It is worth buying an old mansion where I currently live in?

[RMA]

The mansion I've been living in since last 7 years is now on sale. This building is well maintained but quite old (was built in 1989). My current rent is JPY 189,000 and the landlord is asking for JPY 35 million. Initial costs will be around JPY 3 million. Management fees will be JPY 33,000 per month and Repair fund will be JPY 25,000 per month. Annual property tax should be around JPY 350,000.

Taking in to account all these charges the ROI (assuming full cash) will be around 3.22% p.a., i.e., (189,000 - 33,000 - 25,000) X 12 - 350,000 / 38,000,000.

I personally feel that the asking price of JPY 35 million is too high but should I give him the counter offer or just pass this offer as the building is too old? If I give him counter offer then is JPY 30 million ok to pay for such mansion?

The assessed value of land for the property tax purpose is around JPY 11 million and the assessed value of building is around JPY 8 million.

[RetireJapan]

We did something similar a few years ago, but the rent was around 90,000 and we bought the manshon we'd been renting for 9m (got a very nice deal from the owner, who was a friend of my wife's). Same age (built 1990 or so), kanrihi 20,000, repair fund 10,000 a month.

See if you can look at the price of similar manshons in the area (or different units in the same building). That may provide useful information. You may be able to negotiate, it depends on how realistic the price is and how urgently the owner wants to sell (also, as you are renting, if you don't buy it they may need to pay you to move out).

Definitely consider getting a mortgage, the tax refund of 1% of the loan for 10 years (is it ten again? the 13 year thing ended, right?) is very attractive and rates are still low.

Compare your rent against the potential mortgage payment. As long as you are able to live there for a decade or two you may come out ahead.

And of course the most important question: do you enjoy living there?

[RMA]

We did something similar a few years ago, but the rent was around 90,000 and we bought the manshon we'd been renting for 9m (got a very nice deal from the owner, who was a friend of my wife's). Same age (built 1990 or so), kanrihi 20,000, repair fund 10,000 a month.

You definitely got a very good deal! If the asking price was around JPY 20m then I wouldn't think for a second but the owner is asking for JPY 35m. Now I am not decided on the counter offer that I should give, maybe I will just throw JPY 25m and see what they say.

Definitely consider getting a mortgage, the tax refund of 1% of the loan for 10 years (is it ten again? the 13 year thing ended, right?) is very attractive and rates are still low.

Compare your rent against the potential mortgage payment. As long as you are able to live there for a decade or two you may come out ahead.

Oh yes, I will definitely consider getting a mortgage, it's stupid to refuse less than 1% interest loan and the benefit of tax refund. Comparing the rent against the potential mortgage payment, I should be breaking even if I stay in this house for next 17 years (assuming 0.7% interest loan on JPY 25M). As of now I see myself staying in the same house for minimum next 5 years but may continue to stay here more depending on the work situation. In the worst case scenerio, I am hoping to cover the cost of the building at least.

And of course the most important question: do you enjoy living there?

I have been living here since last 7 years so I guess I enjoy living here otherwise I would have moved.

[TokyoWart]

My current rent is JPY 189,000 and the landlord is asking for JPY 35 million. Initial costs will be around JPY 3 million. Management fees will be JPY 33,000 per month and Repair fund will be JPY 25,000 per month. Annual property tax should be around JPY 350,000.

That property tax estimate seems high. We are paying right around that amount for a house on land that cost around 140 million JPY 20 odd years ago.

[RMA]

That property tax estimate seems high. We are paying right around that amount for a house on land that cost around 140 million JPY 20 odd years ago.

I was also wondering why property tax is so high - maybe I've made some mistake in this regards, I'll have to recheck.

[mighty58]

Whether 25m or 30m or 35m is "appropriate", none us really can say as we don't have all the details, but one thing observable is that, at 33k + 25k, the kanri/repair costs are very high. To put it another way, you could buy a 60m yen detached home, and end up paying pretty much the same total amount over the course of a 35yr mortgage (assuming 35m purchase price). It also affects resale value, with many buyers choosing to avoid that, simply because they can, because other buildings are not so much. You can certainly try and use that as a negotiation tactic, but be aware that you'll be at the other end of that if/when you need to sell.

