Types of Investment Property in Osaka, Japan

As part of our series of posts about buying investment property in Osaka, we present some notes about different types of Osaka real estate investments.

While choosing a location is a key factor in a real estate transaction, knowing what type of real estate investment you want must be decide before you can determine an adequate budget. In this post, we’ll review the follow types of Osaka real estate investment opportunities:

For more information, see our guide to buying investment property in Osaka. To find an experienced agent that can help foreigners buy real estate for investment in Osaka, contact us.

Condominiums for Investment in Osaka

Osaka is a dense city, with a large supply of housing stock. For investors that want a relatively low-cost entry to begin investing in Osaka real estate, buying a condominium in Osaka may be an appropriate type of property for an initial purchase. Depending on the location, condominiums of reasonable quality in older buildings can be purchased from 15,000,000 JPY to 40,000,000 JPY. Better locations may offer mansions in Osaka for 40,000,000 to 80,000,000 JPY. Luxury condominiums in ideal locations Osaka could start at 70,000,000 to several hundred million JPY – depending on the location, how recently the unit was constructed, the view, etc.

Newer, nicer construction will attract tenants that are able to pay a higher monthly rent, but given the purchase price for newly constructed condominium units, a better rate of return is likely found in somewhat older properties where better purchase prices can be negotiated.

Owning an individual condominium as an investment property in Osaka, that is rented to a local tenant, may provide a low-cost entry point, and a reasonable rate of return. Fees for maintanencee and for owner’s association duties may reduce the potential for ROI.

Foreign real estate investors in Osaka that would like to use the unit for part of the year, and rent the unit in the remaining months may have trouble offering short-term rentals in a building that is co-owned with other owners; most condominium owners’ associations do not allow short-term rentals or “Airbnb”-type businesses.

For certain foreign investors that want to stay in high-quality accommodations in Osaka, it may be possible to buy a new, luxury condo, use it for several years, and then turn it into a rental.

Single Family, Detached Homes for Investment in Osaka

In the densest, and most popular areas of Osaka (such as central Chuo-ku, Namba, Umeda), detached home are rare, and/or very expensive. However, just outside of the most prized locations, Osaka detached homes can be found for as low as 30,000,000 JPY to 70,000,000 for older homes in good condition.

For foreign investors that want to live in Osaka part time, owning a detached home investment property can be an excellent choice. Single-family homes for rent in Osaka are relatively rare, and may be easier to rent (compared to homes in apartment or condominium buildings). It may be possible to live in the home part of the year, and rent the home for the remaining months (there are fewer restrictions on renting when you own the entire property).

If you own your own detached home in Osaka as a rental, you may be able to operate the home as a short-term rental (or what they call “minpaku” in Osaka). Operating a detached home as a minpaku requires some licensing, but many single-family properties in Osaka would potentially be eligible for that kind of business, and may bring strong returns.

Small, Multi-family Homes for Investment in Osaka

In the tightly-packed neighborhoods of Osaka, there are many structures that are designed to be used as two to four separate homes. There are duplexes in Osaka, tri-plexes, and more. The price of a two-, three-, or four-unit building to be used as a rental may be nearly the same as a detached single-family home. Because real estate in Osaka is primarily driven by the value of the land, you may be able to buy a multi-unit rental property in Osaka for 30,000,000 to 70,000,000 JPY (depending on the neighborhood). For some recent examples, see this review of some small, multi-family rental properties for sale in Osaka.

There are many advantages for investors buying multi-family rental property in Osaka. When the Osaka rental property has more than one tenant, losing a tenant means only losing part of the monthly rental income. The rent for smaller units will be affordable for more renters, so the pool of local Osaka renters will be greater than for a single-family home. In most cases, the collective rental income from four units will be greater than if the same property has a single-family home rented to just one tenant.

International owners of investment property in Osaka can often easily reserve one unit for themselves as a private residence, and can rent the remaining units to local Osaka tenants, or can manage the property as a minpaku, or short-term vacation rental property in Osaka.

Apartments Buildings for Investment in Osaka

Osaka has a large population, both within Osaka City and in the surrounding cities. There is a lot of housing for renters, including many apartment buildings for sale in Osaka. There are smaller multi-family rental properties, as well as larger Osaka apartment building investments. To buy an apartment complex in Osaka, older, smaller buildings might start at 40,000,000 JPY, with older eight- to ten-unit apartment building for investment in Osaka selling for 50,000,000 to 200,000,000 JPY and more.

There are several excellent real estate brokers in Osaka that specialize in rental property investments. Contact us for an introduction.

Single-tenant Commercial Property for Investment in Osaka

There are investment buildings for sale in Osaka designed to be used by single commercial tenants. These buildings are the commercial real estate equivalent of owning a detached home as a rental, with a single commercial tenant in place of a single residential tenant. Pricing may be similar to a detached home, and may be purchased in the range of 30,000,000 JPY to 70,000,000 for older commercial property in good condition.

Commercial investment property in Osaka with a single tenant has the same challenges that come with single-family home rental properties; while one tenant may be easier to manage, there is increased risk when all of the rental income comes from a single tenant. Unlike the simplicity of residential real estate investments, the commercial rental property in Osaka may need extensive capital improvements to suit a new commercial tenant. Multi-tenant rental property in Osaka may be a better choice.

