When we speak with overseas buyers about investing in Japanese real estate, one of the most common questions we hear is whether they can rent out a property in Japan while continuing to live abroad. The same question comes up for homeowners leaving Japan for a few years who want to rent out their apartment until they return.
In our experience, buyers often have a good idea of what they’d like to earn in rent but are less certain about what it will cost to own and manage the property from abroad. Similarly, homeowners planning to leave Japan for a few years want to know who will look after their home while they’re away and whether they’ll be able to move back in when they return.
In this guide, we’ll explain how to become a landlord in Japan from overseas, what costs to budget for, and what to look for in a property manager. We’ll also cover how to choose a lease that fits your plans, receive rent overseas, and handle Japanese taxes on your rental income.
What to Check Before Renting Out a Property in Japan
You generally don’t need a Japanese real estate brokerage license to rent out a home you own under a long-term residential lease.
What you need to check first depends on whether you’re buying an investment property or renting out a home you plan to return to:
Check the Rental Income Before You Buy
If you’re considering a vacant apartment, ask the agent how they estimated the rent shown on the listing. Request examples of what tenants recently agreed to pay for similar apartments near the same station. Look for units with a comparable floor area, building age, and walking distance to the station.
If the apartment already has a tenant, ask to review the signed lease, rent payment history, and security deposit details before making an offer.
In a typical sale with a tenant in place, you take over the existing lease. Use the rent the tenant currently pays when estimating your income, even if similar apartments now advertise at a higher price.
Review Your Mortgage, Building Rules, and Insurance
If you’re renting out your current home and still have a residential mortgage, speak with your lender before listing it. Your loan may require you to live in the property.
Explain how long you expect to be overseas and ask whether the lender will allow you to rent it out during that period.
If you own a condo, check the building’s management rules for any restrictions on leasing your unit.
Also ask your insurer whether your current policy will cover the home once a tenant moves in, and what changes you need to make before the lease begins.
Choose a Lease That Fits Your Return Plans
If you’re leaving Tokyo for a three-year work assignment, you may want the apartment available when you return.
Under an ordinary lease (futsū shakka), a landlord generally needs justifiable grounds to refuse renewal. Signing an ordinary two-year lease therefore does not guarantee you can move back in when those two years are up.
A fixed-term lease (teiki shakka) lets you and the tenant agree on an end date. The landlord must follow specific procedures, including explaining before signing that the lease will not be renewed and giving the required notice for longer leases.
If you have a return date in mind, discuss it with the leasing agent before they advertise the apartment so they can offer a term that fits your plans.
How Much Does It Cost to Be a Landlord in Japan?
If you’re estimating how much rent you’ll keep, start with the expenses you’ll pay even when the property is empty.
Condo owners, for example, continue to pay building fees, property taxes, and insurance between tenants.
Other costs also depend on your agreement with your property manager and how often you need to find a new tenant.
Property Management and Leasing Fees
Rental property managers commonly charge a percentage of the monthly rent to collect payments, communicate with tenants, and coordinate repairs.
When comparing quotes, check which payments the percentage applies to, whether the quoted fee includes consumption tax, and what the company charges during a vacancy. If the manager arranges a repair, you may still need to pay the contractor’s invoice separately.
You may also pay a separate fee when the manager finds a tenant or prepares a new lease. Ask for an itemized quote showing what you’ll pay to advertise the apartment, sign a tenant, and renew the lease if the tenant stays.
If you live overseas, also confirm how often the company will send you the rent and who pays the bank transfer charges.
Condo Fees, Property Taxes, and Insurance
If you own a condo, you’ll generally pay a monthly building management fee (kanri-hi) and a repair reserve contribution (shuzen-tsumitate-kin).
The first covers the upkeep of shared areas such as hallways and elevators. The second helps fund major building repairs.
These charges are separate from what you pay someone to manage your rental unit, and both continue while you’re looking for a tenant.
You’ll also need to budget for fixed asset tax, city planning tax where applicable, and insurance appropriate for a rental property.
If you’re buying, ask for the building’s current fee statement and the seller’s latest property tax notice. If you’re renting out a home you already own, check with your insurer about how your coverage and premium may change when a tenant moves in.
Repairs and Costs Between Tenants
The building’s repair reserve covers shared parts of a condo, so you’ll also need to set aside money for work inside your apartment.
For example, you may need to replace an air conditioner you supplied with the unit or repair a plumbing fixture during the tenancy.
Before signing a management agreement, check which repairs the manager can approve on your behalf and when they’ll ask you to approve an estimate.
When a tenant moves out, the inspection helps determine which cleaning or repair costs you’ll need to cover. You may have to pay for that work before the apartment is ready to show again.
