Understanding the Framework & Buying Process

1. Who Is a Non-Resident in Japan?

In Japan, the term non-resident has a specific meaning defined by the Japanese Income Tax Act and Foreign Exchange and Foreign Trade Act (FEFTA). A non-resident refers to any individual who has lived outside of Japan for more than one year and does not maintain a permanent domicile within the country.
For real estate purposes, the distinction between resident and non-resident matters mainly for taxation and financial transactions, not for ownership rights.

Unlike many countries that restrict property ownership to citizens or permanent residents, Japan’s property market is open to everyone, regardless of nationality or residency status.
This means that even if you live entirely abroad — in Hong Kong, Singapore, the U.S., or Europe — you can legally purchase land, houses, and apartments in Japan under your own name.

The only differences arise in:

• How you handle contracts and documentation (since you are overseas)
• How taxes are applied and reported
• How money transfers are regulated under Japan’s anti-money-laundering rules

From a legal standpoint, Japan treats foreign and Japanese buyers equally in terms of property ownership. You have full ownership rights (called freehold), including the right to sell, rent, inherit, or pass on your property.

2. Can Non-Residents Buy Real Estate in Japan?

Yes — absolutely.
Japan imposes no legal restrictions on foreign nationals or non-residents purchasing property. You can buy:

• Land and buildings (freehold)
• Condominiums
• Detached houses
• Investment apartments
• Commercial or industrial properties

There are no government approvals or quotas like in Thailand or Indonesia, and foreign buyers can register ownership directly at the Legal Affairs Bureau (Hōmukyoku) in their own name.

However, certain considerations apply:

(1) Registration and Identification

To register your ownership, you’ll need:

• A passport copy
• Address verification (in your home country)
• A Japanese tax ID number (Individual Number = “My Number” is not required for non-residents, but a Taxpayer Number may be assigned)
• A certificate of registered seal (inkan) or notarized signature sample

Since you won’t have a Japanese “seal registration certificate,” your real estate agent or judicial scrivener (shihō shoshi) will verify your signature through notarized documents instead.

(2) Financial Transfers

All real estate purchases are done in Japanese yen.
If your purchase involves a large overseas transfer, the transaction must comply with the Foreign Exchange and Foreign Trade Act (FEFTA). Banks and real estate companies are required to report transactions over ¥30 million (approx. USD 200,000) to the Ministry of Finance.

(3) Reporting Obligations

When purchasing land, buyers (including non-residents) are required to submit a “Real Estate Acquisition Report” to the Ministry of Land, Infrastructure, Transport and Tourism (MLIT). Your agent usually handles this step on your behalf.

3. The Step-by-Step Purchase Process

The purchasing process in Japan is standardized and transparent, though paperwork-heavy. Here’s how it typically works for non-resident investors:

Step 1: Property Search

You can find available listings through:

• Major online portals like SUUMO, HOME’S, or Rakumachi
• Specialized agencies offering English support for foreigners
• Investment-focused brokerages dealing with apartment blocks, land, or hotel projects

Agents can provide digital floor plans, income reports, and virtual tours.
If you’re abroad, you can handle most of this remotely.

Step 2: Property Viewing (Virtual or In-Person)

In the post-pandemic era, virtual tours via Zoom or Matterport are standard.
Agents can stream live walkthroughs, allowing you to inspect room layout, condition, and view.
Some platforms now integrate Google Earth overlays and building history records for transparency.

Step 3: Making an Offer

Once you find a suitable property, you submit a Letter of Intent (LOI) — kaitsuke shōsho (買付証明書) — which includes:

• Your offer price
• Payment terms
• Proposed schedule for contract and closing

The seller may accept, reject, or counteroffer.

Step 4: Explanation of Important Matters (IT-Jūsetsu)

Before signing a purchase agreement, Japanese law requires a “Explanation of Important Matters” (重要事項説明) to be given by a licensed real estate agent.
Since 2021, Japan officially allows this step to be conducted online via video conference, a system called “IT-Jūsetsu.”

This means you can receive a legally valid property briefing from overseas, as long as the session is recorded and your identity verified.

Step 5: Signing the Purchase Agreement

Traditionally, contracts were signed with an inkan (seal) and paper documents.
Today, most brokers and law firms accept digital signatures via:

• DocuSign Japan
• CloudSign
• Adobe Acrobat Sign

Payment of a deposit (typically 5–10%) is made via bank transfer to the seller’s escrow account.

