Alternative Investment Feature – A freestanding home in Minami-Azabu with a Ryokan license

In a quiet yet central part of Minami Azabu, close to Azabu-Juban station, sits a beautifully designed home that was built to cater to very discerning tastes. Originally designed as a house for the seller to live in, it has since been retrofitted with structural upgrades required for ryokan licensing.

This is what makes this property very rare – the licensing allows to operate over the 180 day limit that the new minpaku laws regulate. Hence this allows the property to advertise itself the same as a hotel does, servicing tourists year round.

Indeed, in June 2018, AirBnB culled almost 80% of the non-compliant listings for Japan on their platform. Thanks to the ryokan licensing this property holds, this listing was allowed to remain.

This puts this investment property in a class all its own. The Abe government is targeting 40 million per year annually by 2020 and then 60 million annually by 2030. 2018 clocked in with a record breaking 31 million inbound tourists.

There simply are not enough hotel rooms in the city to meet increasing demand which was where Airbnb had helped to alleviate. However, AirBnB’s ability to absorb tourists has dropped dramatically given the lack of listings remaining but the inbound demand is higher than ever.

This creates a very high demand, low supply situation. High demand against low supply means greater financial gains.

Property Revenue Details

The Average Daily Rate (ADR) has risen 40% since operations began from 2014 to 2018 & 2019’s ADR is hitting new highs in the triple digits so far.

Occupancy rates since 2014 have been holding steady too, landing at 80% occupancy on average since operations began.

Seasonality allows for ADR increases too such as during the current influx of tourists who flock to the city for cherry blossom viewings and at year end holidays.

Then there’s the two large sporting events Japan will host in 2019 & 2020; the Rugby World Cup and the Tokyo 2020 Olympics.

While the Rugby World Cup is a nationwide hosted event, Tokyo is viewing the event as a taste of what will come the following year when Tokyo alone will host the Summer Olympics.

The property currently has reservations for the Olympics at an undisclosed amount.

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Flexible Sales Terms

The seller is flexible on how the property can be operated once sold. Since part of the licensing requires someone either to be on site or on-call within 800 meters from the property, Housing Japan offers complete turnkey property management services to allow buyers to continue operating as the seller currently does.

For those less risk averse, the seller is offering a 5 year master lease agreement where the seller will guarantee the buyer a certain amount of rent with the seller operating the property allowing for a complete hands-off investment, albeit with a lower, but predictable, monthly return.

Price is also another area of flexibility to a certain degree so enquire for further information.

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The Area

Minami Azabu is one of Tokyo’s premier addresses where the wealthy and affluent choose to live. It is primarily a residential area but very centrally located which is part of the appeal. The Minami Azabu address has always had a global flavor with many embassies located in the area along with many of Tokyo’s expatriate community.

Minami Azabu is a place where Tokyo meets the rest of the world with Japanese and foreign families living side by side. This particular property sits in a quiet part of the address just steps away from the boutiques and cafes of AzabuJuban and also with easy walking distance to Arisugawa Park towards the Hiroo area.

Property values in the Minami Azabu addresses have risen strongly as well over the last decade. With Tokyo’s population set to rise through to at least 2035 combined with Japan’s very favorable lending environment makes for robust buyer demand in the area for years to come.

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Rarity makes money and this very unique, artfully crafted investment property sits right in the centre of the strike zone where high yielding, high appreciation meet.

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Editor’s Note: Adam German is Vice President of Business Development at Housing Japan and a well-known figure in both the marketing and sales side of Tokyo real estate. Originally from Canada, Adam has been behind some of the most successful international residential property services in Tokyo.