Chapter 11 — After you buy

Tax rates and accommodation regulations change over time, and municipal rules differ enormously — always confirm the current position for your specific property and municipality.

What ownership costs each year

Fixed asset tax (固定資産税) — 1.4% of the assessed value annually, billed by the municipality, usually in four instalments.

City planning tax (都市計画税) — up to 0.3% additionally, in urbanisation promotion areas.

Both are calculated on the assessed value, not what you paid, and residential land receives a substantial reduction in the assessed base — commonly to one sixth for the first 200 square metres.

That reduction is worth knowing about for a reason that catches out owners of neglected houses. Under the Vacant Houses Special Measures Act, a property designated as a 特定空家 — a specified vacant house in a state of disrepair or danger — can lose the residential reduction. The tax bill can rise sharply. The 2023 amendment added a 管理不全空家 category, catching properties that are heading that way rather than already there.

An empty house you never visit is not a passive asset. It is a property with a maintenance obligation attached to a tax incentive.

Insurance — annually. Earthquake cover is a rider on fire insurance and is capped at 30–50% of the fire sum insured.

Management — see below.

Utilities — even an empty house usually keeps a minimum water and electricity connection. Reconnecting from scratch costs more than maintaining a standing charge.

Managing a property from abroad

Somebody has to be responsible for the building. If you visit twice a year, that somebody is not you.

What actually needs doing. Ventilation, more than anything — Japanese summers are humid and a sealed house grows mould quickly. Water run through the pipes so traps do not dry out. Mail cleared, because an overflowing letterbox tells the neighbourhood the house is empty. Garden and gutters, since an overgrown property is what triggers the tokutei akiya process. Snow, in snow country, where a roof load left unmanaged can damage the structure.

Who does it. A management company, typically on a monthly fee for an inspection visit. Some municipalities and NPOs run akiya management services in rural areas.

What it costs to skip. Mould remediation, burst pipes, and in the worst case a designation that raises your tax and obliges you to act.

Renting it out long-term

Entirely permitted for non-resident owners.

Two contract types. An ordinary lease (普通借家) heavily favours the tenant — renewal is effectively at the tenant's option, and ending it requires justifiable cause. A fixed-term lease (定期借家) ends on its date with no renewal right, which gives you certainty at the cost of some rental value.

If there is any chance you will want the property back — to live in, to sell vacant, to renovate — the fixed-term lease is the one to use. Foreign owners who sign an ordinary lease and later want possession discover how strong Japanese tenant protection is.

Management. A company typically takes around 5% of rent for standard management. Sublease arrangements (サブリース) guarantee you a rent and take a larger share; read the revision clauses carefully, because the guaranteed rent is usually revisable downward.

You do not have to do any of this yourself. Letting a property long-term is ordinary licensed work in Japan. A real estate company handles it under their own licence — finding the tenant, the contract, the guarantor, collecting the rent, dealing with complaints and repairs, managing the move-out. You pay the management fee and that is the extent of your involvement. This applies whether you are in Kyoto or in Melbourne.

Monthly rentals

There is a middle option between a long lease and short-term letting: monthly rental, where the property is let by the month rather than by the year. Doing this means using the fixed-term lease described above, because you need the tenancy to end on its date.

Two things are worth knowing before you plan around it.

Ordinary long-term letting exists everywhere in Japan. Rental listings appear on the same major portals as sale listings, side by side, which makes the market easy to read as a user. If you want to know what a property might let for, you can look it up in the same afternoon you look up its purchase price.

Monthly rental does not. Demand concentrates in urban areas, the number of properties is far smaller, and the platforms that handle it are limited. It is a real market and we operate in it, but it is not a national one, and a monthly-rental plan for a house in a quiet town is unlikely to find takers.

Tax. Rental income is Japanese-source and taxable in Japan. You will need a tax representative and an annual filing. Depreciation on the building is deductible, which for an older wooden property can be significant.

Short-term letting

This is where the most money gets lost, so we will be direct.

The national framework. The Private Lodging Business Act (住宅宿泊事業法, "minpaku law") permits short-term letting of a residential property for up to 180 nights per year, subject to notification, signage, guest registration, and a designated manager.

