Real estate investment is an investment strategy that involves purchasing high-value properties to generate rental income and build wealth. While it has recently gained traction among ordinary salaried workers due to concerns about future pensions, many may find it daunting as an investment outside their primary occupation. However, when properly understood and planned, real estate investment can be an attractive method for achieving long-term wealth accumulation through stable rental income. This article addresses the question, “How much capital is needed to start real estate investment?” for beginners with an annual income of 20 million yen or more, while explaining the necessary funds, funding methods, and risk management points.
Real estate investment involves purchasing real estate properties and managing them for rental income (income gain) or capital gains from sale. Compared to other investments such as stocks or FX, a major feature of real estate investment is thatif tenants can be secured, income tends to remain stable over the long term. In the case of single-building apartment complexes or apartment management, there are multiple units, so it is rare for all income to cease at once, and there is less risk of sudden fluctuations in income. Additionally, some management companies offer sublease systems that guarantee a certain amount of rent even during vacant periods, further enhancing the stability of rental income.
One of the attractions of real estate investment is the leverage effect. By obtaining a loan from a bank to purchase property, you can acquire a large property even with limited capital. For example, even with several million yen in capital, you can purchase a property worth tens of millions of yen and start rental operations by leveraging bank financing. After purchase, you can repay the loan using rent from tenants, thereby establishing a source of passive income. Even if you are unable to work due to illness or injury, as long as there are tenants, you can cover loan repayments with rent, providing peace of mind. Additionally, many real estate investment loans require enrollment in group credit life insurance. In the unlikely event of the owner's death, the insurance proceeds would settle the remaining loan balance. This means the property can be left as an asset to the family, serving as a substitute for life insurance, which is another advantage.
For high-income individuals, tax benefits are also attractive. By deducting depreciation expenses and other costs related to the property, you can report a loss on rental income, which can be offset against your primary income to reduce income tax and resident tax. Single-family apartments have a shorter useful life for wooden structures, allowing for significant annual depreciation expenses, making them a highly effective tax planning strategy for high-income earners with annual incomes exceeding 10 million yen.
As such, real estate investment offers a variety of benefits, including stable income for asset accumulation, leverage effects through loan utilization, insurance-like functions through group life insurance, and tax planning advantages. It is also gaining attention as a method for building assets from a long-term perspective, including for private pension planning in retirement.
While real estate investment encompasses various types, this article focuses on two representative types that are relatively easy for beginners to consider: “unit apartment investment” and “single-building apartment investment.” Each has different characteristics in terms of initial costs, risks, and returns, so it is important to understand their features and choose the method that suits you best.
Condominium unit investment (one-room investment) involves purchasing a single unit (a portion of ownership) in a condominium or apartment building and renting it out. Compared to purchasing an entire building, the property price is lower, so the initial costs are also lower, making it easier to start with low risk. In particular, one-room condominium units are popular among beginners due to their smaller purchase price. Condominium units also have relatively high liquidity, so they can be sold easily if you decide to sell them. On the other hand, there is the disadvantage that rental income ceases entirely when tenants move out. With only one unit, income during vacant periods is completely interrupted, so loan repayments during this time must be covered from other sources such as primary income. Additionally, compared to investing in an entire building, condominium units have a smaller land ownership share, resulting in a lower yield (return on investment). Generally, the surface yield for condominium unit investments is around 4%, which is lower than that of single-building investments. However, the ability to start with a small investment makes it an accessible option for beginners.
