Recently, we took over the management of an operating short-term rental.

I will write about the details in another article, but put simply: it was operating illegally.

The owner had purchased the property specifically to operate it as a licensed short-term rental. The real estate agent knew this.

Despite that, the agent introduced a house that did not satisfy the requirements for either a minpaku registration or a hotel license.

As a result, the previous owner was only able to obtain approval by making false statements during the application process.

We are now in the process of correcting the issues and reapplying properly.

But before getting into that story, I want to share something much more important: how to avoid making the same mistake in the first place.

The good news is that you do not need to know every detail of the law or become an expert in regulations before buying.

Even if you accidentally choose a property that does not meet the requirements, there is still a way to stop the purchase before it is too late.

All you need to do is add one extra step to the normal purchase process.

Add This Condition to Your Purchase Offer

When you submit your purchase application or letter of intent, make the purchase conditional upon completing prior consultations with:

• The public health center
• The fire department
• The building department

In other words, before you commit to buying the property, require confirmation from all three authorities.

For both minpaku registrations and hotel licenses, you ultimately need approval from each of these departments.

And in every case, the process begins with a prior consultation.

If the property does not satisfy the requirements, this is usually where you will find out.

For example, the authorities may tell you that:

• Local regulations only allow 60, 90, or 120 days of operation per year
• The road width or legal road access is insufficient
• The staircase, corridor width, or other building features do not comply
• The building cannot satisfy the required fire safety standards
• Local rules require the operator to remain physically present on-site

The important point is that if you make these consultations a condition of the purchase, you can cancel the purchase before losing your deposit or buying a property that can never legally operate.

Even a “Maybe” Is Valuable

Sometimes the answer will not be “impossible.”

Instead, you may be told that the property can be licensed, but only after expensive correction work.

For example, you may need to install additional walls, widen a corridor, or carry out other construction work costing several million yen.

If you know this in advance, you can renegotiate the price accordingly — or simply walk away if it no longer makes financial sense.

There Is Another Benefit

Prior consultations do not just reduce risk.

In many cases, the public health center, fire department, and building department will provide written comments or a checklist showing exactly what is required.

You will have written guidance to rely on during the application process, and something concrete to refer back to if different instructions are given later.

By adding this extra step, you not only avoid buying the wrong property, but also make it easier to plan ahead and move through the approval process more efficiently.

Do Not Assume an Existing License Means the Property Is Safe

There are two points that many buyers misunderstand.

First, a hotel license can generally be transferred to a new owner, but a minpaku license cannot. This means, even if the seller is licensed, if there was a policy change since the seller got the license, you may not qualify for another license. 

Second, in some areas such as Taito-ku, local rules require the operator to stay on-site 24-7, and I’ve heard many stories where the seller registers their residency under the same just to obtain the license. This means, If you don’t do the same, you may not be able to maintain the license moving forward. 

So do not assume that a property is safe simply because it is advertised as “licensed.”

The property may already be operating illegally without the buyer realizing it.

Why This Happens So Often

After confronting the real estate agent who introduced this property, he eventually admitted that he simply “did not know” the rules.

Real estate agents may be experts in buying and selling properties, but unless they have direct experience operating and managing short-term rentals, they often know very little about practical requirements on the Minpaku and Hotel Business Act.

Imagine spending months searching, showing up to view multiple properties, and getting emotionally invested, only to discover at the end that the property can never legally operate as intended. You may have even lost a potential deal. 

If you are considering a property for short-term rental, we strongly recommend working with a real estate company that is actively involved in day-to-day operations and management — not only for the license but also to identify favourable properties for actual operation. 

That one difference can determine whether your purchase becomes a successful investment or an expensive mistake.

This is not the first time we’ve had to navigate issues with neighbors.

Previously, we learned how important early communication can be when introducing a short-term rental in a residential neighborhood:

That experience was about prevention.

This time, we were reminded of something equally important — how to respond when problems actually occur.

Recently, we received a series of complaints from neighbors regarding one of our rental properties.

The first complaint was about garbage being scattered by crows.

At every property, we provide designated disposal areas for different types of waste, including covered containers for food waste to prevent this kind of issue.

However, the guest did not follow the instructions.

The second complaint was about noise.