Step 6: Settlement and Registration

At settlement, the remaining balance is paid, and ownership is transferred.
A judicial scrivener submits your ownership registration to the Legal Affairs Bureau, even if you are abroad.
Your title deed (登記識別情報通知) and property registry (登記簿謄本) are then issued.

Step 7: Post-Purchase Registration & Tax Setup

After purchase, you (or your agent) must:

• Register your property for property tax purposes
• Notify local authorities if the property will be rented
• Appoint a tax representative (zei dairi-nin) if you live abroad

4. Using Online Tools and Remote Procedures

The digital transformation of Japan’s real estate sector now enables nearly every step of the process to be conducted remotely, from property selection to ownership registration.

(1) IT-Based Explanations and Contracts

As mentioned, IT-Jūsetsu allows licensed agents to conduct all mandatory briefings through secure video calls.
This is a game-changer for non-residents who can now purchase property without visiting Japan.

In addition:

• Electronic contracts via CloudSign are fully recognized under Japan’s Electronic Signature Act.
• Identity verification can be done by uploading a passport scan and video verification.

(2) Online Mortgage Consultations

Some banks and finance companies now offer remote mortgage consultations in English, especially for overseas Japanese and permanent residents.
While full approval often requires a Japanese address or guarantor, remote pre-screening helps investors gauge eligibility.

(3) Digital Payments and Escrow

Payment platforms like Wise (TransferWise) or Revolut are frequently used to send funds to Japan, though large transfers must go through bank compliance checks.
Some law offices provide escrow accounts to securely hold deposits until closing.

(4) Virtual Property Management Portals

Post-purchase, investors can use online dashboards to monitor rent, repairs, and tenant status.
Common examples include:

• Property Owner Web (Sumitomo, Mitsui, etc.)
• Global Link Management Portal
• Cloud-based systems integrating tax reporting and maintenance tracking

By using these online tools, non-residents can manage assets across continents almost as if they were in Japan.

5. Working with a Legal Representative or Agent in Japan

Because non-residents often cannot attend signings or handle local administrative tasks, appointing a legal representative (代理人契約) is extremely common — and recommended.

(1) What Is an Agent Contract (Dairinin Keiyaku)?

This is a power of attorney agreement authorizing a person or company in Japan to act on your behalf for specific tasks, such as:

• Signing the purchase agreement
• Handling payments and settlement
• Registering the property
• Receiving mail and tax notices

Your representative might be a:

• Real estate agent
• Judicial scrivener
• Lawyer
• Trusted local partner or friend

(2) How to Create a Valid Agent Agreement

You’ll need:

• A Power of Attorney (POA) letter in Japanese
• Your notarized signature (authenticated by a notary or Japanese consulate)
• Copy of your passport
• The agent’s full legal information (name, address, registration number if applicable)

If signed abroad, the POA must be notarized and apostilled for use in Japan.
Once submitted, the agent can legally sign and complete the real estate transaction on your behalf.

(3) Types of Agent Representation

There are two main types:

1. Full representation (Zen-dairi) – grants complete authority to handle purchase, registration, and management.
2. Limited representation (Ichi-bu dairinin) – grants authority for specific actions (e.g., signing the purchase contract only).

(4) Fees and Trust Considerations

Agent or proxy fees vary depending on the complexity:

• Legal professionals (lawyers, judicial scriveners): ¥50,000–¥150,000
• Real estate agents offering proxy services: often included in brokerage fees
• Management companies: 3–5% of monthly rent for ongoing representation

Choose an agent with real estate experience, bilingual communication, and a proven record of handling non-resident clients.
A poor agent choice can lead to financial loss or unauthorized decisions.

(5) Why a Legal Representative Is Crucial

• You can close deals even when outside Japan
• Your agent ensures compliance with Japanese legal standards
• Smooth handling of property registration, utilities, and taxes
• Serves as your communication bridge with tenants, banks, and authorities

Having a properly executed 代理人契約 is the key to investing safely from abroad.

Ownership, Management, and Investment Strategy

6. Financing, Sending Funds, and Loan Options

One of the most challenging aspects for non-residents investing in Japan is financing.
While Japan allows foreign individuals to own property freely, obtaining a mortgage as a non-resident is still difficult — but not impossible.