180 nights is a ceiling, not a target. It is also only the national floor. Prefectures and municipalities may restrict further, and many do — by season, by day of week, by district, by property type.

Kyoto is among the strictest in the country, and one requirement in particular shapes what is workable there.

Where the owner is not living on site, Kyoto's ordinance requires a manager to be within 800 metres of the property and able to reach it when something happens. Not contactable — present, and close.

That single line decides a great deal. It means you cannot run a Kyoto property from Tokyo, or from abroad, on your own. You need somebody local under contract, and that arrangement is a standing monthly cost rather than a one-off. Before you model any yield on a Kyoto address, put that cost in the model.

The alternative is a ryokan/hotel licence under the Inns and Hotels Act (旅館業法), which has no night cap but imposes substantially higher requirements on the building — fire safety, front desk provision, zoning. Conversion is possible and it is a project, not a formality.

Before you buy with a short-term plan, verify at that address: the zoning designation, the municipal ordinance, any building-level restriction, and the fire safety requirements. All four. A property that satisfies three of them is not usable.

The permission belongs to the operator, not to the house

This is the point that surprises buyers most, and it is worth being very clear about.

Under the Private Lodging Business Act, the notification is made by the person who will operate — the owner, or whoever holds the right to use the property. It is not a permission that attaches to the building and passes with it.

So buying a house that is currently running as a minpaku does not let you run it as a minpaku. The existing notification belonged to the previous operator. You must make your own, and you must be granted it, before you can take a single guest.

The building itself is usually the easy part. A property already operating will have the fire equipment, the signage, the layout — all of that carries over and it has real value. What does not carry over is the permission.

And here is the risk you are accepting. Before you buy, we can check whether an application at that address looks possible: the zoning, the ordinance, the building, the fire requirements. That check is worth doing and we do it carefully. But you cannot apply until you own the property. The application is made by the owner, so the sequence is unavoidable — buy first, apply second.

Short-term letting is also under active debate in Japan at the moment, and rule changes are being discussed. What is permitted at the time you view a property is not guaranteed to be what is permitted when you come to apply.

We are not telling you this to discourage you. We are telling you because it is a risk that sits with the buyer and cannot be moved anywhere else, and you should take it knowingly rather than discover it after completion.

Renovation

Cosmetic work is straightforward. Kitchens, bathrooms, floors, walls.

Structural work may require building confirmation (建築確認), depending on scale and the building's status. A property that is 再建築不可 can be repaired but faces real limits on the extent of work permitted.

Older houses hold surprises. Foundations without reinforcement, termite damage, wiring that predates modern loads, no insulation. A pre-purchase inspection costs a fraction of what it saves.

Seismic retrofitting is available and often subsidised by municipalities for pre-1981 buildings. Programmes are set locally and vary enormously, so check with the municipality the property sits in.

On cost recovery, return to Chapter 6. The market prices the land plus a depreciated building. A ¥10,000,000 renovation on a forty-year-old house does not add ¥10,000,000 to its value, and frequently adds very little. Renovate because you want the house, not because you expect the money back.

Selling later

Capital gains. Held five years or less, the rate is higher; held longer, lower. The five-year test runs from 1 January of the year following acquisition, which trips people up.

Non-resident withholding. When a non-resident sells, the buyer is required to withhold 10.21% of the sale price and remit it to the tax office.

There is an exemption, and most sales of this size fall within it. Where the price is ¥100,000,000 or less and the buyer is an individual acquiring the property as a residence for themselves or a relative, no withholding is required.

So whether it applies to you depends on who buys your house. An individual buying it to live in — no withholding. A company, or a buyer purchasing it as an investment — withholding applies.

Where it does apply, it is withheld from the price, not the gain. On a ¥28,000,000 sale that is ¥2,858,800 held back at settlement, recoverable through your Japanese tax filing but not immediately. Plan for the cash flow.

Liquidity varies enormously. Urban property sells. Rural property may take years, or may not sell at all. If exit matters to you, weigh it at purchase — this is the risk that Chapter 2 flagged and it is worth repeating here.

Next: Chapter 12 — Common mistakes. The specific ways a Japanese property purchase goes wrong.