Back to the price though, it's very easy to determine the market price, just look at current listings in the area, and look at the sale records for the last few years. Use price/m2 or per tsubo to compare if there's no like-to-likes. And unless this landlord is deluded, or is trying to take advantage of your perceived naivety as a gaijin, it's usually not the case in Japan that the owner puts up an asking price 40% more than the actual market price (i.e. asking 35m for a 25m property). Usually the asking prices are much closer to actual market prices (between 5-15% more).

[RMA]

Whether 25m or 30m or 35m is "appropriate", none us really can say as we don't have all the details, but one thing observable is that, at 33k + 25k, the kanri/repair costs are very high.

Yes these kanri and repair costs are indeed too high, if they weren't that high than the asking price of JPY 35m was somewhat reasonable considering the rent. Normal kanri + repair costs here are around 25k + 10k so the extra burden is around 23k per month that comes to around JPY 10m in 35 years which I want to discount from the asking price.

The reason for these high kanri/repair costs is that there are only few mansions (less than 10) in this building which is disadvantageous from costs point of view but at the same time can be advantageous from the share of land ownership point of view.

[Isodora]

Sorry, just noticed that some of the points in here were more or less answered with the latest posts, but will send it as it is anyway


While it sounds expensive to me, it is hard to judge without knowing the size and the location of your apartment. Many Japanese prefer brand new places and 33 years is considered quite „ancient“. A very attractive location, larger than average apartment as well as building facilities in very good condition could justify the price though.

The amount of the repair fund might be important too, are any major repairs or upgrades are planned.

How is the location rated regarding disasters?

Further, the average age of the owners or tenants - to see how likely it is that vacancies might increase over time (or are their already vacancies?) - might also be important. More vacancies will mean that it can be more difficult to resell, and might lead to an increase in both the repair fund fee and the management fee.

The management fee already seems expensive, is this a place with many amenities (gym, rentable rooms/kitchen for parties, rooms for overnight guests, manned reception desk, roof terrace, lots of green, that requires maintenance etc.?) That might justify the amount.

The repair fund fee also is quite high, probably due to the age of the building. From looking around online 20,000 to 30,000 Yen for both fees together seems a common amount.

We pay 26,000 in a 23 year old well maintained building for a 72 square meter apartment in the greater Tokyo metropolitan area. This was increased from 18,000 four years back, as the repair fees were to low.

Finally I have to agree the Tax sounds enormous, could be a mistake? We pay 120,000 a year.

Would be interested to read how you will decide, good luck with it.

[Petronius]

Yep, I also pay 120,000¥ taxes for a 40 years old mansion in Shibuya-ku, ~60m2mansion & ~40m2 of attached land
My management fee is ~12,000¥ and repair fund ~23,000¥; no elevator in a 4 floor building

[jane doe]

Like others, I would also be looking at the building maintenance. One thing to consider is that a building of that age, if it's not well maintained and also has a healthy balance in the rebuilding fund, banks will be wary about lending to prospective buyers. This could apply to you, or if you want to resell it down the line. Although more banks are willing to lend on 'older' buildings (by Japanese standards), it could still be a deal breaker. Also consider that at that price, there will be very few potential buyers with the cash in hand, so it does depend on getting bank approval for a loan.
The maintenance fees look eye watering to me, so apart from the balance in the bank, what repairs have been done? Is there a proper long term maintenance plan? Is it self-managed, or is there a management company? Have the fees been hiked because there are some massive works due, or were in the past? Does it still have the original metal pipes? What condition are they in? Is there a water tank, or is there a direct connection from the mains to the building? When did they last maintain the outside?
These are all questions you could try asking long term residents, or the landlord. Usually when buying, sellers are expected to share this information, so if there's any reluctance, smell a rat.