In our daily contact with many of our clients, we are often asked questions such as, "Why do high-net-worth individuals own real estate? What is the philosophy behind their real estate choices?
With the uncertain economic outlook, there is a renewed focus on the value of real estate as a real asset, in addition to traditional financial assets such as stocks and bonds. On the other hand, it is also true that real estate investment requires specialized knowledge and not everyone can succeed.
Therefore, in this article, based on the knowledge we have cultivated so far, we will explain the philosophy of "how to own" real estate and the specific strategies practiced by high-net-worth individuals in plain language from a professional perspective. We hope this article will be of help to you in your asset building strategy.
Seven Strategic Reasons Why High Net Worth Individuals "Own" Real Estate
The reasons why high-net-worth individuals include real estate in their asset portfolios are not simply because it is profitable. There is a deeper, strategic intent to preserve and steadily grow their assets. Here are seven typical reasons.
- Secure stable income gains: Compared to stock dividends or bond interest, rental income from real estate is less susceptible to economic fluctuations and more stable. High-net-worth individuals appreciate this "stability" that generates constant cash flow while protecting their assets.
- Portfolio Diversification: Real estate markets tend to have different price movements than the stock and bond markets. By combining financial assets with real estate, you can diversify your overall asset risk and increase your resilience to sudden market changes.
- Take advantage of tax benefits: Real estate investments offer a variety of tax benefits and can be an effective tax-saving strategy. In particular, the reduction of income taxes through depreciation and the reduction of assessed value at the time of inheritance are especially attractive to high-income, wealthy individuals.
- Strategic Inheritance Measures: Compared to inheriting cash or financial assets outright, real estate can significantly lower the assessed value for inheritance tax purposes. This ensures a smooth succession of assets to the next generation.
- Maximize the leverage effect: Financing from financial institutions allows for investments of a scale that could not be achieved with personal funds alone. High-net-worth individuals leverage their high creditworthiness to obtain loans on favorable terms, dramatically increasing the efficiency of their own capital.
- Hedge against inflation: Inflation diminishes the value of cash. On the other hand, the value of real assets such as real estate and rents tend to increase as prices rise, thus acting as a "hedge" against the risk of inflation.
- Permanence as a real asset: Real estate , as the name implies, is an "immobile asset. The risk of its value falling to zero, as is the case with financial assets, is extremely low, and land has an enduring value, making it suitable for long-term asset protection.
Real Estate Philosophy of the Wealthy: Long-term Value Creation over Short-term Profit
Successful high-net-worth individuals have a common philosophy in real estate investment. Rather than focusing on immediate gains, they take a long-term, big-picture view of building "true assets" that will continue to generate value over 10, 20 years, or even generations.
Identifying real estate that is an "asset" rather than a "liability
As investor Robert Kiyosaki stated, "Assets put money in your pocket; liabilities take money out of your pocket." High-net-worth individuals adhere to this definition and view "assets" as real estate that generates continuous cash flow and increases the overall value of the asset. Even if the property has a high yield, it is considered a "liability" if it has high vacancy and repair risks, resulting in a high out-of-pocket expense.
Concentrated investment in prime central Tokyo locations and redevelopment areas
High-net-worth individuals particularly prefer to invest in prime urban areas with high population concentration and economic activity. These areas have low vacancy risk due to stable rental demand, and future increases in asset value (capital gains) can be expected. The following data clearly demonstrates their superiority.
| Area | Base land price in 2025 (year-on-year change) |
|---|---|
| Tokyo 23 wards (commercial land) | +13.2% (year-on-year) |
| Tama area (commercial land) | +5.5 |
Source: Ministry of Land, Infrastructure, Transport and Tourism, "Survey of Land Prices in Prefectures in 2025," compiled by our company.
As you can see, land prices in central Tokyo are rising at a higher rate than those in the suburbs, and we believe that this is an extremely promising market in which to aim for long-term asset value growth.
Commitment to "quality" based on the premise of long-term ownership
Quality" of properties is an extremely important factor in aiming for long-term value creation. Wealthy people do not choose a property simply for its high yield. They value the structure of the building, the grade of facilities, the state of management, and above all, the "rarity of the location. This is because these factors are the foundation for maintaining asset value over the long term and ensuring stable rental demand.
| Building age | Asset value (when new construction is set at 100) |
|---|---|
| 5 years | 90-95 |
| 10 years | 80 to 85 years |
| 20 years | 60 to 70 years |
| More than 30 years | 40-50 (but varies greatly depending on location) |
Note: The above are general trends and will vary greatly depending on the property's management conditions and location.
Although the value of the building will decrease over time, if the land value of the property is high, such as in a prime location in the city center, the increase in land value will exceed the decrease in building value, increasing the likelihood that the total asset value will be maintained or even increase.
In summary, maximize assets with a strategic real estate portfolio.
This article has explained the philosophy and specific strategies for "owning" real estate as practiced by high-net-worth individuals.
The key is to position real estate as a "strategic component" of your overall asset portfolio, rather than as a mere "dot. Do you aim for income gains or focus on capital gains? How will you incorporate objectives such as tax reduction and inheritance protection? Clarifying these objectives and building an optimal real estate portfolio from a long-term perspective is the key to maximizing your assets.
Real estate investment is not an easy path. INA & Associates, Inc. provides customized real estate consulting services tailored to each client's unique situation and goals. INA&Associates, Inc. provides customized real estate consulting services tailored to your individual situation and goals. If you would like to discuss your real estate strategy in more depth, please feel free to contact us for a consultation.
Frequently Asked Questions (Q&A)
Q1: How much personal funds do I need to start investing in real estate?
A1: Although it is difficult to say, it is generally recommended that you prepare 10% to 20% of the property price as personal funds. However, depending on your attributes and the financial institution's evaluation, you may be able to start with less personal funds. The important thing is to have a reasonable financial plan.
Q2: Which do you recommend, a property in a rural area or a property in the city center?
A2: It depends on your investment objectives. There are strategies that aim for income gains from high-yield properties in rural areas, but if long-term stability of asset value and liquidity (ease of selling) are important, we recommend properties in central Tokyo, where the risk of population decline is low and rental demand is strong.
Q3: Can I leave all the management to you?
A3: Yes, we can. We offer a one-stop management service that supports everything from rental solicitation to tenant relations, building management, and rent collection on behalf of the owner. We realize stable real estate management without bothering the owner.
Daisuke Inazawa
Representative Director of INA&Associates Inc. Based in Osaka, Tokyo, and Kanagawa, he is engaged in real estate sales, leasing, and management. He provides services based on his extensive experience in the real estate industry. Based on the philosophy that “human resources are a company's most important asset,” he places great importance on human resource development. He continues to take on the challenge of creating sustainable corporate value.
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