Owning
Renting Out a Tokyo Condo From Overseas: Management, Leases and Tax
Management contracts vs master leases, ordinary vs fixed-term leases, running costs, and the 20.42% withholding and tax return for non-resident owners.
Many Tokyo resale condominiums are bought with a tenant in place or let out after purchase. If you will own from abroad, choosing the management company and handling tax correctly matter most.
Key takeaways
- The two main options are a management contract and a master lease (sublease)
- Ordinary leases strongly protect tenants; a fixed-term lease ends on a set date
- Allow for building fees, property tax, vacancies and re-letting costs
- Companies paying rent to non-residents withhold 20.42%, and owners file a Japanese tax return
Management contract or master lease
Under a management contract, a company finds tenants, collects rent and handles issues for you, usually for around 5% of the rent. You carry the vacancy risk.
Under a master lease (sublease), the company rents the unit from you and sublets it. You receive a set rent even when it is empty, but it is below market, and the terms for rent reviews and ending the contract need care.
Ordinary and fixed-term leases
Ordinary leases in Japan strongly protect tenants; a landlord needs just cause to end one. If you may live in the unit later or want to sell at a set time, a fixed-term lease that ends on its expiry date is more suitable.
If you buy a unit that is already let, you take over the lease and the duty to return the deposit. Check the lease terms, any rent arrears and the lease period.
Running costs
Deduct these from the rent to see what you actually keep.
- Management fee and repair reserve (paid by the owner)
- The management company's fee
- Fixed asset and city planning tax, fire insurance
- Letting and restoration costs when tenants change
- Lost rent during vacancies
Tax for overseas owners
Companies and businesses paying rent to a non-resident owner generally withhold 20.42% and pay it to the tax office. Individuals renting the home to live in are not required to withhold.
Rental income from Japan must be reported in a Japanese tax return, where the withheld tax is settled. Owners without an address in Japan appoint a tax representative to deal with the tax office.
Receiving rent and reports
The management company usually collects the rent, deducts its fees and sends the balance to your Japanese or overseas account. Monthly statements and support in English or Chinese are worth checking when you choose a company.
FAQ
How do I judge the rent level?
Compare advertised rents for similar size, age and area. Our listing pages show the current rent and the gross and net yield for let units.
Can I use it for Airbnb?
Most condominium bylaws ban short-term rentals. Check the bylaws and ward rules before buying.
What happens when a tenant leaves?
The unit needs restoring and re-letting. Budget for the cost and an empty period.
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