In the previous article, we introduced mid-term rentals as an alternative to short-term rentals, along with their advantages and disadvantages.
(If you haven’t read it yet, you can find it here: [https://jinshomes.com/an-alternative-to-short-term-rentals-mid-term-rentals/])
Mid-term rentals are a way to rent out a furnished property for stays of 30 nights or longer — often rented out by owners who either cannot operate short-term rentals due to regulations, or simply prefer not to.
A common question we receive is:
Can this actually work financially?
An Example Based On a Listed Property
To explore this, we built a simple model based on a typical property currently available on the market.
- Location: 10mins walk from Sangenjaya Station
- Size: ~50 sqm
- Age: ~15 years
- Price: ¥90,000,000
Assumed Monthly Rent
¥350,000 – ¥400,000
Estimated Monthly Costs and Deductions
- Withholding tax (20.42%)
- Property management (11%): approx. ¥38,500 – ¥44,000
- Payment / mail handling: ¥16,500
- Building management fee: ¥15,000
- Restoration fee: ¥20,000
- Utilities: ¥15,000
- Internet: ¥5,000
(※please inquire for details)
The net income after deductions is ~¥170,000/month.
About Withholding Tax
The 20.42% withholding tax is a prepayment of income tax, applied to the gross income.
In practice, the actual income tax is calculated based on taxable income after deducting expenses such as management fees, utilities, and depreciation (a non-cash expense).
As a result, the withheld amount is often higher than the final tax liability, and the excess can be reclaimed upon filing.
In many cases, this refund can effectively cover annual costs such as property tax.
What Happens When Financed?
Financing can be a useful way to acquire a more desirable property with limited upfront capital.
For non-resident buyers that qualify, Yen Loans are one of the few (and often the only realistic) options currently available.
Typical conditions (as of now):
- LTV: ~35–40%
- Term: up to 35 years
(subject to: building age limit of 50 years, and borrower age limit of 80) - Interest rate: ~4.5% (as of March 18)
(This is a general overview — please inquire directly with Yen Loans for details. Terms are not guaranteed.)
For the example above:
- Property price: ¥90,000,000
- Loan: ~¥36,000,000
The monthly loan repayment is ~¥170,000/month.
This means the loan repayment is roughly covered by the rental income.
A Perspective on Personal Use
During personal use and without rental income, the total monthly payment — excluding withholding tax and property management fees that don’t apply — is approximately:
~¥240,000/month ( ≈ ¥8,000 per night)
For owners who spend several months in Japan each year, this can often be meaningfully lower than comparable hotel options, particularly for larger spaces in well-located areas.
Beyond Price
In addition to cost, there are practical advantages:
- No need to search for accommodation each time
- No uncertainty around availability
- No need to adapt to a different location or layout
- A consistent living environment in a preferred neighborhood
- Reduced time and mental load
For many, this consistency alone has meaningful value.
If You Choose a Higher Grade Property
In practice, rental income does not increase in proportion to property price.
However, some owners may choose to purchase a higher-quality property for personal pleasure.
For example, if the purchase price is 30% higher:
- Price: ¥120,000,000
- Loan: ¥48,000,000
- Term: 35 years
- Interest: 4.5%
The monthly loan payment is ~¥227,000.
This represents an increase of:
- +¥57,000/month
- +¥684,000/year
If the property is used for approximately 4 months per year:
¥684,000 ÷ 4 months ÷ 30 nights ≈ ¥5,700 per night increase
Even after this increase, the total effective cost is ≈ ¥13,000/night.
This is still favourable compared to hotel options — especially considering the additional benefits mentioned above.
Long-Term Perspective
Unlike hotel expenses, these payments are not purely consumptive:
- A portion goes toward principal repayment (building equity)
- The asset remains, and may benefit from capital appreciation
- In Tokyo’s relatively stable market, this can be meaningful over time
What This Means for You
If you visit Tokyo regularly, this model can be viewed less as an investment and more as a way to structure the cost of staying in the city.
Rather than repeatedly paying for accommodation, you are partially offsetting costs while maintaining access to a property that suits your preferences.
For some, this may be a more practical way to approach owning and using a property in Tokyo.
