartment in Tokyo suburbs)

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        • #5
          Originally posted by tokyo_dom View Post
          With the way the Yen is going, combined with the deflation of property prices here, it may not be a good idea.
          Add to this the costs associated with buying, insuring, and also selling, and i wouldnt be surprised if it ends up costing more than the 2.5-3 mil that you might have spent on rent during the 2 years (average apartment in Tokyo suburbs)
          Is that 2.5-3 million in yen? That would only be 2,500,000-3,000,000, right? Don't think you're going to find too many condos in the Tokyo area going for as little as 250-300 man. Probably won't find many of those anywhere in Japan.

          Even if you paid 15 man a month in rent for two years, that would still only be 360 man. I would guess that a relatively new and decent unit is probably going to cost at least 20,000,000 (2000 man) depending upon it's location, size, and other amenities. So, I would say that if the OP is just planning on staying for two years and then leaving than renting is definitely going to be cheaper than buying regardless of any of those extra costs.

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          • #6
            Originally posted by Shimi View Post
            Is that 2.5-3 million in yen? That would only be 2,500,000-3,000,000, right? Don't think you're going to find too many condos in the Tokyo area going for as little as 250-300 man. Probably won't find many of those anywhere in Japan.
            I think Tokyo-dom was talking about the net cost once the condo is sold, not the asking price of the condo.

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            • #7
              Originally posted by cucashopboy View Post
              I think Tokyo-dom was talking about the net cost once the condo is sold, not the asking price of the condo.
              OK. Makes complete yen to me now.

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              • #8
                Exactly, i am talking about net loss.
                Lets say he buys a 25 mil yen apartment at the current exchange rate ($266,000).
                Sales tax is paid on purchase of properties here (the average on taxes paid is 6-9% according to this site: http://www.globalpropertyguide.com/A...n/Buying-Guide), so taking the lower amount its 1.5mil, or $16,000.

                His total outlay will be $282,000

                Then property taxes, which i think are about 1.7%, perhaps $2500 per year

                Then property insurance, possible repairs if he needs them etc. Over the 2 years the outlay may get to $290,000

                After 2 years he sells it for 24 mil if he is lucky, but its possible with Abenomics in play that the USD will buy 100+yen by that time (lets say 105), so thats $228,000 he will get out of it.

                $62,000 loss, at an average exchange rate of 100yen/$ works out to be over 250,000 a month, for which he could have gotten a VERY nice apartment, in the middle of the Yamanote loop.

                Even if the exchange rates dont tank, and he gets 24 mil, at 93.3yen it works out to be 127,000 a month, which is still a decent apartment, and that is assuming everything else goes in his favour (resale value, exchange rates, taxes)

                Only way this would work is if he bought now, in the middle of a slump in the Yen, and it happens to rebound back to sub-80 levels by the time he sells.

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                • #9
                  I know someone who bought an apartment in Tokyo for their daughter who is going to university there. The logic is that she can use it for 3 years and then sell it afterwards. They seem to know what they are doing, having been involved with real estate for awhile.

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                  • #10
                    I am no money expert, but my maths says it isnt a great idea in a country with a rapidly declining currency, and property deflation.
                    I would think that having that $290k in stable investment fund would be a more logical choice. But then again, i dont have 290k spare, so i suspect that the ones who do, are fairly smart and know what they are doing.

                    Now if it were Australia, where house prices just keep going up, it makes sense. The dollar doesnt seem to be going anywhere, and you will probably end up with a net profit.

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                    • #11
                      Originally posted by tokyo_dom View Post
                      I am no money expert, but my maths says it isnt a great idea in a country with a rapidly declining currency, and property deflation.
                      I would think that having that $290k in stable investment fund would be a more logical choice. But then again, i dont have 290k spare, so i suspect that the ones who do, are fairly smart and know what they are doing.