(1) Cash Purchase – The Common Route

Most non-resident investors purchase property in cash.
This is due to strict bank requirements, which often include:

• Proof of income in Japan
• A Japanese address or residence card
• A guarantor residing in Japan
• Japanese tax filing history

Because these conditions are rarely met by overseas buyers, cash transactions remain the most straightforward path.

(2) Financing for Non-Residents

Some banks and financial institutions do offer limited financing programs for non-residents:

• Shinsei Bank, Tokyo Star Bank, and certain regional banks provide special programs for overseas Japanese or permanent residents abroad.
• Global Trust Networks (GTN) and Prestia (SMBC Trust Bank) occasionally offer financing for overseas investors with strong credit and high-value assets.

However, interest rates are generally higher (around 3–5%) and loan-to-value (LTV) ratios lower (50–70%).

(3) Using Overseas Financing

Another option is to borrow in your home country, using:

• A home equity loan
• An international mortgage from HSBC, Standard Chartered, or DBS
• A foreign currency loan for yen-denominated investments

This gives flexibility, especially when Japanese banks are restrictive. However, investors must manage exchange rate risk, since the yen’s fluctuation directly affects repayment costs and returns.

(4) Sending Funds to Japan

Japan’s Foreign Exchange and Foreign Trade Act (FEFTA) regulates large money transfers.
To send funds legally:

• Use your bank’s international wire transfer (SWIFT)
• Include details of purpose (“Real estate purchase in Japan”)
• Keep documentation (invoice, contract, etc.) for compliance checks

For transfers exceeding ¥30 million, the receiving bank must file a report to the Ministry of Finance.
Using services like Wise, Revolut, or Payoneer may be allowed for smaller amounts, but property payments should always be made through banks to ensure legal traceability.

(5) Tax Representative Requirement

If you live abroad and earn rental income in Japan, you must appoint a tax representative (zei dairi-nin).
This person or firm handles your Japanese tax filings, receives official mail, and ensures your income and withholding taxes are reported correctly.

7. Taxes and Ongoing Costs

When you buy property in Japan, you’ll encounter several taxes at different stages.
Understanding them helps you calculate true net returns and avoid surprises later.

(1) At the Time of Purchase

• Registration and License Tax (登記免許税): about 0.4–2% of the property value.
• Stamp Duty (印紙税): from ¥5,000 to ¥100,000 depending on contract size.
• Acquisition Tax (不動産取得税): around 3–4% of the assessed value, billed 6–12 months after purchase.

(2) Annual Property Taxes

• Fixed Asset Tax (固定資産税): about 1.4% of the assessed value per year.
• City Planning Tax (都市計画税): additional 0.3% in applicable areas.
  The local city or ward office sends bills once a year (April–June).

For non-residents, payment can be made by your property manager or agent, who forwards digital invoices and handles payment via proxy.

(3) Income Tax on Rental Income

If you rent your property, the income is subject to:

• 20.42% withholding tax (for non-residents)
• Additional inhabitant tax (住民税) if you are considered a resident for tax purposes

You can deduct maintenance costs, management fees, insurance, depreciation, and interest expenses to reduce taxable income.
A tax accountant (zeirishi) familiar with foreign clients can handle filings remotely.

(4) Capital Gains Tax on Sale

When selling property, non-residents pay:

• Short-term (held <5 years): 30.63%
• Long-term (held >5 years): 15.315%

You must file a tax return in Japan even as a non-resident, but your agent or accountant can handle it on your behalf.

(5) Inheritance and Gift Tax

If a non-resident passes away owning Japanese property, Japanese inheritance tax may apply, depending on domicile and nationality.
To reduce risk, some investors use corporate ownership structures or trusts to manage succession planning efficiently.

8. Managing and Leasing Property from Overseas

Once you’ve purchased your property, managing it efficiently from abroad is crucial.
Japan’s property management system is highly organized, and numerous bilingual agencies provide full remote support.

(1) Hiring a Property Management Company

Most non-resident owners use professional management firms.
Services typically include:

• Tenant recruitment and screening
• Rent collection and deposit handling
• Repairs and maintenance coordination
• Monthly reports (in English)
• Tax document preparation

Major firms like Mitsui Fudosan Realty, Tokyu Livable, and Global Link Management have English-speaking teams for overseas investors.