Multi-tenant and Mixed-Used Commercial Property for Investment in Osaka

There are also many multi-tenant commercial buildings for investment in Osaka, as well as mixed-use investment real estate in Osaka for sale. The price of Osaka commercial property varies even more than residential, particularly as commercial property can be more common in expensive, central locations, with very high cost per square meter.

Mixed-use commercial properties for sale in Osaka are common. These properties often feature a commercial tenant on the ground floor, with one or more residential units above it. Buying Osaka mixed-use property may offer investors good returns, and less risk than single-tenant properties. For some investors that want to live in Osaka part time, they can buy this kind of mixed use building, reserve one unit as a private residence, and rent the other units and the commercial space to produce income to off-set the cost of the investment.

Land for Investment in Osaka

Osaka is an old city, and a well-developed one. There is some undeveloped land in Osaka City for sale, but most of that empty land for sale was previously developed, and the owner will have torn down the existing structure to make the land more attractive for a new buyer. Most of the value in Japanese real estate, particularly when the structure is over 20 years old, is in the land. The cost of land for investment in Osaka may be very close to the price for similar land with a home or other structure.

In some cases, the land without the structure is worth more; the new owner won’t have to pay the cost to have the house emptied (paying trash disposal fees), to tear it down (demolition cost), and to haul away all the waste (additional trash removal fees).

See our report on the increasing value of land in Osaka.

New Construction and Real Estate Development Projects for Investment in Osaka

There are opportunities for new construction, and large real estate development in Osaka. A simple plan might be to buy existing property or land, and build a multi-unit condominium development project, and then resell the units to other buyers. Larger scale commercial developments are also possible. The cost for these projects will vary depending on their complexity.

Foreigners may choose to hire a local Osaka real estate consulting firm to help plan and coordinate larger Osaka real estate development schemes.

Buying Akiya as Investments in Osaka

The concept of “free houses in Osaka” or “abandoned houses in Osaka” has been a kind of media sensation. Some successful akiya investors like Anton Wormann – in his excellent book, Free Houses in Japan – have fueled the desire to find “cheap” houses in Japan for investment. There are many international real estate investors that believe they can buy significantly undervalued real estate in Osaka. However, as Anton’s personal story indicates, being successful with akiya as an investment strategy in cities like Osaka requires several advantages that most foreign investors do not have.

While the prefecture of Osaka may certainly have some available real estate that can be purchased at very low costs, in central neighborhoods in Osaka City, easily purchased akiya basically do not exist. Generally speaking, in locations that have access to jobs and other amenities, the value of the real estate is well known. While abandoned and unoccupied properties exist, they are typically identified by local Osaka real estate insiders, and are not available for sale to outsiders – particularly not at attractive prices.

For most “abandoned” properties in Osaka, the local Japanese real estate professionals are better suited to attempt to work through the issues associated with finding the owner and negotiating the sale, as well as the work to make those properties livable. Foreigners that don’t live in Osaka, and speak Japanese, should not assume they are ready for that kind of project.

For foreigners that are interested in exploring the possibility of buying an Osaka Akiya as an investment, working through an local Osaka broker is probably a requirement. For the best clients of local real estate agents, some off-market real estate investment opportunities in Osaka may become available over time, and may be offered to the best clients.

Without an established relationships with Osaka real estate insiders, particularly if you do not speak Japanese, the akiya investment strategy in Osaka may be more difficult than it has been portrayed.

Property Management Companies that Manage Rental Properties in Osaka

For most real estate investors that are not full-time in Osaka, the role of a local Osaka property management company that can speak English will be more important than ever.

As noted in our guide for foreign real estate investors in Osaka; owning a building for investment in Osaka comes with many ongoing responsibilities. As the investment property is purchased, the Japanese government wants a local domestic contact for real estate. Paying the local real estate acquisition tax and the ongoing local Osaka property taxes / Japanese property taxes may be difficult for owners that live abroad. Managing local tenants, and the leasing process when tenant need to be replaced, will most likely be too complicated to do from another country. For foreigners that want to try to manage a minpaku short-term rental business in Osaka, local accommodation bookings and cleanings are added to the usual property management duties. Preparing the financials for the property as a part of income taxes on real estate investment in Osaka will also need to be done.

All of the needs of international real estate investors in Osaka can be managed by a competent, local Osaka property manager. For help managing real estate in Osaka, contact us for an introduction.

Brokers with Experience with Real Estate Investments in Osaka

Foreigners without extensive experience buying real estate property in Japan will benefit greatly by working with an Osaka broker that specialized in helping real investment buyers. These agents may primarily serve local Japanese real estate investors in Osaka, and can then use their networks and local experience to help foreign buyers find entry into profitable property investments in Osaka.

While residential properties are often bid-up by buyers that have personal reasons for being willing to pay high prices for a place to live, for real estate investors in Osaka, over-paying for a property can create a losing investment.

Many international investors are tempted to try to use English-language websites that list available investment properties in Japan to find properties themselves. Those online services are private businesses, they may be paid to host listings for Osaka property that cannot be sold through other methods, and those online property listing websites in Japan are always incomplete; many of the best investment properties in Osaka are never listed online.

“Besides, properties of better quality are now usually circulated among insiders with mutual trust.”
— From the book, Winning Strategies for Japan Real Estate

As we state in our recommendation for Osaka investment property buyers; creating a relationship with an agent that has experienced with Osaka rental properties will be key to your success.

For free, personal recommendations to local Osaka real estate companies, contact us.

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