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 — then runs a ¥30M Setagaya 1K all the way from a 5.8% listed gross to after-tax cash flow.

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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.

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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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From the desk — The cost line that surprises my foreign clients most often is not property tax, it is the combined HOA fee and repair reserve in older buildings, which I have repeatedly seen swallow close to a third of a small unit’s rent. After enough closings you stop trusting the gross number and start asking for the long-term repair plan first, because the buyers who skip that step are the ones who call me a year later about a reserve increase they never modeled.

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 — th

Related reading: Vacancy and Tenant Risk in Tokyo Rental: Underwriting the Downside.

ey 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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Beyond NOI: A ¥30M Setagaya 1K From Gross to After-Tax Cash Flow

The ¥15M stack above stops at net operating income. Most buyers never get past that line — but the number that actually lands in your account sits three steps further down: after acquisition costs, after debt service, after tax. Here is the full run on a second Setagaya unit, at a price point closer to what Sangenjaya actually clears. When a 1K in Sangenjaya clears ¥30M, agents call it “a quality asset.” I call it a spreadsheet problem.

The deal structure below is illustrative — based on a real property type I’ve evaluated, not a specific transaction. Every number is grounded in current market conditions but represents a range, not a guaranteed outcome.

The property: Sangenjaya 1K, 2008 build

• Location: Sangenjaya, Setagaya-ku (3 min walk to Sangenjaya Station, Tokyu Den-en-toshi Line)
• Size: 26 sqm
• Build year: 2008 (RC, good seismic spec)
• Floor: 6th of 9
• Asking price: ¥30,000,000
• Current rent: ¥145,000/month (tenant in place, 3 years into contract)
• Listed gross yield: ¥145,000 × 12 ÷ ¥30,000,000 = 5.80%

Looks acceptable for Setagaya. Now take it apart.

From the desk — The pattern I see again and again in Setagaya is buyers anchoring on the listing yield and budgeting their lives around a cash flow that simply evaporates once acquisition costs and debt service hit the page. What actually trips people up here is the special repair levy on these mid-2000s buildings, an envelope arrives one year asking for several hundred thousand yen per unit, and the owner who never modeled it suddenly understands this was always a capital appreciation bet, not an income one.

Step 1: Gross to net operating income

Gross potential rent: ¥145,000 × 12 = ¥1,740,000

Vacancy allowance: 7% (Sangenjaya has tight supply; this is already conservative) Vacancy drag: −¥121,800 Effective gross income: ¥1,618,200

Item	Monthly	Annual
Property management fee (6%)	¥8,700	¥104,400
HOA/common area fee	¥12,000	¥144,000
Building repair reserve	¥9,500	¥114,000
Fixed-asset tax	—	¥108,000
City planning tax	—	¥23,000
Fire + earthquake insurance	—	¥28,000
Minor repairs / maintenance	¥3,000	¥36,000

Total operating costs: ¥557,400

Net Operating Income (NOI): ¥1,618,200 − ¥557,400 = ¥1,060,800

Net yield (unlevered): ¥1,060,800 ÷ ¥30,000,000 = 3.54%

Already down from 5.80% to 3.54%. We haven’t touched acquisition costs or financing.

Step 2: Acquisition costs and the true denominator

Buying this property as a foreign individual:

Acquisition Cost	Amount
Real estate agent commission	¥1,026,000 (3%+¥60K+tax)
Registration license tax	¥90,000
Real estate acquisition tax	¥105,000
Judicial scrivener (property registration professional)	¥90,000
Stamp duty	¥20,000
Building inspection (optional but recommended)	¥60,000

Total acquisition costs: ¥1,391,000 Total capital deployed (all-cash): ¥31,391,000

Net yield on total capital: ¥1,060,800 ÷ ¥31,391,000 = 3.38%

So 5.80% listed → 3.38% actual unlevered net yield on cash deployed. This is the real baseline.

Step 3: Leveraged cash flow

Most foreign investors who can access Japanese financing use a loan. Conditions for non-residents are restrictive, but some regional banks and specialized lenders will extend credit with 30–40% down.

Financing assumption (illustrative; non-resident rates vary):

• Loan amount: ¥18,000,000 (60% LTV)
• Interest rate: 2.8% fixed
• Term: 25 years
• Monthly repayment: approx ¥83,500 (principal + interest)
• Annual debt service: ¥1,002,000

Cash invested at purchase: down payment ¥12,000,000 + acquisition costs ¥1,391,000 = total equity in ¥13,391,000

Leveraged annual cash flow: NOI ¥1,060,800 − debt service ¥1,002,000 = pre-tax levered cash flow ¥58,800

Cash-on-cash return: ¥58,800 ÷ ¥13,391,000 = 0.44%

0.44% cash-on-cash looks terrible. Context: the loan amortizes at roughly ¥460,000/year in principal in Year 1. Total return including equity buildup: approximately ¥518,800. Yield on equity including paydown: 3.87%. Not exciting. Serviceable — and this is before any appreciation.