Single-building apartment (mansion) investment involves purchasing an entire apartment or mansion building and renting out multiple units. Since the property price is high, most investors purchase the property with a loan. If all units are occupied, you can generate a steady stream of rental income, but if units remain vacant, income can decrease significantly, so caution is necessary. Even if you plan to cover the loan with rental income from multiple units, if the number of vacant units exceeds expectations and rental income falls short, you may need to cover the shortfall with income from your main job. Additionally, single-building properties have many rooms, so maintenance and management costs for the entire building tend to be high. This is because costs such as cleaning and equipment inspections for shared areas, as well as repairs for the entire building, are expenses not incurred in condominium ownership. However, if multiple tenants can be secured long-term, there is potential to generate significant profits over an extended period. Single-building investment should be viewed as a strategy aimed at achieving stable income through long-term holding rather than quick profits through short-term buying and selling. Since the purchase price is high, a significant amount of capital is required, making this investment method suitable for those with sufficient capital or high annual income. In fact, financial institutions' apartment loan products often set high income criteria, such as “annual income of at least XX million yen,” targeting high-income professionals like company employees or doctors. If you have an annual income of 20 million yen or more, you may qualify for financing for a single-building property and have more options available.
As mentioned above, if you want to start with a small amount of capital and in a straightforward manner, consider a condominium unit. If you have sufficient capital and want to invest on a larger scale, consider a single-building apartment. Choose your investment target based on your capital size and risk tolerance.
“How much does it cost to start real estate investing?” The first thing beginners wonder about is the initial capital required. The initial costs of real estate investing are broadly divided into ‘down payment (own funds) + miscellaneous expenses.’ As a general guideline, it is common to prepare approximately 10–20% of the purchase price as the down payment and approximately 5–10% as miscellaneous expenses. In other words, approximately 17–30% of the total property price is required as down payment. For example, if purchasing a property priced at 50 million yen, the estimated down payment would be approximately 8.5–15 million yen. The remaining 35–41.5 million yen is typically financed through a loan from a financial institution.
Let's take a closer look at the specific breakdown of miscellaneous expenses.
The total of the above miscellaneous expenses typically amounts to a few percent to at most 10% of the property price. Generally, preparing 20–30% of the property price as your own funds, including miscellaneous expenses, will increase your chances of securing a loan from a financial institution. Conversely, relying entirely on a loan (full loan) with no own funds is challenging and carries significant risks. Some companies specializing in investment real estate may offer proposals similar to “full loans” that allow investors to start with less than 10% of their own funds. However, using a full loan increases monthly repayment burdens and extends the repayment period, narrowing the options for exit strategies (sale or full repayment). For beginners, it is safer to invest within a reasonable range of your own funds and start with a certain amount of down payment.
Let's simulate the case of purchasing an investment property priced at 50 million yen. Following the guidelines mentioned earlier, we will first pay 20% of the property price (10 million yen) as a down payment, and allocate approximately 7% of the property price (3.5 million yen) to miscellaneous expenses. In this case, the total amount of own funds required would be approximately 13.5 million yen. The remaining approximately 36.5 million yen would be financed through a loan from a financial institution. If the loan amount of 36.5 million yen is borrowed at an annual interest rate of 2% over a 25-year term (equal principal and interest payments), the monthly loan repayment amount would be approximately 170,000 yen (subject to change depending on interest rates and term). Assuming that the monthly rental income from this property is 250,000 yen when fully occupied, after deducting operational costs such as management fees, maintenance reserves, and taxes (20% of the rental income, approximately 50,000 yen), the net rental income would be approximately 200,000 yen per month. After paying the loan repayment of 170,000 yen, the net cash flow would be approximately 30,000 yen per month. In this simulation, an investment of 13.5 million yen yields a monthly positive cash flow of 30,000 yen while holding 50 million yen in assets (land and building) long-term. After 25 years, the loan is fully repaid, and thereafter, approximately 200,000 yen per month (after deducting expenses) becomes nearly pure profit (owner's income). Additionally, if the property value increases over time, capital gains from sale can be expected, and even if not sold, the asset can be passed down to the next generation. Of course, this calculation assumes full occupancy, and any vacancies would worsen the cash flow. Interest rate increases or maintenance costs could also affect cash flow. The key is to conduct a thorough cash flow simulation before purchasing, ensuring sufficient equity and a sound financial plan to comfortably repay the loan. As mentioned above, if the property can generally cover loan repayments with rental income, it could serve as a solid foundation for asset accumulation.