We were informed that guests had been making noise late at night over several consecutive days, to the point where it was affecting a neighbor’s ability to sleep and work.

In both cases, the root cause was the same.

The house guide — which includes the address, entry instructions, and house rules such as garbage disposal — had not been properly read before check-in.

This was not something new to us, but it reminded us how important it is to design the guest experience in a way that guides behavior naturally — so that the intended rules are followed without relying on guests to actively read and remember instructions.

To address this, we implemented additional preventive measures.

For garbage disposal, we placed clear instructions directly on the entrance door, where guests would naturally see them before taking the garbage out.

For noise, we posted reminders in the hallway where guests would see them immediately upon returning, reinforcing quiet behavior during nighttime hours.

It has now been about two weeks since these changes were made, and so far, no further issues have occurred.

In addition, we are planning to install a noise monitoring system.

We have seen cases where large, highly visible noise monitors negatively impacted guest reviews, so we opted for a more discreet system — one that only sends alerts when noise exceeds a certain threshold.

We also felt it was important to communicate these measures directly to the neighbors.

After explaining what we had implemented, we received the following response:

“We don’t want problems to happen, of course. But as long as you address them when they do, we have no issue.”

Even the neighbor who had been particularly upset about the noise responded with a simple “Thank you,” and the situation settled.

What We Learned

This experience reinforced something important.

Neighbors are not only concerned about the problems themselves — they are also observing how those problems are handled.

By speaking directly — not as an anonymous company, but as an individual — it becomes much easier to build understanding.

Of course, this should never be taken as an excuse to be careless. Preventing issues remains the priority.

But when problems do arise, responding sincerely and taking visible action can make a meaningful difference.

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.

Not every property can be used as a short-term rental — and even when it can, not every owner is comfortable doing so.

For properties such as condominium units, townhouses with management rules, or properties located in municipalities with strict short-term rental regulations, mid-term rentals offer a practical alternative. The same applies to owners who prefer not to have a constant flow of different guests coming in and out of their property.

The key difference is straightforward:

• Short-term rentals typically allow stays from one night and require registration or licensing depending on local regulations
• Mid-term rentals generally involve stays of 30 nights or more and do not require such approvals

Why Doesn’t Everyone Choose Mid-Term Rentals?

If mid-term rentals are simpler, why doesn’t everyone choose them?

Like any strategy, they come with both advantages and disadvantages.

Advantages

• Greater flexibility in property selection, without being constrained by zoning restrictions, building rules, or short-term rental regulations
• Access to financing options (see: Yen Loans, one of the few viable options for individual non-resident buyers)
• Faster and more cost-efficient setup, without licensing requirements or fire safety upgrades
• Tenants tend to take better care of the property, partly due to security deposits
• Longer stays are common, often ranging from a few months to half a year

Disadvantages

• Generally lower income compared to short-term stays, as longer-term tenants tend to have tighter budgets
• Longer turnover periods due to the minimum 30-night lease, making it difficult to fill short gaps between leases

Which Is More Suitable?

For those aiming to maximize income, short-term rentals may be the better option.

However, for owners who prioritize how their property is used — and prefer a more controlled and less intensive rental approach — mid-term rentals can be a more suitable choice.

Final Note

If you are unsure which strategy is more suitable for your situation, or if you already own a property and are looking for a property manager, feel free to schedule a call:

https://calendly.com/yoshi-jinzaki-jinshomes/new-meeting

In a previous article (https://jinshomes.com/3-things-to-check-before-buying-a-short-term-rental/), we explained that evaluating a potential short-term rental property involves three key steps:

• Whether the property can meet licensing requirements

• Capacity planning — bed configuration, renovation, and furnishing costs

• Financial projections

This article focuses on the third step: estimating net income.

Estimating Revenue

To estimate potential revenue, we analyze comparable listings of similar quality and guest capacity in the surrounding area.

We review booking calendars for the next three months and use the rates of highly occupied properties as the baseline for our estimates.

Note: When reviewing Airbnb listings, the displayed nightly price often includes a portion of the cleaning fee averaged across the stay. To approximate the true nightly rate, we discount the displayed price by several thousand yen to account for embedded cleaning costs.