Step 4: After-tax cash flow (non-resident individual)

Non-resident individuals earning Japanese rental income pay withholding tax. The payer withholds 20.42% of gross rent unless you appoint a Japanese tax management agent to file properly.

Deductible items for Japan income tax: management fees, taxes, insurance, repair costs, and depreciation on the building component (RC building: 47-year schedule; purchased second-hand — remaining life calculation applies).

For a 2008 RC building bought in 2025 (17 years old), remaining depreciation life: (47 − 17) + 17 × 20% ≈ 33 years. Building value portion (approx 40% of ¥30M): ¥12,000,000. Annual depreciation: ¥12,000,000 ÷ 33 = ¥363,636.

Taxable rental income (illustrative calculation):

• Gross rent: ¥1,740,000
• Less: operating costs (excluding depreciation): −¥557,400
• Less: loan interest (Year 1, approx): −¥504,000
• Less: depreciation: −¥363,636
• Taxable income: ¥315,000 (approx)

Japan income tax on ¥315,000 at marginal rate (5% bracket): ¥15,750

After-tax cash flow: pre-tax levered cash flow ¥58,800 − income tax ¥15,750 = ~¥43,000/year

On ¥13.4M of equity invested, that’s 0.32% after-tax cash-on-cash. This is why the Setagaya 1K is not a cash flow play. It’s a total return play.

The bull case: why people buy this anyway

Sangenjaya has appreciated steadily. That’s the thesis.

If the property grows 2% annually for 10 years (illustrative scenario): ¥30,000,000 × (1.02)^10 = ¥36,567,000. Less selling costs (~3.5%): net proceeds ≈ ¥35,287,000. Approximate loan balance after 10 years of 25-year amortization at 2.8%: roughly ¥13,200,000.

Equity return at exit: ¥35,287,000 − ¥13,200,000 remaining loan − ¥13,391,000 equity in = roughly +¥8.7M capital gain before tax. Add cumulative after-tax cash flows over 10 years (rough): ~¥430,000. Total return on ¥13.4M equity: roughly ¥9.1M over 10 years.

IRR on equity with 2% annual appreciation: approximately 5.5–6.0%. Not bad. Not 8%. For a prime inner-city asset with yen exposure and no FX risk on income, 5.5–6% IRR is a real thesis. At 0% appreciation, after-tax IRR on equity drops to ~2.5% — you’

Related reading: Setagaya Ward Guide: Why Tokyo’s Biggest Ward Is Its Most Family-Loved.

re taking illiquidity risk for government bond returns.

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Related reading: Gross vs Net Yield in Japan: Why That 8% Becomes 4.1% After You Pay for Everything.

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.
• Special levy from the building management association. A large repair (elevator replacement, exterior waterproofing) can trigger a one-time special assessment of ¥300,000–¥800,000 per unit. For a 2008 building, this could arrive within 5–10 years.
• The loan rate resets upward. If you’re on a floating rate and Japan rates climb, debt service could rise ¥100,000–¥200,000/year.
• The tenant leaves and rent resets lower. Sangenjaya market rents for a quality 26 sqm 1K might be ¥130,000–¥140,000 now — the tenant at ¥145,000 in the example above is slightly above market. The next contract may come in lower.

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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.

Q: What happens to depreciation when I sell? A: In Japan, depreciation reduces your acquisition cost basis for capital gains tax purposes. If you’ve depreciated ¥3.6M off the building, your tax basis is lower, and your taxable gain at sale is higher. Model this before assuming the exit is clean.

Q: Can a non-resident get a 60% LTV loan in Japan? A: Difficult but possible. Some regional credit union banks, specialized mortgage brokers, and Japanese banks with international branches offer non-resident mortgages. Rates and conditions are less favorable than resident rates. Some investors use Japanese companies they own to borrow domestically.

Q: Is Setagaya worth the lower yield compared to eastern wards? A: Historically, yes — if you’re betting on capital preservation and moderate appreciation. Tenant quality, vacancy rates, and exit liquidity are all better in Setagaya than Adachi or Edogawa. You pay for it in yield compression.