Japan is an extremely attractive destination for real estate investment. Many properties are surprisingly cheap to buy. Low mortgage interest rates are available, e.g. 1% or 1.5%, with low down payments. Rental income provides excellent ROI. There are numerous tax benefits on real estate ownership in Japan. Therefore, owning and renting out real estate in Japan can even lower your personal income tax on earnings from work. However, after reading all this good news, many investors wonder “Can I rent out my property if I am not a permanent resident of Japan?”
Spoiler: The answer is:
“Yes, even nonresidents can buy, own, and rent out property in Japan.”
However, different rules apply to different categories of people.
Let’s Be Clear on What Exactly a Permanent Resident Is
A “Permanent Resident” is a foreigner holding the “Permanent Resident” Status of Residence granted by the Japanese Ministry of Justice. Colloquially, some (including PM Shinzō Abe) call it the Japanese “green card.” It is NOT the same thing as “Japanese citizen” or “Japanese national”. In short, a “Permanent Resident” is mostly unrestricted and can live freely in Japan as long as desired, but is ineligible for a Japanese passport, and does not have the right to vote or hold public office in Japan. However, he or she can freely get mortgages at Japanese banks, buy real estate, own it, rent it out, and receive rental income. Permanent residents account for ~771,000 of the total ~2.73 million foreigners living in Japan. In other words, most foreigners in Japan, are “residents,” but not “Permanent Residents.”
Can nonresidents of Japan rent out property in Japan?
Can an American in Texas buy Japanese real estate and rent it out, while continuing to live in America? Can a German in Munich do the same? How about an investor from Botswana? Can he entrust the management of his properties to a local real estate management company, sit back in his estate in Gaborone, Botswana, and make passive income?
The answer is “yes”.
Nonresidents of Japan can buy pretty much any property freely, including land. This is unlike countries such as Indonesia in which foreigners cannot buy real estate, or the Philippines and Australia in which investors can buy buildings, but not land. Of course, a nonresident who buys property in Japan should submit a notification to the Japanese government within 20 days, in accordance with the “Obligation of Notification Due to the Foreign Exchange and Foreign Trade Control Act.” This notification is not a barrier to buying, but simply notifying the government about what one has already bought, and there are numerous exceptions to this.
What about Spouses of Japanese Nationals or Long-Term Residents?
“Spouse of a Japanese National” is mostly unrestricted and allowed to earn income from almost any source, including real estate. He or she may collect rental income and pay income tax on it using the Blue Tax Form just like a Japanese national. The same goes for Long-Term Residents (定住者, teijūsha). Just simply living in Japan for a long time does not mean you are a Long-Term Resident in the eyes of the Japanese Ministry of Justice; a Long-Term Resident is usually a Nikkei (ethnic Japanese), for example, from Brazil or Peru, a divorcee or widow of a Japanese former spouse, etc.
Can other foreigners in Japan rent out property?
What about other categories? Can an Indian engineer buy and rent out property? What about an Irish English professor? How about a Chinese university student/aspiring entrepreneur whose family is one of great wealth and privilege back in Mainland China?
In short: They can buy whatever they want as long as they pay cash, but will need to get creative and/or change to another type of visa before receiving rental income.
Take the example of the engineer from India. He can buy a condo, or even a whole apartment building. However, it will be in cash because his chances of getting a mortgage from a Japanese bank on his current Status of Residence are low. He has “Engineer/Specialist in Humanities/International Services,” therefore, he can only legally generate income in Japan from those activities. He can do engineering/IT work, work at a foreign trading company, or teach a Hindi, all legally. However, rental income does not fall under the scope of his Status of Residence.
Does this mean he can never rent out some units and make money? No, it does not, but first, he will have to change his Status of Residence. Perhaps he has been in Japan long enough to apply for Permanent Residency. Perhaps he can switch to Investor/Business Manager. If he has a Japanese spouse, he can apply for that Status of Residence.
What about Irish English professor, or the rich Chinese university student? Same answer: apply for Permanent Residency, Investor/Business Manager, or Spouse of a Japanese National. Maybe the Chinese university student could even have his family buy and rent out the investment real estate on his behalf; they are nonresidents, and therefore unrestricted.
For some real estate investors who plan to live in Japan, they can start a company, register it, and receive a Status of Residence that allows them to invest in Japanese real estate and collect income to their hearts’ content. This used to require a ¥5,000,000 investment and the hiring of two full-time employees; however, recently, these requirements have been changed and you no longer need to employ anyone- even better. The red tape requirements are being eased, putting real estate investment within reach of countless more expat investors than before.
- Firstly, YES, foreigners who do not live in Japan (even those who have never even visited Japan) can buy Japanese real estate and earn passive income from it.
- Additionally, YES, Permanent Residents, Spouses, Long-Term Residents, Investors/Business Managers, etc. can invest in Japanese real estate and receive passive, turnkey income from it. Letting a bank mortgage will be easiest for permanent residents, though depending on other factors (Japanese spouse, language skills, etc.) some non-Permanent Residents can also receive mortgages. ALL of these categories are allowed to receive rental income.
- However, those on limited-Period of Stay and/or Activities-Based student, work, etc. Statuses of Residence can buy property with cash, but will need to change Statuses of Residence before receiving rental income. The best path will depend on the individual’s circumstances. It is best to do research and consult with your real estate agent.