For practical purposes, we define “highly occupied” as properties that are booked for:

• 20 or more nights in the current month

• 15 or more nights in each of the following two months

For Tokyo properties, we typically assume:

• 15 occupied nights per month for properties with a minpaku license (limited to 180 nights per year), which can often be supplemented with a few months of monthly rentals

• 20–25 occupied nights per month for properties with a hotel license

Occupancy and pricing vary seasonally, but this simplified approach is generally sufficient for initial screening.

Estimating Operating Costs

Once gross revenue is estimated, operating costs must be deducted to approximate net income. We use the following assumptions for quick back-of-the-envelope calculations in Tokyo.

OTA Fees — approximately 15%

Platforms such as Airbnb and Booking.com charge commissions that vary by platform (Airbnb ~15.5%, Booking.com roughly 12–15% as of May 2026). Using 15% as a baseline is reasonable for preliminary analysis.

Cleaning

Cleaning costs are typically passed on to guests as a separate fee. When priced appropriately, they can be treated as largely cost-neutral.

Utilities — approximately 7.5%

Utilities include electricity, gas, water, internet, and consumable supplies. Because usage increases with occupancy, estimating these costs as a percentage of revenue is practical.

Insurance, Taxes, Compliance, and Support — approximately 7.5%

Less visible expenses can materially affect profitability, including:

• Property insurance

• Guest liability coverage

• Property tax

• Fire safety inspections and maintenance

• Emergency response or local support personnel

Consumption Tax (if applicable, 10%)

If the property owner is subject to consumption tax (generally exceeding JPY 10 million in taxable revenue), the 10% tax should be factored into revenue projections.

Property Management Fees — approximately 15–25%

Full-service property management for short-term rentals in Tokyo typically falls within this range as a market norm.

A Practical Net Income Rule of Thumb

After accounting for the above costs, net operating income for a short-term rental in Tokyo typically falls in the range of 45–55% of gross revenue.

For detailed evaluation, we recommend modeling seasonal occupancy and pricing on a month-by-month basis. However, performing this level of analysis for every potential opportunity is inefficient.

For initial screening, assuming that roughly 50% of gross revenue becomes net income is usually sufficient and unlikely to produce major deviations. If a property still appears attractive under this assumption, it may warrant deeper investigation.

If you are evaluating a specific property in Tokyo, feel free to book a call to discuss its feasibility:

https://calendly.com/yoshi-jinzaki-jinshomes/new-meeting

We currently operate three short-term rental properties in the Komae area of Tokyo.

Our first project there began through a personal connection. A homeowner asked for help with a family home that had been vacant for nearly three years. At the time, we were actively looking for opportunities to gain practical experience in short-term rental operations. Despite our initial reaction — “Where exactly is Komae?” (a question many Tokyo residents themselves share) — we decided to examine the area more carefully.

Komae is located about 20 minutes southwest of Shinjuku on the Odakyu Line, between Setagaya (Tokyo) and Kawasaki (Kanagawa), along the Tama River. The city has three stations — Kitami, Komae, and Izumi-Tamagawa — and is zoned primarily for low-rise residential use, with very few tall buildings. The result is an open skyline and a calm atmosphere with little sense of urban crowding.

In recent years, the area has seen gradual redevelopment, with new commercial facilities and cafes opening while long-established local shopping streets remain active. National retail brands such as Starbucks have also entered the area, signaling steady local demand and a stable residential base. Each station area features a small public plaza, and the riverside offers extensive walking paths and sports grounds used daily by residents. Overall, it is a clean, safe, and family-oriented community.

While the area feels quiet and suburban, access to central Tokyo is straightforward. On the way to Shinjuku, the Odakyu Line passes popular destinations such as Shimokitazawa and Yoyogi-Uehara, and through services via the Chiyoda Line provide convenient travel to major districts including Omotesando, Akasaka, Kasumigaseki, and Otemachi. In other words, Komae sits firmly within the metropolitan commuting zone, making both residential and accommodation demand understandable.

How We Evaluated the Area

To better understand this demand and quantify its potential in order to determine a realistic investment budget, we analyzed the area from three perspectives:

• What types of competing accommodations exist nearby
• At what price they are advertised
• How fully booked they actually are

When accommodations are scarce in an area, it may indicate either weak demand or strict local regulations. Komae has not seen a rapid increase in accommodation supply; however, there has been sufficient supply since then, and many properties are performing well today.

