Real estate—the most expensive consumer good. Or does it have to be?
Look around at the newspaper headlines. The median home value in Los Angeles is $696,900. The average house price in London is £644,215 (about US$828,191). That’s the Western World.
What about the East? Singapore: S$1,183,375 (US$874,372). For only HK$4.34 million (US$553,398) you can have a home in Hong Kong—if that means a 430-square-foot condominium in Kowloon, not on Hong Kong Island.
When people think of Japan, news headlines from the Bubble Era (late ‘80s to early ‘90s) often spring to mind. An era in which one might wave a ¥10,000 bill to catch a taxi, or drink a cup of ¥100,000 coffee featuring sprinkled in gold dust. The land under the Imperial Palace was estimated to be worth more than Canada. All 620 square kilometres of Tokyo were thought to be worth more than the United States.
Although the Bubble Era is over, property prices have now surpassed their Bubble Era highs. Surely, it must be impossible to obtain real estate in Tokyo for an affordable price… Surely, investing in it must be a rich man’s game…
To be sure, owning a ¥1 billion (US$9.2 million) building in Ginza would probably have wealthy tenants lining up. They would pay key money so that you would bestow upon them the privilege to pay you rent and give you a great ROI. Is an investment of that size really necessary, or even possible, for someone just getting started, though?
On a per-square-meter basis, Tokyo real estate is quite expensive, but the Japanese are willing to divide it up into affordably-priced units. This means that home ownership is within the reach of almost anyone who is good at space management.
A quick search on one of Japan’s leading real estate websites reveals that, if we look outside of the 23 Special Wards and focus on western Tokyo, there are 4,620 used condominiums. If we order those condominiums by price, we see condos starting at ¥1.98 million ($18,269.46) on the first page, and it is not until Page 8 that any of them break the 10 million yen mark.
For literally the price of a Toyota, you can own a condominium in Tokyo, not only the four walls, but also a share of the land it sits on, and start getting passive, turnkey income. Once you own your first unit, you can reinvest the profits. Therefore, your second unit will come much more quickly, and your third practically on the heels of that one. Growth will be exponential, not linear. Soon, you can enjoy a life of financial independence.
Western Tokyo: Condominiums for Less Than US$20,000
At the time of this writing, a small condominium is available in Ōme-shi, Tokyo for just $18,269.46. It may not be located in downtown Tokyo or be particularly spacious (19.11 square meters, or 205.69 square feet), but it is a decent place, and someone, somewhere would want to rent it. Even though it costs less than a Toyota Corolla, it is a 56-minute train ride (without transfers!) from Suginami Ward, one of the 23 Special Wards; just 6 more minutes on the train from there and you are in Shinjuku, where the Japanese Prime Minister himself lives.
Who would rent it? Quite likely an ordinary salaryman or woman, who has a respectable job in downtown Tokyo, but who cannot afford to rent there. Or maybe an elderly retiree (or a budget-conscious retiree couple) whose children live and work in Tokyo. The building is not even that old: it was built in 1991. As Japan’s demographics change, there is an increasing number of single-member households. This condo is exactly the type they are looking to rent.
The 23 Special Wards: Condominiums for Less Than US$55,000 in the Heart of Tokyo
What about closer to downtown, say, in the 23 Special Wards? Is it possible to find real estate there for under 10 million yen? Here is a search result from today:
¥5.5 million (US$50,738): It is in Itabashi Ward, with the main campus of Teikyo University. It may be small at 13.98 square meters (150.47 square feet), but it has the updated building codes regarding earthquake resistance. It has the added special feature of being surrounded by trees and greenery, something numerous tenants in downtown Tokyo will crave after a day in the concrete jungle. Or will the next tenant perhaps be a bright young scholar from a good family, who attends Teikyo University?
Similar properties are available in Osaka, Nagoya, etc. Land prices there are lower, meaning even more affordable units.
Is it possible to find a free-standing house in Tokyo Metropolis for under 10 million yen? Yes, it is. It is not new, but for ¥4.5 million, a home in Ōme, Tokyo can be yours to rent out. It is not small, either: at 80.26 square meters (863.9 square feet), a whole family could occupy this home (with plenty of room in the yard for the children to play: the property is 144.77 square meters, or 1,558 square feet).
How does ¥5.8 million ($53,527.02) sound for a two-story, four-bedroom house built in 1993, in Ōme, Tokyo? Okay, a little caveat: it is a 22-minute walk from the station. Consider that 44 minutes of enforced exercise per day for the salaryman father. His children can walk to Ōme Shiritsu Imai Elementary School, and his wife can go shopping at Mami Mart, all within 14 minutes on foot. Could they be your next tenants?
Why not start with a small purchase in western Tokyo (or Osaka, or Nagoya) just to get your feet wet, for under 10 million yen? Learn the ropes. Once that rental income starts coming in, there will be a snowball effect and you can consider acquiring more property. Soon enough, you can start looking at premium properties.