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Interest in investing in an Airbnb property has surged among foreign property buyers in Japan due to the tourism boom of the last few years. However, navigating the process of setting up an Airbnb in Japan requires a grasp of the market, a solid business plan and knowledge of local rules and regulations that is not easy for those new to the market.
This basic guide will take you through the main considerations for finding and preparing a property to operate as an Airbnb in Japan.
Nostal Homes, a leading one-stop platform for international buyers to buy a second home in Japan and rent it out on Airbnb provided advice for this article.
Buying and financing property in Japan as a foreigner
Foreigners, whether resident or overseas, can legally buy property in Japan. You do not need to have citizenship or even a resident visa to buy a home, but buying property in Japan does not entitle you to a status-of-residence permit.
Also, if you do not have a permanent residence visa or are not married to a Japanese citizen, it is difficult to obtain financing from a Japanese bank. If you at least have a working visa with a certain income level and two years of work history in Japan, some Japanese banks can help you finance a purchase. However, lending criteria and rates are different for those purchasing a home as a residence versus purchasing an investment property.
So if you are considering financing your purchase, it is important to work with a local agent who has strong connections with banks that will lend to foreigners.
Searching for the perfect property
Before beginning your property search, it is essential to set suitable search criteria so that you do not waste your time considering a property that is not inline with your purchase objectives and business plan.
Understand zoning regulations
In Japan, land is categorized into different zoning areas (用途地域), each with specific rules about what can be built and how properties can be used. It’s crucial to check if the property is in a zone where short-term rentals, like Airbnb, are allowed. Land may also be categorized as for agricultural use only, which means that you would not be able acquire it for a business purpose.
You can usually find this information on the local city or ward office’s website, or by consulting with a real estate agent familiar with local regulations.
Research local ordinances
Apart from zoning regulations, local ordinances can significantly impact your ability to operate an Airbnb.
Some cities have strict rules limiting the number of days you can rent out your property or require special permits. For example, in Kyoto, there’s a minimum stay requirement, and in some residential areas, you can only rent out your property during specific times of the year. Always check the local government’s website for the most up-to-date information.
There are also municipalities that restrict the days you can operate a private lodging if there is a school nearby (generally within 100 meters), and in some cases you may not be able to obtain a business license.
Image credit: iStock/Francesco ScatenaAsk your agent how zoning regulations and local ordinances could affect your Airbnb plans. Understand building management regulations
On top of land use and local ordinance requirements, whether you can turn your property into an Airbnb also depends on getting approval from a building’s management association.
The management associations (管理組合) of many condominium buildings have strict rules against short-term rentals to avoid disturbing other residents. Without this approval, you could face fines or be forced to stop your Airbnb operations. So if you are considering buying a condominium (マンション) and running it as an Airbnb, you should make this consideration a part of your initial search criteria.
Know that some properties cannot be rebuilt
When you looking at possible properties, you should also be aware that some properties are designated as “properties that cannot be rebuilt” (再建築不可物件).
A property that has been designated as such can be used as is, but once demolished, cannot be rebuilt again. This is sometimes the case for properties that are built on land that does not meet the conditions for new construction under the Building Standards Act. This is an important consideration if you are thinking about buying a property and tearing it down to create your dream home in your dream location.
Look at the neighborhood, not just the property
This is true of any home search but especially true when evaluating the suitability of a property to use as an Airbnb, to ensure that the neighborhood is convenient for your guests.
There is an entire laundry list of questions to ask. Here are just a few: Are there convenience stores and restaurants nearby? Is the road wide enough for a car to easily access? Will there be a major construction project planned in the near future? Is there a parking lot nearby that guests can use, in cases where your property does not have on-site parking.
Understand the impact of running costs
In the business plan for your property, minimizing running costs will be critical to making your Airbnb at least break even so that you can enjoy your second home.
For example, if you are buying a condominium, remember to account for management association fees, building maintenance fees and required contributions to the repair reserve fund.
If you will not be resident in Japan, you should also strongly consider using a property management company to look after your home while you are away. A good property manager will not only keep your home in good condition but also be able to pay taxes and take care of fire and building inspections on your behalf. Of course, property management fees will have an impact on your bottom line.
Image credit: iStock/yearsSet up a realistic business plan and factor in running costs with the help of your agent and property manager. Work with an experienced local agent
After your initial online search, the next step is to find a local agent, or preferably a company that has previously helped international clients navigate the entire process, from purchasing to setting up and managing an Airbnb.
Another advantage of going to a local agency is that many agents will have access to private listings that are not available on real estate websites.
Your agent will also help you understand the various purchase fees and taxes involved in acquiring your property and even be able to introduce you to banks and service providers like judicial scriveners, architects and interior designers.
Book a Consultation: Launch Your Airbnb Business in Japan
During and after the purchase process
Market research
Before finalizing your purchase decision, research the local market to understand the potential profitability of your Airbnb. Websites like Airbnb and AirDNA can provide valuable data on the occupancy rates, average nightly rates, and seasonal trends for properties in the area. This information can help you set competitive prices and estimate your potential earnings.
Which license to apply for
In Japan, there are three types of licenses that allow you to operate an Airbnb legally:
- Hotel Business Act License (旅館業法許可): Required if you plan to rent out a property like a traditional hotel.
- Minpaku (民泊) License: For private lodging, often used for Airbnb. This license has specific rules, such as limiting rental days and requiring safety measures.
- National Strategic Special Zones License: Available in certain regions with more relaxed regulations, such as Tokyo’s Ota Ward.
You’ll need to determine which license applies to your situation and start the application process. This often involves submitting plans, meeting safety standards, and undergoing inspections.
Hygiene and safety checks
You must also ensure that the property meets all fire safety requirements to obtain the necessary license. This typically includes having fire extinguishers, smoke detectors, and emergency exit maps posted in the property. The specific requirements can vary based on the type of license you’re applying for and the size of the property.
Once you have ensured that your property meets all the necessary requirements, the next step is to submit the required application documents to the local health center (保健所). This process typically involves providing detailed information about the property, including its location, size, and intended use. You may also need to submit floor plans, proof of compliance with fire safety regulations, and other relevant documents.
The health center will review your application and may conduct an on-site inspection before granting approval. It’s important to ensure that all documents are complete and accurate to avoid delays in the approval process.
Conclusion
Purchasing a property and converting it into an Airbnb property is not a simple process and can be much more complicated if you are an international buyer who does not speak Japaese. To ensure that you have as trouble-free an experience as possible, it is recommended that you work with an experienced agent or company that has a successful track record of helping investors.
Nostal Homes
Book a Consultation: Launch Your Airbnb Business in Japan
Nostal Homes is an all inclusive platform that assists global buyers to buy a second home in Japan and rent it out on Airbnb. Please fill in the inquiry form below to contact them about their services.
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