A common way to estimate potential revenue is to observe competitor pricing. Fortunately, those competitors were (and are) accommodating similar group sizes, making comparisons straightforward.

Finally, and most importantly, we examined competitors’ booking calendars to see how far in advance they were already booked. Even among very similar properties, booking levels can vary dramatically. Excluding listings with special features such as BBQ facilities, pools, or rooftop terraces, the key difference typically comes down to the price per guest — not the maximum capacity, but the nightly rate based on a comfortable number of occupants.

Overpriced properties tend to remain largely vacant, reasonably priced ones are booked one to two months in advance, and competitively priced properties often have more than half of their calendars filled three to four months ahead.

Because the minpaku license limits short-term accommodation to 180 days per year (excluding stays longer than 30 days, which are treated as rentals), we conservatively assumed a 50% occupancy rate — approximately 15 nights per month — at competitive pricing, and proceeded because the overall investment scale made financial sense.

What We Learned Through Operation

In practice, our properties operate closer to 20 nights per month, reaching the 180-day limit in about nine months. We are also able to secure several months of long-term bookings exceeding 30 nights, resulting in high overall occupancy throughout the year.

In addition, we discovered an additional source of demand that was not immediately obvious from data alone. The broader area is home to numerous universities and attracts both domestic and international students, sports teams, and families, in addition to inbound tourists. As a result, the property receives a significant number of longer stays, with an average booking length of around six to seven nights — considerably longer than typical tourism-focused accommodations.

A Practical Entry Point Beyond Central Tokyo

While central districts such as Shibuya or Shinjuku often command higher nightly rates and occupancy, acquisition costs in these areas are substantially higher, meaning overall yields are not necessarily superior — and can often be lower.

Locations like Komae offer a different balance. Strong demand combined with more affordable purchase prices reduces downside risk and lowers the psychological barrier for first-time investors. At the same time, being only about 20 minutes from central Tokyo, the area provides a tranquil residential environment rarely found in the city center. This makes such properties appealing not only as income-generating assets but also as lifestyle investments or potential second homes.

For investors entering the short-term rental market for the first time, areas like Komae may represent a practical and lower-risk starting point.

When evaluating a property for short-term rentals, many people focus primarily on how the property will be operated after launch.

Operational quality certainly matters. In practice, it comes down to basic professionalism — responding to guest messages promptly, maintaining consistent cleanliness, and ensuring that the listing accurately reflects the property.

Assuming the property is managed by a reliable and professional operator, the next question becomes whether the property itself is suitable as a short-term rental investment.

There are three things to check before selecting a property.

1. Whether the Property Can Obtain an Operating License

The first and most fundamental question is whether the property can legally operate as a short-term rental.

In Japan, licensing feasibility depends on several regulatory factors.

At a basic level, this typically involves:

• Zoning of the property
• Building structure (a common checkpoint is the layout of the staircase)
• Additional municipal ordinances (mainly related to special zoning rules and operational requirements)

(*We will cover these topics in more detail in future posts.)

Some of these requirements can be confirmed through municipal websites. However, if you are unsure how to evaluate these factors, it is often best to consult someone familiar with the regulations and conduct a pre-purchase consultation with the relevant authorities before purchasing.

If you are evaluating a property and would like a second opinion on whether it may be suitable for short-term rental, you can schedule a consultation here:

https://calendly.com/yoshi-jinzaki-jinshomes/new-meeting

2. Planning and Cost Estimation

The second step is estimating how the property would be set up for operation and what that setup would cost.

This usually begins with determining:

• How many beds can comfortably be installed
• The resulting guest capacity
• The furniture, appliances, and amenities required to support that capacity

Renovation costs do not have a single correct answer. They depend largely on the condition of the property and the level of design quality the owner wants to achieve.

Regardless of the target quality level, it is common for small issues to appear once construction begins (for example plumbing problems or electrical upgrades). For this reason, renovation costs are generally better estimated with a margin of safety.

3. Estimating Income Potential

The third step is estimating the income potential of the property.

This usually involves analyzing comparable listings nearby to understand typical nightly pricing in the area and how occupancy tends to respond to those price levels.

