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Three Misconceptions about Japan’s Properties

Japan’s attractive property market draws real estate investors worldwide for its high yield, affordability, rental income cash flow and safe haven economic environment. While the real estate investment arena is undoubtedly attractive, and the second largest real estate investment market in the world, Japan is also one of the countries most affected by natural disasters. Therefore, before jumping in to buy up properties, foreign investors, new to the market, often test the waters by asking about the quality of Japan’s structures and their ability to weather the storm. Investors ask, “What is the risk associated with the age of Japan’s real estate?” To answer this question, we explore the common misconceptions of Japanese properties.

Misconception #1 – Properties are Made of Wooden Structures

Some investors have concerns about the materials used to build real estate in Japan and whether or not they can withstand the force of earthquakes and tsunamis. This misconception stems from traditional wooden houses which used to line the streets of Japan in the former imperial capital. Most investors focus on buildings for the cash-flow play, rather than houses. Therefore, the concern is an out-dated concept and no longer a consideration. Furthermore, wooden houses are being steadily replaced by earthquake-resistant, reinforced concrete apartment blocks.

Misconception #2 – Properties Built after 1981 Pose Less Risk

In 1981, the Building Standards Law was revised to protect residential and commercial structures against earthquakes. In 2006, building certificates and inspections became even more regulated subjecting builders to inspections during the construction process for buildings above three stories. Because of the revisions to the Building Standards Law in 1981, some investors consider 1981 the turning point for sounder structure. Herein lies another misconception.

A building’s condition is affected by more than just its age. A properly managed accumulated funds pool can also affect its condition. With adequate funds, buildings built prior to 1981 can be retrofitted to bring them up to code by regularly renovating, repairing and re-strengthening exterior walls and taking care of unforeseen renovations. Alternatively, a newer building could be poorly managed with insufficient funds for renovations and maintenance. As you can see, investing in an older building under these circumstances could be the wiser choice to minimize risk.

As facilitators to foreign investors, we try not to source anything older than 1973. But, those that we did source were well-maintained buildings housing 50 to 200 units, showing no signs of deterioration, beyond normally acceptable and repairable wear and tear. Generally, since the cost for renovations and repairs are taken out of the building repair fund, if funds are insufficient, then apartment owners bear the extra costs. To ensure the risk to investors is minimal, when conducting due diligence on a potential purchase, we look into the status of the accumulated funds pool, renovation/repairs/maintenance history and the building management company’s handling of the collected renovation/repair funds and provide a report to the investor for an educated investment.

Misconception #3 – Properties have Just a 20 Year Life-Span

Life-span of a house is sometimes referred to as approximately 20 years, while that of a building approximately forty years. From a value perspective, this is a misconception. This life-span refers to tax depreciation not the quality of the property.

There are other benefits to an apartment investment over a house. Houses require more maintenance and can present unexpected costs, whereas, in a building, structural expenses are known in advance and covered by pre-set building fees. And, the building management company’s monthly fees normally cover all or most maintenance expenses, so there are far less surprises.

Overall, risk is greater with speculative play for capital gain such as units in Tokyo or Osaka. Investing in Japan for its monthly cash flow environment in cities such as Sapporo, Fukuoka, Nagoya and other cities with stable or growing population can result in stable returns. For highest yielding properties, investors should focus their criteria on condo units under 200 sq. ft., one to two room units, for inexpensive interior maintenance. Alternatively, some of our clients aim for smaller and older buildings on large plots of land in key locations. The strategy in this case is to sell to a developer when the building becomes too expensive to maintain, in exchange for either compensation at a profit, or a new unit in a new residential project built on that land. The downside is that these units only have a small fraction of land attached to them, so appreciation potential is lower.

Priti Donnelly, Sales and Marketing Manager, Nippon Tradings International, pdonnelly@nippontradings.com

Priti Donnelly

Priti Donnelly is the sales and marketing manager at Nippon Tradings International, a proxy and buyers’ agency representing foreign investors with purchasing, selling and managing real estate in Japan. She understands the importance of transparency in today’s international market. Through her insight, she focuses on breaking barriers and helping investors feel confident about their overseas property investments.

Phone: +1 226 336 4097 / +81 3 4520 9262
Email: info@nippontradings.com
Website: http://www.nippontradings.com

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The KEYS to Unlocking ELITE Success in Real Estate

Exclusive Interview by Tim Houghten

The Founder of Rodeo Realty, the largest single-owner firm in the nation with 12 branch offices, 1,200 REALTORS ® , and annual sales and listings exceeding $5 billion, shares how he went from operating out of his garage to listing homes for $150 million.

