Net Yield in Tokyo, Line by Line: Every Cost That Eats Your 6%

TL;DR: Net rental yield in Tokyo is gross yield minus a list of costs that most listing presentations omit entirely. For a typical 23-ward apartment, the total cost load runs 35–50% of gross potential rent — depending on building age, location, and financing. This issue opens each line item individually: what it is, what range to expect, and where foreign buyers routinely underestimate.

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Six percent gross on a Tokyo 1LDK — decent enough to get your attention. Then you buy it, and the actual costs start arriving. After my first few investments I kept a running spreadsheet of every expense that surprised me post-purchase. By the time I had four properties, the list was longer than I expected.

None of these costs are hidden. They’re in the mandatory property disclosure document or on public records. Buyers just don’t ask early enough, and agents don’t volunteer.

Here’s every line.

[OPERATOR NOTE — add your own first-hand detail here: a real deal, number, or scar.]

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What Are the One-Time Acquisition Costs You Need to Model?

These aren’t annual, but they affect your effective yield when amortized across your hold period. On a ¥15M property, expect:

Cost	Typical Range	Notes
Real estate agent commission	3% + ¥60,000 + tax	Statutory cap in Japan; both buyer and seller often pay separately
Stamp duty	¥10,000–¥60,000	Sliding scale by contract value
Real estate acquisition tax	~3% of assessed value	Paid once, 3–6 months after purchase; assessed value ≠ market value
Registration / judicial scrivener fees	¥80,000–¥200,000	Transfer of title, mortgage registration
Home loan setup fees (if financing)	0.5–2% of loan	For financed buyers
Building inspection	¥50,000–¥100,000	Optional but recommended

Total acquisition cost for a cash buyer: roughly 5–7% of purchase price. For a ¥15M property: ¥750,000–¥1,050,000.

Spread over a 10-year hold, that’s ¥75,000–¥105,000/year of effective annual cost. On a ¥15M property with ¥900,000 gross annual rent, this alone shaves 0.8–1.2 percentage points from your effective yield.

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Annual Costs: What’s Fixed and What Varies

How Does Property Tax Work in Japan?

Rate: 1.4% of assessed value.

The assessed value — determined by the municipality — is not the same as market price. For residential property, it runs somewhere between 50–80% of market depending on land vs. building. Land values in Tokyo are assessed at roughly 70% of market (after residential reduction). Buildings depreciate for tax purposes.

Illustrative calculation on a ¥15M purchase (for illustration only — individual properties vary):

• Assessed land value: ¥6M (market ¥8M, residential reduction applied)
• Assessed building value: ¥3M (¥5M market, depreciated)
• Total assessed: ¥9M
• Property tax: ¥9M × 1.4% = ¥126,000/year

For a 1K/1R in mid-ring Tokyo, expect property tax in the ¥40,000–¥120,000 range annually depending on the land component.

City Planning Tax

Rate: 0.3% in most of Tokyo’s 23 wards. Applied to the same assessed base as property tax.

On the example above: ¥9M × 0.3% = ¥27,000/year.

Combined property + planning tax (illustrative): roughly ¥55,000–¥150,000/year for most 23-ward investments.

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What Is the HOA Fee and Why Can’t You Avoid It?

This is the monthly HOA equivalent (kanrihi) — covers building administration, cleaning, elevator maintenance, front desk if applicable. Paid regardless of occupancy. You pay it even when the unit is vacant.

Ranges:

• Small older building (20+ years old, no elevator): ¥3,000–¥8,000/month
• Standard mid-size building: ¥8,000–¥15,000/month
• Tower condo or high-spec building: ¥20,000–¥50,000+/month

For a 1K in a mid-size older building: ¥8,000–¥12,000/month → ¥96,000–¥144,000/year.

Critical point: the HOA fee is often invisible in gross yield calculations. It is not discretionary. You cannot opt out. Budget for it on day one.

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What Is the Building Repair Reserve and How Much Is It Rising?

This is the building’s collective repair fund (shuzen tsumitatekin) — paid monthly per unit, pooled to cover major renovation: exterior, roof, waterproofing, elevators, piping. Also paid when vacant.

Ranges:

• Older buildings with historically underfunded reserves: ¥800–¥3,000/month (but likely to increase)
• Well-managed newer buildings: ¥5,000–¥12,000/month
• Buildings approaching or post-renovation catch-up: ¥15,000–¥25,000+/month

The 2022 regulatory changes pushed building management associations to calculate reserves more actuarially. Old buildings that were coasting on ¥1,000/month reserves are facing mandatory increases. If you’re buying an older building, get the most recent long-term repair plan and the repair reserve trend over the past 5 years. A building raising reserves aggressively is actually better managed — but your cost model needs to reflect where reserves are heading, not where they are today.

For a standard 1K: budget ¥5,000–¥15,000/month or ¥60,000–¥180,000/year.

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Property Management Fee

If you’re a foreign investor, you’re almost certainly using a property management company.

