🏙️ Hidden Costs of Buying Investment Property in Tokyo

Introduction

Tokyo real estate is often marketed with attractive gross yields—but these numbers don’t tell the full story.

To truly understand your investment performance, you need to look at the hidden costs that impact your net yield.

In this guide, we break down the key expenses every investor should be aware of before purchasing property in Tokyo.

💰 1. Taxes You Need to Consider

Property-related taxes in Japan fall into three categories:

🏁 Acquisition (One-Time Costs)

• Real estate acquisition tax

• Registration & license tax

• Stamp duty

• Consumption tax (on buildings only)

📊 Holding (Ongoing Costs)

• Fixed asset tax

• City planning tax

• Income tax on rental income

⚠️ For non-resident owners:
Rental income may be subject to 20.42% withholding tax (often partially refundable after filing taxes).

📉 Sale (Disposition)

• Capital gains tax:

  • ~30% if sold within 5 years

  • ~15% if held over 5 years

🧾 2. Property Management Fees

If you use a property manager (common for overseas investors), expect:

• Around 3–5% of monthly rent + tax

This typically covers:

• Tenant communication

• Rent collection

• Administrative work

🏢 3. Building Fees & Repair Funds

For apartments (mansions), you’ll pay monthly:

• Building management fees

• Repair reserve fund

These are mandatory and used for:

• Maintenance of common areas

• Long-term building repairs

🔑 4. Leasing-Related Costs

Tenant Placement Fees

• New lease fee: ~1 month’s rent

• AD (Advertising) fee: 0.5–2 months’ rent (optional but common)

Renewal Fees

• Often 1 month’s rent (shared between owner and management)

🧹 5. Restoration & Turnover Costs

When a tenant moves out:

• You’ll need to restore the unit for the next tenant

Tenants cover damages, but:

• General wear and tear = owner’s responsibility

🔧 6. Maintenance & Repairs

As the owner, you are responsible for:

• Repairing or replacing appliances

• Fixing equipment during tenancy

👉 Newer properties tend to have lower maintenance costs.

❄️ 7. Setup Costs (Often Overlooked)

• Air conditioning installation (essential in Japan)

• Basic fixtures if needed

🌏 8. Costs for Overseas Owners

If you live outside Japan:

• Wire transfer fees for sending rental income abroad

• Difficulty opening a local bank account

💡 Many owners choose quarterly transfers to reduce fees.

🚗 9. Parking & Additional Fees

• Parking spaces may come with monthly fees

• Bicycle parking is often recommended for tenants

🔥 10. Insurance

• Fire insurance (required)

• Earthquake insurance (optional but recommended)

⚠️ Why These Costs Matter

While a property may show a 5–6% gross yield, your net yield can be significantly lower after expenses.

Understanding these costs upfront helps you:

• Avoid unexpected surprises

• Make better investment decisions

• Accurately evaluate returns

✅ Conclusion

Tokyo remains one of the most stable real estate markets in the world—but successful investing requires looking beyond the headline numbers.

By factoring in taxes, management fees, and ongoing costs, you can gain a realistic view of your investment performance.

📩 Final Note

If you’re considering investing in Tokyo real estate, I provide bilingual support and tailored guidance—helping you evaluate properties not just on price, but on long-term value and performance.

👉 Feel free to reach out for a consultation.