When raising funds to purchase investment real estate, individual investors primarily utilize loans from financial institutions, commonly referred to as “real estate investment loans” or “apartment loans.” While real estate investment loans and apartment loans are often used interchangeably, generally, real estate investment loans are intended for the purchase of condominium units, while apartment loans are intended for the purchase of entire buildings. However, even in the case of condominium investments, some loan products may be labeled as “apartment loans,” but they should be considered specialized loans for the purchase of investment properties.
While the structure of apartment loans is similar to that of residential mortgages, it is important to note that the interest rates and loan approval criteria differ. Regarding interest rates, apartment loans tend to have higher rates than residential mortgages for residential use. As of 2025, the average interest rate for apartment loans is approximately 2.5% per year. For example, major banks such as megabanks may offer low interest rates of around 1% per year for high-quality customers, but regional banks may vary from around 1.5% to 4.5% per year. Banks that offer low interest rates tend to have stricter approval criteria, with higher thresholds for factors such as annual income and employer. Generally, the better the borrower's attributes (annual income, occupation, creditworthiness, etc.), the lower the interest rate they are likely to receive. Additionally, the loan term is restricted based on the property's useful life and age. For wooden apartment buildings, the maximum loan term is typically around 20 to 25 years, while for reinforced concrete apartments, it is around 30 to 35 years. A longer repayment period reduces the monthly repayment burden but increases the total interest paid. It is important to choose an interest rate type (fixed or variable) and repayment period that aligns with your financial plan.
When evaluating loan eligibility, financial institutions primarily assess two factors: the borrower's attributes and the collateral value of the property. Borrower attributes include annual income, occupation/employment status, years of employment, asset status, and credit history. Generally, apartment loan requirements often include criteria such as “annual income of at least XX million yen,” with the widely recognized benchmark being “annual income of at least 7 million yen.” In practice, individuals with stable income from professions such as doctors, lawyers, or government employees, or those working for listed companies, and who have no significant outstanding loans, are said to have an advantage in the review process for real estate investment loans. While a high annual income does not guarantee approval, an annual income of 7 million yen can be considered a general benchmark. For the target readers of this article, who have an annual income of 20 million yen, the income criteria are sufficiently met, and they are likely to secure financing under favorable terms. However, some financial institutions may use a guideline of approximately 10 times the annual income as the loan limit. Based on this criterion, an annual income of 20 million yen could potentially qualify for a loan limit of approximately 200 million yen. However, the actual loan amount will also be determined based on the balance between the rental income from the property and the repayment ratio. While financial institutions take the property as collateral, they ultimately prioritize whether the loan repayments can be sustained comfortably through rental income plus the borrower's income. Therefore, in addition to the property's collateral valuation being sufficient, the property's earning potential (expected rental income and vacancy risk) will also be reviewed during the screening process. Even if you have a high income and ample equity, financing may not be approved if the property's cash flow plan is not viable.
Considering the above, beginners should keep the following points in mind when applying for financing.
As such, both the borrower's creditworthiness and property selection are crucial for securing favorable financing through an apartment loan. Leverage your strengths, such as a high income, while ensuring that the loan amount is manageable to start off on a solid footing.
After purchasing a property and starting real estate investment, various maintenance costs (operating costs) will arise. While it is easy to focus on initial expenses, it is important to plan your finances by considering post-purchase expenses as well. Here, we will explain the main maintenance costs and the risks associated with real estate investment, along with their countermeasures.
The above operating costs vary depending on the size of the property, but it is advisable to estimate approximately 20–30% of the monthly rental income as a guideline. For example, if the total monthly rental income is 200,000 yen, subtract 40,000–60,000 yen for maintenance costs, and use the remaining amount to repay the loan. It is important to conduct a cash flow simulation in advance, taking into account that a portion of the income will be consumed by operating expenses, to ensure that the net income does not turn negative.
