Property Investment: How to Recruit Tenants to your Property
When investing in real estate, buying property itself can be a lengthy process. However, the process does not end there if you wish to begin making profits through your investment. One of the most important factors in making a profit is recruiting a tenant to generate regular income on your new purchase. In this article, we will share with you the dos and don’ts of recruiting a tenant and getting your investment property filled quickly.
1. Seasonal Market
No matter what time of year you purchased your new investment, it’s always exciting. However, there is a “right time” to purchase. If you happen to purchase during a low period in the market, it may be more difficult to find a tenant. In Japan, the peak purchasing and rental times are in the beginning of the year between January and March. People are looking for a fresh start to the New Year, meaning they will be eager to move into a new place. Therefore, you may want to consider purchasing shortly before this peak moving season begins in order to avoid large gaps in vacancy.
2. Market trends
A reason why you may not be recruiting tenants as soon as you would have hoped is that the ever-changing market prices may be at a peak high. While receiving a large sum of rent each month sounds appealing as an owner, prospective buyers may be hesitant to move when prices are higher than usual. In order to combat this issue, there are steps you can take to recruit a tenant fast despite market prices. We will discuss this next.
3. Advertising by budget
You likely have an ideal amount in mind that you want to receive each month from your rental. However, at first look, this price may look a bit steep, or just go over search ranges when prospective tenants search for property based on budget. For example, let’s say you would like to receive ¥100,000 per month. Prospective renters may initially search for properties under ¥100,000, meaning your property will be excluded. To avoid this, you can list your property at ¥95,000 and charge a ¥5,000 management or building fee. Through this method, your property will show up in a lower budget search, but still generate your original ideal price.
4. Low start up fees
If you happen to purchase in the off season, or your tenant moves out after the peak renting time is over, you can reduce the initial move in fees to recruit tenants quickly. In Japan, almost all rental properties will charge a security deposit (in many cases non-refundable) in addition to something called “Key Money.” Both charges can cost around one to two month’s rent price. For some tenants, this can be a bit of a financial hurdle. In order to appeal to a prospective resident, you can offer lower or no key money. On many real estate sites there is an option to search for properties without key money. If you elect to eliminate key money, your property will be included in a broader search range.
5. Special offers
In addition to reducing move in costs, you may want to consider offering special discounts to new tenants. For example, many companies choose to offer one or month’s rent for free. In the long run, offering one month free may be a better option in comparison to having a unit vacant for months at a time. During times of economic recession, this is a way to fill up vacancies to satisfy the needs of the investor.
6. Comparing unit prices
When advertising your property, it is essential to look into the rental prices of units within the same building, or that are similar to your unit. If your rental is being listed for significantly more than other units in the same buildings, it is very unlikely that your unit will be chosen over another similar unit in the same building for a lower price. Analyzing asking prices for other units will allow you to set a competitive, yet appealing price for your unit.
7. Your online listing
Your unit’s listing online is the most important agent for attracting tenants. If your listing lacks pictures, details, or essential information, prospective residents might not find your rental appealing. Units that are advertised online with many pictures, specific details (sizes, rules, aesthetic aspects, etc), and all of the necessary information a tenant may want to know (are pets allowed? What cardinal direction is the unit facing? Is the building earthquake safe?), are more likely to generate appeal to those viewing online.
Something unique that more and more properties are offering “360° online viewings.” Prospective residents can view the interior of the unit completely online through the use of a 360° camera. With this, people can get a feel for the unit before an in-person viewing. Being able to view the inside of a unit from the comfort of your home can be a huge plus in generating interest.
8. Condition of the unit and building
If your unit has not been renovated or the appliances have not been upgraded in over ten years, it may look a bit unappealing. Older appliances can lead to higher utility charges, creating a burden on the resident in addition to being environmentally unfriendly. A simple upgrade in a refrigerator, air conditioning unit, or stovetop can make a world of a difference in aesthetic appearances, appealing to a wider range of potential residents. Furthermore, if you choose to purchase a unit in a rather old building that lacks modern safety standards (such as earthquake and fire protection), you may lose many potential renters. As many buildings in Tokyo are undergoing major renovation, it is in your best interest to be aware of the effect a building’s age may have on your unit’s possibility of being rented quickly and for a longer period of time.
9. Property Management options
If all else is failing and you still cannot generate tenants, or if you simply wish to avoid dealing with the process of filling vacancies yourself, you may want to consider using a property management company. These companies will charge a fee, but may offer convenient services and prioritized advertising on major sites and physical locations (such as in real estate offices).
If you have any questions or would like to arrange a viewing, please feel free to contact us!
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- An overview about purchasing property in Japan
- Steps in purchasing property in detail with Property Flow, Costs and Taxes
- Example case
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