Rental deal in Tokyo: ¥172,100,000 purchase, ¥1,056,000/month — sanity check

[gate.strong]

The headline yield looks attractive, but I’m not yet convinced the rent supports it. This is a 3-bed country home in Tokyo priced at ¥172,100,000, with projected rent of ¥1,056,000 a month and an advertised gross yield near 7.4%.

I have included periods without a tenant, management, regular upkeep and a reserve for a major repair. The building appears sound, though a short lease or frequent turnover could change the result quickly. My next step is to verify whether the rent comes from an existing lease or comparable properties, then rerun the figures with different vacancy and financing assumptions. Which ownership cost is easiest to underestimate here, particularly tax or insurance, and what unlevered net return would make the price reasonable?

 

[clear_wall]

Tenant turnover may be the bigger leak than any single annual bill. Vacancy is only part of it; management work, preparing the home again and finding the next tenant can arrive together. I’d ask for separate figures for ongoing management and each change of tenant.

Also calculate unlevered net yield before discussing your personal target. If financing is involved, the acceptable yield depends heavily on the borrowing cost and repayment structure.

 

[BalancedLedger]

What supports the ¥1,056,000 monthly rent: a signed lease, comparable homes, or the broker’s estimate? And is the proposed lease long-term, short-term or aimed at a particular tenant type?

I’m less comfortable calling the model conservative until that is clear. A generous repair reserve cannot compensate for rent that proves optimistic or a home that takes a long time to re-let.

 

[FarPlan]

I wouldn’t set one net-yield hurdle from these numbers alone. Start with the annual gross rent of ¥12,672,000, then run three cases: expected occupancy and costs, a turnover year, and a year combining vacancy with the larger repair. Add property tax and insurance from property-specific quotes rather than broad estimates.

Then stress the financing separately. If modest changes in rent, vacancy or borrowing cost remove the cash surplus, the 7.4% headline is not providing much protection.