In general, when listings of similar quality are compared, the lower-priced option tends to be favored. Today, most short-term rentals in Tokyo are presented at a certain standard, making it difficult to create large differences in quality between comparable listings. As long as properties are properly maintained and honestly presented, pricing often becomes the deciding factor.

That being said, it is important to evaluate not only what price other listings advertise, but also the occupancy level at the advertised price.

To take this analysis one step further, it can be helpful to evaluate listings based on price per guest, rather than simply comparing nightly rates. For example, a property that appears in search results for six guests may actually have the capacity to host twelve people, which allows it to charge a higher nightly rate.

However, many listings also adjust pricing depending on the number of guests, so careful observation is required to understand the true pricing structure.

If you would like help evaluating the income potential of a property, you can schedule a consultation here:

https://calendly.com/yoshi-jinzaki-jinshomes/new-meeting

The Most Important Investment Decision

Taking these three factors together — licensing feasibility, setup costs, and income projections — investors can usually estimate a reasonable range for the property’s potential performance.

In short-term rental markets, pricing and occupancy patterns are often visible through comparable listings. This means that the potential income of a property can usually be approximated before it is purchased.

Once that income range is understood, the most important question becomes simple:

Was the property acquired at a price that allows those projected returns to make sense?

If the acquisition price is favorable, the owner has flexibility to adjust pricing and maintain healthy occupancy. If the property is purchased at an aggressive price, achieving the expected returns becomes much more difficult.

In practice, the success or failure of a short-term rental investment — whether it ultimately delivers the expected returns or falls short — is often determined less by what happens after launch and more by the accuracy of the income assumptions and the price at which the property was acquired.

If you are currently evaluating a property and would like a second opinion before making a purchase decision, you can schedule a consultation here:

https://calendly.com/yoshi-jinzaki-jinshomes/new-meeting

In one of our early projects, we learned an important lesson about dealing with neighbors.

In Japan, launching a short-term rental begins with advance notification. Operators are required to notify nearby residents either by posting written notices or by explaining the project in person. If objections are raised within a specified period, those concerns and the proposed responses must be summarized in the application.

At the time, we were short on time and completed the notification by posting written notices only.

In central Tokyo, this might not have caused much reaction.

But this property was located in a quiet residential area of Tokyo, on a narrow private road shared by six elderly households.

One week later, one of the shared road owners called and requested an explanatory meeting.

In short-term rentals, the main concerns are usually garbage and noise. We prepared a summary of the preventive measures and response systems we had already implemented in other operating properties.

On the day of the meeting, all five neighboring households attended. Through their connections, even a city council member joined.

Before we could begin explaining the project, opposition voices were raised. Some residents were visibly upset. One person even made a comment that bordered on a threat.

The atmosphere was tense.

During the meeting, we clarified three points.

First, we were following proper procedures under the Residential Lodging (Minpaku) Act.

Second, neighbors do not have the authority to stop a properly filed operation.

Third, we explained our garbage control measures, noise prevention policies, and our commitment to respond promptly if any issue arose.

Most eventually accepted the situation, though not comfortably. A few remained emotionally opposed.

We began the interior renovation after submitting the short-term rental application, as approval typically takes several weeks.

We wanted to avoid further friction, so every time we visited the property, we greeted the neighbors and asked our contractors to do the same.

Over the next few months, the atmosphere gradually changed. The tension eased and conversations became easier.

By the time construction was completed, we were on good enough terms to be invited into one of the neighbors’ homes for tea.

After operations began, they allowed our cleaners to temporarily park on the shared private road during cleaning.

Today, the property operates with consistent five-star reviews.

From this experience, we took away two lessons.

First, especially in quieter neighborhoods and among elderly residents, investing time in relationships matters. What appears to be opposition is often uncertainty.

Second, while many short-term rental issues relate to garbage and noise management, some conflicts stem from insufficient communication.

Since then, whenever necessary, we conduct advance notification in person and bring a small gift as a courtesy. We make a deliberate effort to communicate early and consistently. We also mention that we occasionally look for part-time cleaning staff — and in a few cases, neighbors have joined our team.

Proper operations are essential.

But in our experience, communication with the local community can be just as important for long-term stability. 

Coming Soon..