Gross vs. Net Yield in Tokyo: Reading the Real Cash Flow
Published
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.
Short answer
The gross yield is rent ÷ price. It ignores every cost.
In the example a 4.8% gross yield becomes 3.52% after running costs, and the loan turns the month negative.
Three yields for the same condo
¥22,000,000 condo, rent ¥88,000 a month
Gross yield
4.8%
¥1,056,000 ÷ ¥22,000,000
Net yield (NOI)
3.52%
¥775,200 ÷ ¥22,000,000
With the loan
−¥3,892
per month
Listings in Japan advertise the gross yield (表面利回り, hyōmen rimawari). The net yield subtracts running costs; that is roughly what an all-cash buyer earns before income tax. With a loan, what matters is the monthly balance after the loan payment.
The monthly breakdown
| Item | Amount |
|---|---|
| Rent | ¥88,000 |
| Management fee | −¥8,000 |
| Repair reserve fund | −¥6,000 |
| Rent collection fee (5%) | −¥4,400 |
| Property tax (¥60,000 a year) | −¥5,000 |
| Net operating income | ¥64,600 |
| Loan payment (¥21M, 1.9%, 35 years) | −¥68,492 |
| Monthly balance before tax | −¥3,892 |
The management fee and repair reserve go to the building's owners' association (管理組合). The collection fee goes to the rental management company that finds tenants and collects rent. None of these stop when the unit is empty.
What moves the balance
Effect on one year
The tax refund in the first years can cover these shortfalls, but it ends (see tax refunds from a rental condo). Plan the property so that the monthly balance is survivable without the refund.
Estimating the rent you will really get
- Compare current listings, not the rent the seller quotes: look up similar units in the same building or station area, same size and age.
- Expect rent to fall with age: older one-room units typically lose a little rent each year. The simulator assumes 0.5% a year by default.
- Check the current lease if the unit is already rented: the rent, the start date, and whether it is above today's market (a high rent can drop when the tenant leaves).
- Renewal fees and key money vary by area and are not guaranteed; do not count on them in your plan.
A cautious plan uses a rent you are confident of, adds one or two months of vacancy every few years, and still leaves a balance you can carry from your salary.
Test it
Details: master leases, tenant turnover and costs people forget
Master lease (sublease)
Some sellers offer a guaranteed rent: a company leases the unit from you and sublets it. The guaranteed rent is lower than market rent, and contracts usually allow the company to revise it, often every few years. Check the review clause, the notice period and whether you can cancel.
Tenant turnover
- Cleaning and restoration after a tenant leaves (the owner pays for normal wear and tear).
- Advertising fees to the leasing agent, often one month of rent.
- One to three months without rent while the unit is marketed.
Costs that appear later
- Water heater, air conditioner and kitchen replacement (typically every 10–15 years).
- Real estate acquisition tax, billed a few months after purchase.
- Tax-return preparation if you use an accountant.
Frequently asked questions
Q. Is a 5% gross yield good for Tokyo?
Q. Why is the property tax only ¥60,000?
Q. Should I prepay the loan?
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.
More articles
- Investing in a Tokyo One-Room Condo as a Foreign Resident
- Tax Refunds from a Japanese Rental Condo: The Loss Offset
- Depreciation of Used Condos in Japan: The Simplified Method
- Selling Property in Japan: Capital Gains Tax and the 5-Year Rule
- Can Foreigners Buy Property in Japan? Rules, Steps and Costs
- Renting Out Japanese Property from Abroad: 20.42% Withholding
- Selling Japanese Property as a Non-Resident: 10.21% Withholding
- Leaving Japan with a Rental Condo: What Changes for Tax
These articles explain how the system generally works. They are not tax, legal or investment advice for your situation. Check with the tax office, your municipality or a licensed tax accountant.