1R Investment Labs
Japan Condo Investing Notes
Practical notes for foreigners looking at one-room condos in Japan (listed as "1R" in Japanese listings): how the numbers work, how the tax refund on a rental loss is calculated, depreciation of used condos, cash flow, and selling.
Written by a licensed real estate broker in Japan (takken-shi) who worked for ten years at a listed Japanese real estate company and now owns rental property while working a salaried job. Figures in each article come from the free simulator on this site.
Most articles use the same example so you can follow one property from purchase to sale: a 14-year-old ¥22 million concrete condo in Tokyo renting for ¥88,000 a month, bought with a ¥21 million loan at 1.9% over 35 years by someone earning ¥8 million a year. Change any of these in the simulator to see your own case. Articles are updated when tax rules change; the update date is shown under each title.
Key points
- A Tokyo one-room condo bought with a loan usually costs a little each month. The income tax refund in the first years is what makes it look positive.
- The refund comes from offsetting a paper loss (mostly depreciation) against your salary. Interest on the part of the loan used for land does not count.
- Used buildings can be depreciated over a shorter life, so equipment in an older building may be written off in 2–3 years and the refund ends early.
- Depreciation lowers your cost basis, so selling can create a taxable gain even below the purchase price. Gains are taxed at 39.63% within five years (counted from January 1) and 20.315% after.
- Foreigners can own property in Japan without nationality restrictions. Loans depend on residence status, and non-residents have extra reporting and withholding rules.
- If you live abroad, rent is withheld at 20.42% when a company pays it, and the buyer withholds 10.21% of the price when you sell. A tax return settles both.
Run your own numbers
Enter the price, rent, loan and your salary to see the monthly cash flow, the tax refund and a 35-year projection. Runs in your browser.
- Leaving Japan with a Rental Condo: What Changes for TaxThe tax refund from a rental loss stops once you leave, but later years can cost less. What changes, with numbers, and what to arrange before departure.Keeping a Japanese rental condo after moving abroad: the loss offset ends, resident tax stops, withholding starts, and a checklist for before you leave.
- Renting Out Japanese Property from Abroad: 20.42% WithholdingRent from a Japanese condo stays taxable after you move abroad. A company paying you must withhold 20.42%, but for one small unit the tax due is often zero.Non-residents pay Japanese tax on rent from Japan. When the 20.42% withholding applies, how the tax return gets it back, and a worked example for one condo.
- Selling Japanese Property as a Non-Resident: 10.21% WithholdingThe buyer holds back 10.21% of the whole price, far more than the tax on the gain. A worked example shows the refund and the cash you get at closing.When a non-resident sells, the buyer withholds 10.21% of the price. The real tax on the gain, the refund, and why a loan can leave you short at closing.
- Investing in a Tokyo One-Room Condo as a Foreign ResidentWhat you actually buy, what it costs each month, where the tax refund comes from, and why the numbers usually turn negative after a few years.How one-room condo investment in Japan works for foreign residents: price, rent, monthly costs, loans, the tax refund and the risks, with a worked example.
- Can Foreigners Buy Property in Japan? Rules, Steps and CostsThere is no nationality restriction on owning property in Japan. What you need is the paperwork, the cash for purchase costs, and, for a loan, residence status.Foreigners can own land and buildings in Japan. The purchase steps, documents, taxes and fees, and the extra reports that may apply to non-residents.
- Tax Refunds from a Japanese Rental Condo: The Loss OffsetA rental loss on paper is offset against your salary, so tax withheld at work comes back. Here is how it works and how long it lasts.Why salaried residents in Japan get income tax back when a rental condo shows a paper loss, how much, the land-interest rule (Art. 41-4), and when it ends.
- Depreciation of Used Condos in Japan: The Simplified MethodA 14-year-old concrete condo is depreciated over 35 years, its equipment over just 3. That short life drives the early tax refunds.How the useful life of a used condo is set in Japan (the simplified method), why equipment can be written off in a few years, and what that means for tax.
- Selling Property in Japan: Capital Gains Tax and the 5-Year RuleSelling at a loss to the price you paid can still create a taxable gain, because depreciation lowered your cost basis. Timing the sale matters.Japan taxes property gains at 39.63% or 20.315%, depending on whether you held it over five years as of January 1. Why depreciation raises the gain.
- Gross vs. Net Yield in Tokyo: Reading the Real Cash FlowThe advertised yield is rent divided by price. What reaches your bank account is much smaller. Here is the full monthly breakdown.A 4.8% gross yield on a Tokyo condo can mean a negative monthly balance. How management fees, repair reserves, property tax and the loan eat into rent.