                      Now if it were Australia, where house prices just keep going up, it makes sense. The dollar doesnt seem to be going anywhere, and you will probably end up with a net profit.
                      Right, opportunity costs!
                      Purely as a place to make money, but I think one would want to be an American to take advantage of tax breaks (and/or live there), for 290K in real estate, I would recommend Florida (e.g., Sarasota). About 10? days ago on the NYT front page, there was an article/advertisement about how much 300K buys. There were a few pretty nice places. Certainly there are some bargains in the American real estate market.

                      Out here in the Japanese heartland (between Hamamatsu and Nagoya), there are lots of bargains, provided that a person has a solid income and a desire to live here very long term. That would be the case for much of rural and semi-rural Japan. Aging population coupled with depopulation as young people move to the cities means there are lots to be had.

                      I would not buy a condo now. We had one years ago. I would rent one of those UR rentals or similar, where you can get 70+ square meters for a reasonable (for the area) price.

                      Comment


                      • #12
                        Originally posted by tokyo_dom View Post
                        I am no money expert, but my maths says it isnt a great idea in a country with a rapidly declining currency, and property deflation.
                        I would think that having that $290k in stable investment fund would be a more logical choice. But then again, i dont have 290k spare, so i suspect that the ones who do, are fairly smart and know what they are doing.

                        Now if it were Australia, where house prices just keep going up, it makes sense. The dollar doesnt seem to be going anywhere, and you will probably end up with a net profit.
                        well in Australia house prices don't ALWAYS go up! And no one knows for sure if the Japanese house prices will continue to go down, with the yen getting back to a normal rate, exporters will boom and perhaps kick the economy into gear? Maybe not this year or next, but when you are thinking of buying a place you shouldn't just think short term

                        btw the rapidly declining currency,is right now, things change

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                        • #13
                          I can't see the point of buying real estate outside Tokyo as an investment, unless it is for the additional emotional satisfaction home ownership seems to give a lot of people.

                          As somebody noted, Australia and the urban parts of Canada might be a good bet, given that the populations and markets there will likely continue to grow, but there are some warning of a bubble effect in those places too.

                          I find real estate way too much of a pain as an investment strategy.

                          I have, however, been thinking about getting myself a Japanese Fortress of Solitude, and given some of the bargains available, as SG noted, I could see buying one just to lock it down.

                          I found a mondo condo in seaside Chiba for 1750 Man, and some of the places in the area SG mentioned are unbelievably cheap.

                          The problem is the towns around there are holes, I think.

                          SG,

                          Why wouldn't you buy a condo?? Is it the hassle of the strata council and that, or is it an investment strategy thing???

                          Also, what is the Numazu and Shimoda Peninsula area like????

                          Comment


                          • #14
                            Originally posted by Jed333 View Post
                            well in Australia house prices don't ALWAYS go up! And no one knows for sure if the Japanese house prices will continue to go down, with the yen getting back to a normal rate, exporters will boom and perhaps kick the economy into gear? Maybe not this year or next, but when you are thinking of buying a place you shouldn't just think short term

                            btw the rapidly declining currency,is right now, things change
                            Yes you are right, house prices in Aust arent always going up (especially in QLD). Buying in Sydney would be a fairly safe bet though; but nothing is completely foolproof. The trends are upwards when looking back over 10 years though. Of course there is talk of a bubble, which could cause problems.

                            I of course was talking short term in my calculations - the OP did mention that.

                            As KG said, property is a painful investment strategy, and there are so many risks even when investing locally. Adding exchange rates, earthquakes, downward trend in property prices and i wouldnt 'invest' here. I might consider buying, once i make up my mind if I will be here long term; for peace of mind, and so iam not constantly paying off someone else's mortgage.

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                            • #15
                              We spent about 9m yen in rent over five years at an apartment that was just a few minutes from a JR Yamanote/Keihin Tohoku line station.

                              We decided to move out of central Tokyo and bought a house, saving roughly 60,000 yen/month in housing costs. The place we bought is 7 minutes from a JR/Shinkansen line station and we're banking on that being a factor in the resale price in the distant future. We are here for the long-term, so the buying vs. renting choice seemed sensible after five years of rent.

                              In my opinion from a financial perspective, short-term (10 years or less) renting is better than buying.

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