Tokyo RE Rent vs Buy: How much do you lose over 10 years?

14 comments

1. Go look at setagawa property prices on similar items of similar age, and go look at what they sell new right now, and that’s your answer. Not a very complex question given the increased simplifications.

2. I’ll skip calculating this because it’s a hassle, but if you were to buy, I would say it should be a mansion of tower mansion, not a detached house. Detached houses not only lose value significantly, but they are also hard to sell.

3. If you want to simplify that far, just roll a few dice and decide or just make a pure vibes-based decision.

   It’s the biggest single purchase of your entire life. Maybe take a few hours and run some numbers.

4. Don’t forget all the fees involved in buying when making your calculations.

5. Annual expense of ¥2.64 million as rent (recurring) versus ¥100 million upfront investment (present value). I just need to generate ~3% return on my ¥100 million investment to breakeven in simplified rent vs buy scenario. Assuming all upfront payment (no leverage aka mortgage) for purchase.

6. AI gave me a moderately good answer;

   1. Renting:As you’ve calculated, JPY 26.4 million over 10 years.
   2. Buying a JPY 70 million detached house in Setagaya:

   Initial costs:

   * Purchase price: JPY 70 million
   * Taxes and fees (roughly 6-10% of purchase price): JPY 4.2-7 million
   * Total initial cost: JPY 74.2-77 million

   After 10 years:

   * Estimated depreciation: 20-30% (houses in Japan typically depreciate)
   * Estimated sale price: JPY 49-56 million
   * Selling costs (roughly 3-5% of sale price): JPY 1.5-2.8 million

   Rough estimate of money lost: JPY 20-30 million

   1. Buying a JPY 100 million 2LDK 65sqm mansion apartment in Setagaya:

   Initial costs:

   * Purchase price: JPY 100 million
   * Taxes and fees (roughly 6-10% of purchase price): JPY 6-10 million
   * Total initial cost: JPY 106-110 million

   After 10 years:

   * Estimated depreciation: 10-20% (apartments typically depreciate less than houses)
   * Estimated sale price: JPY 80-90 million
   * Selling costs (roughly 3-5% of sale price): JPY 2.4-4.5 million

   Rough estimate of money lost: JPY 20-34 millionAdditional considerations:

   * Maintenance costs for owned properties (not included in estimates)
   * Property taxes (not included in estimates)
   * Potential for property value increase in desirable areas like Setagaya
   * Mortgage interest (if financing is used)
   * Quality of life factors (more space, ability to customize, etc.)

   These estimates suggest that the financial outcomes of buying vs. renting over a 10-year period may be relatively similar in your scenarios. The choice may come down to personal preferences, lifestyle factors, and long-term plans rather than purely financial considerations. Remember that property markets can be unpredictable, and actual outcomes may vary significantly from these estimates.ShareRewrite

7. My father owned an apartment in Yokohama and a house in Fujisawa (just outside of Yokohama) and we sold the apartment in less than a month for a very good fee but the house , we sold it for nearly nothing . Defo better to buy an apartment if you’re reselling it.

8. [removed]

9. For the cost of rent. Don’t forget key money, deposit cleaning fee agent fee etc etc.

   And also the cost to renew the lease every 2 years I believe?

10. https://youtu.be/Uwl3-jBNEd4?si=bZhnz3glTSG8dqMS

11. This really all depends on the area.

    If you shop wisely you can definitely find properties in Tokyo which have a good chance of appreciation over the next 10 years.

    Also, if you buy in an area you know well and educate yourself about the RE market, you have a good chance of finding underpriced properties – particularly in the off-season (now to January).

    Conversely if you buy an overpriced property you will likely still be underwater after ten years.

    Also worth saying that this is primarily a lifestyle choice. How much is living in a nicer place you can call your own for 10 years worth to you?

12. You don’t say mortgage or not. Your total mortgage payment will of course not be for the value of the house. I’ll guess 80mil mortgage. And I’m not sure if you plan to transfer the mortgage to a new property or even if you can do that in Japan. In my case even though I paid 45mil, I get 4mill back in tax breaks. And my house went up in value to probably 52mil. I still wouldn’t make any money selling in 10 years time. Due to fees and paying back the full amount on the mortgage. It only makes financial sense if I stick it out for the full term of the mortgage.

    If you have 70mil in cash. Then investing that cash will be way better. You’ll easily top the 26mil lose by investing 70mil. Even an index fund should beat that with a stating point of 70mil over 10 years.

    The guy who was sarcastic about using spreadsheets is correct a spreadsheet will answer this question for you fairly easily.

13. Exact numbers are a bit tough but for condos, assuming rent is about 1/250th of the property value and assuming that home loan interest rates are less than 0.5%, usually if you stay at a place more than 5 years, owning would lose less money than renting.

14. Is rent a loss? We don’t consider buying clothes or food a loss when they’re gone after a day or a few years. I’ve never considered rent a loss, just a considerable “spend”.