What does it take to achieve elite success, at the top of the ultra-luxury real estate market, in the most exclusive community in the world?

Rodeo Realty is a name not just associated with celebrity real estate, but with dominating the ultra-elite markets of Los Angeles and Beverly Hills, California. The Rodeo Realty brand has been ranked the largest single-owner firm in California, with 12 branch offices, 1,300 REALTORS ® , and annual closed sales exceeding $5 billion. What does it take to obtain, and own this level of success?

Syd Leibovitch is the president and leader of the Rodeo Realty empire, and has been championing the crème of the crop of top-end international real estate, year after year, for 30 years. No matter what you aspire to achieve in real estate, it’s clear that Syd just might have a tip or two on how to get it.

In an exclusive interview, Syd Leibovitch gives us a peak behind the glass to see what it takes to get to the top of the real estate world, and stay there. Want elite success? Where do you start?

BLAZE YOUR OWN TRAIL

Rodeo Realty’s founder has been breaking through barriers since he got into real estate sales during college. Starting at 23 years old Syd says, “I sold three houses in my first month. I only went into real estate as a job for winter break. I fully intended to go to law school. But when my first sale closed, and the buyer hugged me and told me how excited she was to own a home, I was hooked!”

Syd says his family, who thought becoming a doctor or lawyer was a far better career choice, were disappointed when he began pursuing real estate. Yet, by the time he was 25 years old, he was a top-selling agent in Los Angeles. In just three years he opened his own firm. Today the world’s leading doctors, lawyers, and hottest celebrities come to Leibovitch’s firm for help in selling and securing the globe’s finest estates.

HARD WORK

During his time studying economics and banking at California State University and UCLA, Syd ran for the relay team, track and cross country; he set new school records. His take away from the experience, and how it has influenced the success of Rodeo Realty – “Learning the value of hard work.”

People can’t ask for more than your best. Shame on you if you don’t give it to them.” – Syd Leibovitch

CONSISTENCY

Last year Rodeo Realty sold at least one unit for $70M, and listed another at $150M. Yet, the surprisingly modest founder says that the majority of the firm’s transactions are in the $1M to $6M range, and that consistency is key. If you’ve ever run cross country you know you have to be able to keep up the pace, for the long haul, and often over unknown and challenging terrain. This could just as well describe navigating the real estate world. Yet, Syd says: “I did at least one deal a week for my first 15 to 17 years in the business.”

How do you create that type of consistency in results? He says, “I found something I like doing, and I do it a lot,” explaining that “if you do your best to take care of everyone you meet, the results will take care of themselves.”

DO YOUR BEST

Although he is a very hands-on business owner and accessible to his staff, today Syd has certainly handed on the baton to Rodeo Realty’s army of luxury real estate agents, and expert management team. Syd is very clear that he does not compete with his REALTORS ® for sales and credits them for the incredible sales figures posted. Asked how he manages to stay organized, and maintains efficient operations at such scale, Syd simply credits his “good people,” whom he says have become “friends,” more than employees.

Rodeo Realty surprisingly invites even new agents to come and train with the organization. So why work with Rodeo Realty, besides the prestige of joining one of the world’s most respected and envied real estate companies?

Syd’s Theory – “You’ve got to be the best, you’ve got to give the best.”

At Rodeo Realty this isn’t just evidenced by selling the best real estate on the planet, it is “being the best in ALL areas.”

THAT MEANS:

Best Luxury Real Estate Website – ranked by Who’s Who in Luxury Real Estate

Best Marketing – with an in-house print shop with 30 team members

Best Internet Marketing – with an in-house team of 17 graphic artists

Best International Marketing – reaching 200M+ buyers, in 190 countries, monthly

Best Technology – with Cirrus Super Search for deep data, on the go

Best Personal Service – local expertise, global presence

Syd says quite frankly and firmly that “real estate agents that want to serve their clients the best find that ability at Rodeo Realty,” and that “if you’re not on the Rodeo Realty team that’s because you’ve got other priorities, and are putting something else first, rather than serving your clients in the best possible way.”

It’s hard to argue with that.

OPEN THE DOORS TO YOUR SUCCESS IN REAL ESTATE…

To reach your full potential in real estate; blaze your own trail, work hard, be consistent, give your best, leverage good people and the best tools.

Want to see what a great real estate website looks like and view some of the most exclusive real estate eye candy in the world? Check out Syd’s site at RodeoRE.com, and download the free Rodeo mobile app.