Investing in a Tokyo One-Room Condo as a Foreign Resident

Published October 26, 2026

Written by: Licensed real estate broker in Japan, 10 years at a listed real estate company, now a salaried landlord

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.

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Short answer

A Tokyo one-room condo bought with a loan rarely pays you every month.

What makes it work on paper is the income tax refund in the first years. Check what happens after those years end.

If you live in Japan and earn a salary here, you have probably been contacted by an agent offering a "tax-saving" one-room condo. This article walks through one realistic example, using the same calculation as the simulator on this site, so you can see where the money comes from and where it goes.

The example

A used one-room condo in Tokyo
Item	Value
Price	¥22,000,000
Building	Reinforced concrete, 14 years old
Rent	¥88,000 per month
Management fee + repair reserve	¥14,000 per month
Rent collection fee (5%)	¥4,400 per month
Property tax	¥60,000 per year
Purchase costs	¥800,000 (bought from a reseller, no brokerage fee)
Loan	¥21,000,000, 1.9%, 35 years
Your salary	¥8,000,000 per year, single

Month by month: slightly negative

Where ¥88,000 of rent goes each month

Loan payment

¥68,492

Management fee + repair reserve

¥14,000

Property tax (per month)

¥5,000

Rent collection fee

¥4,400

Property tax is paid a few times a year; it is shown here as a monthly amount.

Rent of ¥88,000 minus ¥91,892 of payments leaves about −¥3,900 a month. You pay a little every month to own the unit. The gross yield in the advertisement is 4.8% (¥1,056,000 a year ÷ ¥22,000,000), but the loan payment alone takes most of the rent.

The tax refund is what turns it positive

For tax, a rental condo is a small business. You can deduct depreciation of the building, loan interest, management fees and property tax. In the first years these deductions exceed the rent, so the property shows a loss on paper. That loss is subtracted from your salary, and part of the income tax withheld at work comes back.

Tax refund in the example

Year 1

¥497,300

includes purchase costs

Years 2–3

¥310,200

per year (year 2)

Year 4 onward

−¥36,800

you pay extra tax

Income tax refund after filing in February–March, plus lower resident tax deducted from salary from the next June.

The large refund lasts only three years here. A 14-year-old building's equipment (plumbing, electrical) is written off in just three years under Japan's simplified useful-life method, so depreciation drops sharply in year 4. From then on the property shows a taxable profit, and you pay tax while the monthly balance is still negative.

After-tax cash flow by year (example)

Year 1

−¥289,404 (purchase costs paid)

Year 2

+¥258,216

Year 3

+¥251,362

Year 4

−¥99,265

Year 5

−¥105,766

So why do people buy?

Equity builds up: about ¥35,000 of each monthly payment reduces the loan at first, and more later.
An asset at the end: after 35 years the loan is gone and the rent is yours, if the building is still rentable.
Leverage: you control a ¥22 million asset with about ¥1.8 million of your own money.

Whether that is worth paying for depends on the sale price years later, rent levels, interest rates and repairs. None of those are guaranteed, and the tax refund does not make a weak property strong.

Five checks before you sign

Monthly balance
Rent − loan − fees − property tax
Refund years
When does depreciation drop?
Rate +1%
Still affordable?
Vacancy
2–3 months every few years
Exit price
What could it sell for in 10 years?

You can enter your own numbers in the condo simulator and see the monthly balance, the refund by year and the 35-year projection at once.

Details: who counts as a resident, loans, and risks

Resident or non-resident for tax

Japanese tax treats you as a resident if you have your domicile in Japan or have lived here for a year or more. Residents add rental income or loss to their salary and file a tax return between February 16 and March 15 of the following year. Non-permanent residents (foreign nationals who have lived in Japan for five years or less in the past ten) are taxed the same way on Japanese rental income. If you leave Japan and become a non-resident, the rental income is still taxable in Japan, but you can no longer offset a loss against a Japanese salary (see leaving Japan with a rental condo).

Loans for foreign residents

Many Japanese banks lend to foreign residents with permanent residency, and some lend with other visas if you have a stable job and enough years in Japan. Conditions differ by bank and change often, so ask the lender directly. Loans for investment property generally carry higher rates than home loans.

The main risks

Interest rate rises: most investment loans are variable. A 1% rise on ¥21 million adds roughly ¥11,000 to the monthly payment.
Vacancy and rent decline: older units rent for less, and every move-out costs cleaning and a few months of no rent.
Repair reserve increases: building associations raise the reserve as the building ages.
Selling below the loan balance: in the early years the loan balance can exceed what the unit sells for.
Master lease (sublease) terms: a guaranteed rent can be reduced by the company later; read the review clauses.

Numbers in this article

All figures come from the simulator on this site with the inputs in the table above. Rent is assumed to fall slightly each year (0.5%). Taxes follow the 2026 rules for income tax and resident tax.

Frequently asked questions

Q. Is the tax refund guaranteed?

A. No. It depends on your salary, other deductions and the property's expenses each year. It shrinks or disappears when depreciation drops.

Q. Do I need to file a tax return?

A. Yes. Rental income or loss must be reported in a final tax return every year, even if your employer handles your salary tax.

Q. Can I buy without a loan?

A. Yes. Then the monthly balance is positive, but there is little paper loss, so there is almost no tax refund.

Q. What happens if I leave Japan?

A. You can keep the property. Rent remains taxable in Japan, and you usually need a tax representative. The loss offset against salary no longer applies.

Sources