Financing a Tokyo rental apartment from the United States

“I actually used to work in Tokyo. I lived there for several years, working as an expat […]. The experience was positive for me professionally, and also from a cultural perspective. It was a very pleasant and very educational experience, in Tokyo and in Japan in general — it became my second home.”

“We had very specific criteria. We needed a community that had great food and a sense of culture and history. We didn’t want big crowds.”

“I put the pencil down on the map and said, for what we were looking at and what we could afford, that seems to be the better location. You stay up late at night and you just keep on searching properties. […] Our agent actually stopped sending us listings. I would send him listings and say, ‘Look at this, show us this.’ We pretty much knew exactly what we wanted.”

“We saw one property in the same building, but […] the seller had decided to demolish everything, down to bare concrete. […] We found another property that was a floor higher, the same layout, and it was fully renovated. I would say it’s luck, because that property had someone in contract already, and I believe the transaction fell through. We were told we could bid on it, […] so we acted very quickly.”

“And the financing part was a consideration. A wrecked apartment would probably not be attractive to any lender. Also, we wanted an investment property. This was fully renovated, ready to go, in a location that was prime.”

“Before we decided on this place, we bid on a different property. It was a smaller property. […] But at the end of the day, we decided not to go with that property, because the seller was being difficult. They kept on pressuring us to keep accelerating the timeline, and it was just really difficult.”

“We were able to afford to pay cash on that one, so we thought we would move forward. But given the considerations that we just shared, we pulled out. And then we just kept on looking and searching.”

“A random search-engine search. We were looking up questions like, ‘How do I get a mortgage in Japan if I’m a non-resident?’ There’s only a handful of lenders. We engaged with [an overseas bank], but […] they were amazingly slow. There were other banks, but we didn’t qualify. […] Then YEN LOANS popped up along the same list of articles answering that same question.”

“We spoke to our agent first, because we didn’t know exactly if this was legit. […] Our agent called up [the YEN LOANS team], started talking, and got a sense of what the business is like and who they are. That gave him the confidence to say, ‘They seem legitimate — you should engage and see how far it goes.’”

“It was very professional, to be honest. […] There was always a very quick turnaround — a prompt and timely response on any question.”

“We thought that was the best option for us because we were going to rent the apartment. And at the same time, we only have a 13-year loan. […] For us, it was the fact that we could get the financing quickly and efficiently, and lock it in. Our professional circumstances prevent us from just moving to Tokyo outright, so […] renting it was the right solution for our situation. […] It’s all about the circumstances.”

YEN LOANS note Under our current terms, an interest-only period of up to five years is available, after which the loan reverts to normal amortization. A premium applies to the rate during the interest-only period only, and the monthly payment steps up when amortization begins — the calculator shows both payments. This loan was written on earlier terms, under which the premium applies for the full term. Here, the expected rent on the apartment covers the monthly payment during the interest-only period.

“It’s not a surprise to me, because we did a lot of research […]. You can get a loan, but at the end of the day you’re going to have to pay at least 50% up front. So we had to figure out how much we could afford.”

“Because of that limit on borrowing power, we had to rely on resources based here in the US. Anyone who is thinking about using your lending service has to be cognizant of that. It’s not going to be 20% down and you’re good to go.”

YEN LOANS note The loan is sized on an independent valuation of the property, carried out by a third-party appraiser and not by YEN LOANS, up to a maximum of 65% of that valuation. The valuation is commissioned once an application is made. It reflects the building’s age, location, developer and specification, and it can sit below the purchase price, in which case the buyer funds the difference.

“With the previous transaction that failed, the other side were really trying to push aggressively to get everything done during the holiday season. […] So for us, having more of a luxury — contract to closing was six to eight weeks — it was good. We weren’t pushing it. There was no pressure on our side. We were just worried that if it took too long, the seller might back out.”

“Our agent sent us a text — ‘Congratulations, everything went through’ — and a picture of the keys. The next day we got the keys and we saw the apartment. […] It was pretty smooth. [The YEN LOANS team] did a good job of talking it through and letting us know in advance: ‘This is what we need, and this is when we need it.’”

YEN LOANS note The settlement date is set by the sale and purchase agreement (売買契約書) between buyer and seller, not by the loan. Here the loan offer was issued three days after the application was submitted.

“Our agent’s firm is not the property manager, but they got us the property manager. […] I closed my Japanese bank account, unfortunately, so we have to work through our property manager, and it seems pretty self-explanatory. They’re very responsive and pretty clear on what they need to do. It helps that both our agents speak English.”

YEN LOANS note Where a borrower has no Japanese bank account, we require a local property manager (管理会社, kanri-gaisha), and the monthly payment is collected from the property’s management account. Where the property is let, the rent is paid into that account. If you do not already have a manager, we can introduce one.

“We never like paying fees, just so you know. […] You had a brochure, and we read it. There’s nothing shocking. In any real estate transaction, even here in the US, on the day of closing there are fees that crop up out of the woodwork. […] There’s a lot of administrative paperwork and costs that come with it, so be prepared.”

“The first one was an application fee. That was new to us, and we questioned it — ‘Should we go through with this?’ […] It was maybe the only thing that gave us pause, because it is a chunk of money. But then again, even in the States, if you’re entering a mortgage, you’re going to pay a mortgage application fee.”

“The loan-to-value is something that we really needed to think about, to be honest. We wanted to maximize it, so in the end we had to find a property where we could have at least 50 to 60%.”

“Your list of prefectures and cities is very limited, to be honest. If you’re limited to the big cities, and you’re saying a property in Kyoto has to be within a ten-minute walk of a train station, that’s impossible. […] We’re not stopping with this one. We actually want another home, but it’s a house as opposed to an apartment.”

YEN LOANS note Lending is currently limited to apartments in the metropolitan areas listed on our eligibility page; detached houses and other locations fall outside our criteria today. If your property is outside them, you can register your interest.

“Understand how real estate is valued and what drives the market in Tokyo, because it’s not the same thing as the United States. Understand the lending environment you’re part of. And understand your own goals. Do you just want a vacation place, do you want to build a home in Japan, or do you just want an investment property? Whichever it is, really understand why you want it that way — and that things can change.”

“I agree. It’s about setting one’s expectations: what works in America doesn’t necessarily work elsewhere.”