Standard fee: 5–8% of monthly rent collected (some charge flat fees). The management company handles tenant screening, rent collection, maintenance calls, and tenant liaison.

On ¥75,000/month rent:

• 5%: ¥3,750/month → ¥45,000/year
• 8%: ¥6,000/month → ¥72,000/year

Some management companies also charge additional fees: vacancy guarantee programs, fire insurance procurement, key exchange, and lease renewal fees. Read the management contract carefully. These can add up to an effective 10–12% of rent in a normal year.

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Vacancy

Not technically a cost, but it reduces effective income and has to be modeled.

Realistic Tokyo vacancy buffers by area type:

• Central wards (Minato, Chiyoda, Shinjuku): 5–8%
• Mid-ring (Setagaya, Meguro, Suginami): 7–10%
• Outer wards (Adachi, Katsushika, Edogawa): 10–15%
• Regional cities outside Tokyo: 15–25%

For a unit with ¥900,000 gross potential rent, a 10% vacancy buffer = ¥90,000/year off income. Even a 1-month vacancy every two years is roughly 4% annual vacancy drag.

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Non-Life Insurance (Fire + Earthquake)

Fire insurance is standard. Earthquake insurance is sold as a rider — skip it in Japan at your own risk.

Annual cost: ¥12,000–¥35,000 depending on building construction type and coverage amount. Wooden buildings pay more. RC/SRC buildings pay less.

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Minor Repair Contingency

Tenants call about things. Faucets drip, air conditioner filters clog, ventilation fans seize. Some of these are tenant responsibility; many fall to the landlord.

Budget ¥15,000–¥30,000/year per unit for small items. Major in-unit repairs (full aircon replacement at ¥100,000+, water heater at ¥150,000+) should be modeled separately — they happen every 10–15 years but are large when they do.

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The Full Stack on a ¥15M Setagaya 1LDK

Figures below are illustrative — representative deal structure, not a specific property or guaranteed outcome.

Assumptions: ¥85,000/month market rent, 10% vacancy, 15-year-old RC building, PM company at 6%

Line Item	Annual Amount
Gross potential rent	¥1,020,000
Vacancy (10%)	−¥102,000
Effective gross income	¥918,000
PM fee (6% of collected)	−¥55,080
HOA fee (¥10,000/month)	−¥120,000
Building repair reserve (¥9,000/month)	−¥108,000
Fixed-asset tax	−¥95,000
City planning tax	−¥20,000
Fire + earthquake insurance	−¥22,000
Minor repair contingency	−¥20,000
Total costs	−¥440,080
Net operating income	¥477,920
Net yield on purchase price	3.19%

3.19% on a ¥15M Setagaya 1LDK with 6% gross. Yes. Setagaya has strong land values and lower gross yields to start. The cost stack doesn’t shrink because the area is nicer — costs are largely fixed regardless of rent level. A 6% gross in a higher-rent area can produce a lower net than you expect.

Location isn’t just a capital gains story. It fundamentally affects how much net yield you can extract.

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Where This Goes Wrong

• Underestimating HOA fees and repair reserves combined. Both numbers together in an older Tokyo building can run ¥20,000–¥35,000/month — almost a third of unit rent on a small 1K.
• Skipping earthquake insurance. Saving ¥15,000/year against a building loss event in one of the world’s most seismically active cities is not a good trade.
• Not stress-testing vacancy at 20%. If you’ve modeled at 10% and the property stays vacant for 3 months during a major renovation or turnover cycle, your actual realized yield that year is significantly lower. Run the downside case.
• Forgetting that repair reserves can spike. A ¥5,000/month reserve can jump to ¥15,000 at the next general meeting. If you’re buying in year 8 of a 12-year renovation cycle, that increase is coming.

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FAQ

Q: Can I deduct these costs for Japanese tax purposes? A: Most of them, yes. HOA fees, repair reserves, property management fees, insurance, property tax, depreciation, and repairs are generally deductible against rental income for Japanese income tax purposes. Tax treatment depends on your residency status. See a Japanese tax accountant — this is not optional for foreign investors.

Q: What’s the minimum net yield I should accept in Tokyo? A: Personal threshold. Some investors take 3.5% net in Minato for a capital appreciation play. Others need 5%+ net for it to make sense as an income investment. The number only means something relative to your cost of capital and alternative investments.

Q: How do I find the HOA fee and repair reserve before making an offer? A: Ask the listing agent directly. Both are disclosed in the mandatory property disclosure document before contract signing, but a reputable agent will give them to you on request much earlier.

Q: Do costs scale with rent? A: Not exactly. PM fees scale with rent (percentage-based), but HOA fees, repair reserves, and property tax are largely fixed per unit regardless of rent. This means costs consume a smaller percentage of income on higher-rent units — which is one reason larger units in good buildings can have better net yield than small units in cheap buildings, despite similar gross yields.

Q: What’s a reasonable total cost load (% of gross potential rent) to budget? A: For a 10+ year-old Tokyo building: 40–50% of gross potential rent. For a newer building with low reserves: 30–38%. Use the higher end if you’re modeling conservatively.