(2) Lease Structure

Japan mainly uses two lease types:

1. Ordinary Lease (普通借家契約): Standard 2-year renewable contract; provides tenant protection.
2. Fixed-Term Lease (定期借家契約): Non-renewable; popular among investment owners seeking flexibility.

Non-residents often prefer fixed-term leases to simplify turnover and avoid legal complexity.

(3) Rent Collection and Reporting

Management companies collect rent and transfer it to your overseas account (minus fees and taxes).
Monthly or quarterly reports include rent payments, expenses, and tenant updates.
Some firms integrate online dashboards, allowing owners to check income and maintenance requests in real time.

(4) Maintenance and Repairs

Minor repairs (under ¥20,000–30,000) are usually handled automatically by the manager, while major repairs require your approval.
Digital platforms now allow you to approve estimates online with photos and invoices attached.

(5) Handling Vacancies

Vacancy risk in Japan depends heavily on location and property type.
Urban centers like Tokyo, Osaka, and Fukuoka maintain strong demand.
Your management company will market the property on SUUMO, HOME’S, and CHINTAI, ensuring quick tenant turnover.

9. Selling and Exit Strategy

Eventually, you may decide to sell the property and realize your investment gains.
The Japanese real estate market is stable but not as liquid as in some Western countries, so proper timing and strategy are key.

(1) How to Sell a Property from Overseas

You can sell through:

• The same agent who handled your purchase
• An investment brokerage
• Online real estate platforms offering remote sale management

Your agent or proxy can handle listing, negotiations, and closing on your behalf under your existing power of attorney.

(2) Sales Process

1. Obtain an appraisal or market evaluation
2. Sign a brokerage agreement
3. Negotiate with buyers (offers may come from Japanese or foreign investors)
4. Sign the sales contract (online possible)
5. Settlement and ownership transfer handled by a judicial scrivener

All proceeds are paid in yen and can be remitted abroad freely after tax obligations are cleared.

(3) Tax Clearance and Repatriation

Before sending sale proceeds overseas, the buyer’s agent or your accountant must ensure all taxes (especially capital gains) are paid.
Once confirmed, the balance can be wired to your foreign account.

(4) Exit Timing and Market Cycles

Japan’s market tends to be stable rather than speculative.
Good exit timing depends on:

• The yen’s exchange rate
• Tokyo/Olympic cycle impacts
• New infrastructure developments (e.g., Linear Shinkansen, Osaka Expo)

Foreign investors often use a 5–10-year hold period to balance stable rental yields with moderate appreciation.

10. Market Trends & Outlook for Foreign Investors

Japan continues to attract strong interest from international buyers due to:

• Political stability
• Low interest rates
• High construction quality
• Transparent property laws

(1) Who Is Buying?

Recent years have seen a surge in buyers from:

• Hong Kong and Singapore: Seeking safe-haven assets
• Taiwan: Purchasing for future relocation
• U.S. and Australia: Dollar-advantaged investors leveraging yen weakness
• China: Luxury condominium buyers in Tokyo and Hokkaido

(2) Hot Investment Areas

• Tokyo Bay Area (Toyosu, Kachidoki, Harumi): New towers, high rental demand
• Osaka (Namba, Umeda, Shin-Osaka): Preparing for Expo 2025, strong yield
• Fukuoka: Popular among Asian investors for long-term stability
• Hokkaido (Niseko, Sapporo): Resort and hotel development

(3) Impact of Yen Depreciation

The weak yen since 2022 has dramatically increased foreign purchasing power.
Properties that cost ¥100 million now effectively cost less in USD terms, creating attractive entry points for foreign investors.

(4) Government Initiatives

Japan’s government is promoting:

• Digitalization of real estate transactions
• Relaxed visa rules for investors
• Expansion of REIT and property fund markets

These measures make cross-border investment simpler and safer.

11. Summary – Investing Confidently as a Non-Resident

Japan offers one of the most foreigner-friendly property ownership systems in Asia.
Even as a non-resident, you can:

• Buy freehold land and buildings directly under your name
• Complete all procedures online
• Appoint a legal representative to act on your behalf
• Manage, rent, and sell property remotely

With careful tax planning, professional support, and reliable management, Japan can provide stable long-term returnsand strong legal protection for overseas investors.