When estimating your annual income, allow for both the cost of preparing the unit and the rent you’ll miss between tenants.
How to Choose a Property Manager in Japan
When you live overseas, start by asking how the property manager would handle a problem if they couldn’t reach you.
For example, if a tenant reports water leaking into the apartment below, can the manager send a contractor immediately? Who will contact the building manager, approve further work, and send you the invoice? Walking through a situation like this gives you a clearer idea of what the company will handle and which decisions will still fall to you.
Ask How They Set the Rent and Find Tenants
Ask whether the company manages apartments similar to yours near the same station. A manager familiar with the area should be able to explain the rent they would recommend, what comparable units have recently rented for, and how long those units took to find tenants.
If one company suggests a higher rent than the others, ask which recent leases support that figure.
It’s also worth asking what happens if the apartment attracts little interest. Find out where the manager will advertise it, how they’ll arrange viewings, and what feedback you’ll receive before they recommend a price change.
Once someone applies, clarify who reviews the application, coordinates with the guarantor company, and gives final approval to proceed with the lease.
Agree on Repair Authority and Communication
Before signing the management agreement, agree on which repairs the manager can authorize and when they need your approval. You might allow them to send a plumber to stop an active leak while requiring a written estimate before replacing a fixture.
Confirm who answers tenant calls outside business hours and how the manager will reach you across time zones.
Ask to see a sample owner statement as well. You should be able to tell how much rent the manager collected, which bills they paid, and how much they transferred to you.
If you need reports and repair estimates in English, confirm that the person handling your apartment can provide them.
Check the Terms of Any Guaranteed Rent Offer
Some companies offer a master lease, sometimes advertised as “guaranteed rent.” Under this arrangement, the company rents the property from you and sublets it to a tenant.
With a standard management agreement, you rent directly to the tenant and pay the manager to act on your behalf.
If you receive a guaranteed rent offer, check when payments begin, whether the company can revise the rent it pays you, and how you can end the agreement. This deserves particular attention if you plan to move back to Japan.
Before signing, ask the company to explain what would happen to both the master lease and the tenant’s lease if you wanted to live in the apartment again.
How to Receive Rent Overseas and Pay Tax in Japan
If a property manager collects rent on your behalf, your tenant may pay monthly while you receive the money overseas less often.
The amount that reaches your account depends on which bills the manager pays for you, what the bank charges for the transfer, and whether the tenant withholds Japanese income tax from the rent.
Receiving Rent in Your Overseas Bank Account
Before the first rent payment is due, confirm that your manager can transfer funds to your overseas account and agree on a payment schedule.
Some managers send rent quarterly, while others offer transfers every six or twelve months. Receiving several months of rent in one transfer can reduce bank charges, but if you rely on that income to cover a mortgage or other expenses, you’ll need to account for the time between payments.
Your owner statement should show the rent collected, each expense paid on your behalf, and the balance transferred to you. Keep those statements alongside your bank records.
When you prepare your Japanese tax return, you’ll need to report rental income and allowable expenses separately. The deposit in your bank account shows only what you received after deductions.
When a Tenant Must Withhold Tax From the Rent
If you’re a nonresident for Japanese tax purposes, who signs the lease can affect how much rent you receive during the year.
For example, if a company leases your Tokyo apartment to house an employee, the company generally must withhold 20.42% of the gross rent and pay it to the Japanese tax office.
If the employee rents the same apartment in their own name and pays the rent, withholding generally does not apply. The same exception covers an individual who rents the property as a home for a relative.
Filing Your Japanese Tax Return From Abroad
Japan treats rent from a property in Japan as Japanese-source income, including when an individual tenant pays you without withholding tax. Your annual return accounts for your rental revenue, allowable expenses, and any tax already withheld. Depending on the final calculation, you may owe additional tax or receive a refund.
As a nonresident, you must appoint a tax representative who lives in Japan and notify the relevant tax office. A relative living in Japan or a Japanese tax accountant can serve as your representative.
If your property manager offers to handle tax correspondence, confirm who will actually prepare and file the return. Some managers coordinate with a separate accounting firm for that work.
Planning to Rent Out a Property in Tokyo?
If you’re considering a Tokyo apartment as an investment, start with the rent you can reasonably expect to collect and the expenses you’ll still pay if the unit sits empty.
If you already own a home in Tokyo and plan to move back, start with your expected return date.
That gives you and your leasing agent a timeframe to work with before you offer the property to tenants.
If you have a listing in mind, send it to us along with any details you have about the current rent and monthly building fees.
If you’re preparing to leave Tokyo, tell us about your property, when you’re moving, and how long you expect to be away.
You can contact Tokyo Portfolio to discuss your plans with one of our agents.
