The Profitability of Guest Houses in Japan
Japan is notoriously weak compared to other countries when it comes to affordable shared housing. Most rental apartments come with two year contracts and for foreign people, if you have no working visa and no Yen earned income, then this becomes a non-option.
Australia, New Zealand and most of Europe in comparison have fully fledged out hostel and guest house industries allowing for very affordable quick getaways utilized not only by foreign travellers but citizens of those areas too. Japan on the other is seriously lacking in this industry. Tokyo has several companies that target this market segment in an organized way, opening several new locations a year. In other areas of Japan, guest houses are usually run by the owner of the building who is looking to locally assist foreign travellers with clean, affordable accommodations. However these Mom & Pop locations usually are not interested in expanding their corporate entity outside of their one location. This leaves a very strong demand under supplied which presents a very interesting investment opportunity.
The current guest house industry as it is in Japan places it somewhere between a hostel and a budget hotel. The rent tenants pays usually includes all utilities including internet, have lockable private rooms but shared kitchens and bathrooms, have all major appliances, cookware and everything else necessary in the common areas for tenants to be able to unpack their suitcases and be at home. The private rooms can be either furnished or unfurnished as both exist.
Take a 5LDK in the suburbs of Tokyo and say the running costs are JPY 200,000 / month (sub lease rent or mortgage costs plus utilities and repairs). Assuming each bedroom is at least 6 Jo (9.72 square meters) and within a ten minute walk from the nearest station. The location connects to the metro area without a transfer (the Toyoko, Odakyu, Meguro and Denenchofu lines are perfect candidates for a project like this) then charge a conservative figure of JPY 60,000 per room. The revenue generated monthly is JPY 300,000 / month. From an investment standpoint, this translates into a net profit of JPY 1,200,000 a year at least in the above scenario.
Investment real estate comes with the notion that once you find the right property and hire a property manager then every month you are receiving money from your investment without any active participation on your part. Money making more money. Usually when people are approached with the idea of opening a guest house as an investment opportunity, many people think that managing it will take more time and effort then owning a mansion or apartment that require longer term contracts.
However, as with all investment property, the source of your revenue comes from tenants and any real estate investor can tell you no matter what or where you own, the key is to find the right tenants who must be properly screened. Here in Japan that is relatively easy to do. Assuming your guest house is in a desired location then you will have no trouble going about finding tenants. Marketing tools that have gained popularity within the last decade such as GaijinPot.com or Japan Today make it easier than ever to inexpensively advertise your property to a very wide market. In the limited exposure but free marketing world, Craig's List has gained in popularity as a location for guest house owners to market their properties to an ever increasing crowd.
The guest house industry in Japan is thriving and has much more room for competition while still keeping all participants financially healthy. Contact any of the agents listing for sale properties on RealEstate.co.jp to start your journey.
By Adam German
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Adam German is the Business Development Manager at Real Estate Japan, The authority on Japanese real estate. Adam can be contacted at adam@realestate.jp or visit Real Estate Japan’s website at www.realestate.co.jp
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