To buy or not to buy, that is the question

[adamu]

I think OP is either from the UK or grew up there and has the "home is an investment" mindset. This is not valid in Japan where a house is a more similar financial profile to a car. The key phrase that stood out for me is "paying somebody else's mortgage".

This may or may not be true, but it's not relevant. What's relevant is your personal financial situation. If you are earning a high income and saving only a small percentage of it, you are paying a lot of people's... whatever. Better to spend some time learning about personal finance and how to pay yourself first. You never know if your income stream could stop, and then the change in lifestyle, especially if you have high expenditure, would be pretty unbearable IMO.

I suspect cutting expenses and increasing savings will have a bigger effect than a buy/rent decision, especially as you are ~30 years old and have decades ahead.

Here's another link, if you like videos
https://www.youtube.com/watch?v=T71ibcZAX3I&t

[Tkydon]

...
2. Your mortgage would be over 400k per month on 0.5% flex interest, plus 400-800k yen per year for property tax, plus the 30-60k of management fees, maybe 100-200k for annual insurance. So roughly you’d go from 350k to 500k in cash out every month.
...

Just a few numbers here I can help with based on my experience. We bought for 144 million yen in central Tokyo (Minami-Aoyama) back in 2001. Our property tax came in at 335,300 this year. I hear mixed reports on whether or not our home is worth more than our purchase price so I won't even speculate on that. We had a 15 year mortgage at something around 1.8% and while we were paying it my impression was we could have rented an equivalent home for about 60% of what we paid each month for the mortgage.

Yes, as an owner occupier, if you choose to pay the loan off in 15 years, that will be very expensive. The Break Even point, rent vs. mortgage payment, is probably a 25 year or 30 year loan, depending on the interest rate and prevailing Rimawari. You won't pay so much interest over the life of the loan, but you'll have to pay a lot more monthly to pay off the loan in 15 years instead of 25 or 30 years.

The ways economies have continued to fuel property price inflation have been to:
1. Increase the Multiple of Annual Household Income they were willing to lend.
But the only way they could do this was to:
2. Increase the length of the loan, reducing the monthly payment back to 'affordable' levels
and still the only way was to:
3. Increase the number of incomes in the household to be able to cover the monthly payment

At the height of the bubble, Japan had Multi-Generational Loans...

As an owner occupier, investment wise, you are probably better off taking the absolute longest duration loan you can get, and paying the difference between the 30 year loan payment and the 15 year loan payment into your investment accounts. Further, in Japan the loan balance is covered by Life Insurance, which will pay of the outstanding balance leaving the property free and clear in the event of the death of the insured... Why would you pay it down any faster than absolutely necessary?

By paying down the loan in a shorter period, you actually pay yourself a return on the extra money spent equal to your loan interest rate.
Your lender will not give you credit for the increased payments, should you come across hard times in the future.
If the difference between the 30 year loan payment and the 15 year loan payment were invested into your investment accounts, especially NISA, that balance will be available to you in such circumstances.

The OP was saying that he intends to convert from owner occupier to rental property for at least some portion of the loan duration, in which case the dynamic is different, as he will not be paying the loan payment from his income, but it will instead be paid by the tenant's rent; passive income, in which case, the largest possible loan with a larger down payment, and shortest reasonable terms that can be paid by the rental income would yield the best investment result, along with the tax savings if the OP is in, or has income in Japan against which to offset the depreciation. This is a different dynamic than for the owner occupier.

[bakabakababy]

I think OP is either from the UK or grew up there and has the "home is an investment" mindset. This is not valid in Japan where a house is a more similar financial profile to a car. The key phrase that stood out for me is "paying somebody else's mortgage".

This may or may not be true, but it's not relevant. What's relevant is your personal financial situation. If you are earning a high income and saving only a small percentage of it, you are paying a lot of people's... whatever. Better to spend some time learning about personal finance and how to pay yourself first. You never know if your income stream could stop, and then the change in lifestyle, especially if you have high expenditure, would be pretty unbearable IMO.

I suspect cutting expenses and increasing savings will have a bigger effect than a buy/rent decision, especially as you are ~30 years old and have decades ahead.

Here's another link, if you like videos
https://www.youtube.com/watch?v=T71ibcZAX3I&t

Thank you very much, you are quite right and I think I needed to hear this. I appreciate your comments and the link, I’m watching now!