Real estate investment involves the following risks. However, if you take precautions in advance, there is no need to worry excessively. Let's review the main risks and countermeasures.
1. Vacancy risk: If tenants move out and the property remains vacant, rental income will cease, while fixed expenses such as property taxes and management fees continue to accrue. This can result in losses for the owner and lead to significant financial losses. To mitigate this risk, the first step is to select properties in areas with high rental demand. Properties located near stations, universities, or businesses, or in areas with good surrounding environments are less likely to remain vacant. It is also important to set appropriate rent levels in line with local market conditions and to promptly recruit new tenants when vacancies occur. Selecting a reliable property management company with strong recruitment capabilities to secure the next tenant quickly can also be effective. Furthermore, utilizing sublease (vacancy guarantee) contracts is an option, but in such cases, it is essential to thoroughly verify the guaranteed rent levels and contract terms.
2. Maintenance Risk: Buildings deteriorate over time, potentially leading to unexpected high maintenance costs. According to guidelines from the Ministry of Land, Infrastructure, Transport and Tourism, major maintenance work for apartments is generally conducted every 12 years, with costs estimated at approximately 1 million yen per unit. Additionally, costs for restoring the property to its original condition due to wear and tear from daily use are generally the responsibility of the owner. Such repair costs can strain rental income and worsen cash flow. As a countermeasure, it is important to establish a long-term maintenance plan in advance and set aside a maintenance reserve fund (contingency fund). When purchasing a property, it is essential to review the Important Matters Investigation Report (a document summarizing management status and maintenance history) to understand future maintenance plans and past maintenance history. For older properties, there is a higher likelihood that major repairs will be required in the near future, so it is advisable to factor these costs into price negotiations or plan to initiate repairs immediately after purchase. Additionally, it is important to conduct regular maintenance on a routine basis to maintain the building in good condition. By addressing minor repairs promptly, you can prevent major issues from arising and extend the property's lifespan. When tenants move out, be sure to deduct appropriate restoration costs from the security deposit.
3. Interest Rate Risk: If you have a loan with a variable interest rate, an increase in interest rates in the future could lead to higher loan repayments and cash flow pressures. While Japan has been in an ultra-low interest rate environment in the 2020s, there is a possibility that the Bank of Japan may shift its policy and raise interest rates depending on inflation conditions. As a countermeasure, consider selecting a fixed-rate loan or, if opting for a variable-rate loan, ensure you have the flexibility to make early repayments. By making prepayments to reduce the principal, you can mitigate the increase in interest expenses in the event of rising interest rates. Additionally, if there is a significant rise in interest rates, considering refinancing with another bank may be effective. Refinancing can allow you to switch to a fixed-rate loan or move to a financial institution with lower interest rates, thereby adjusting repayment burdens. Stay informed about economic news and keep an eye on interest rate trends.
4. Tenant-related risks: In rental management, there is also the risk of disputes with tenants and rent arrears. There may be time-consuming situations such as responding to equipment malfunctions or noise complaints late at night, and if tenants fail to pay rent, it will result in a reduction in income. To address this, it is effective to first select a reliable property management company as a partner. A reputable management company offers 24/7 support and strict tenant screening processes, helping to enhance tenant satisfaction while preventing issues before they arise. During tenant screening, it is crucial to thoroughly verify income, employment status, and past payment history to select tenants with a low risk of rent default. In recent years, there has been an increase in cases where the use of a rent guarantee company is mandatory at the time of signing a lease agreement. In the event of a tenant defaulting on rent, the guarantee company will cover the payment. By utilizing a guarantee company, the risk of default can be significantly reduced, so consider implementing this option as needed. Additionally, maintaining smooth communication with tenants and building trust can lead to long-term tenancies and prevent issues. Regular property inspections and prompt repairs of any issues demonstrate a sincere management attitude as an owner, which can enhance tenant satisfaction and ultimately reduce the occurrence of rent arrears and complaints.
5. Real estate price decline risk: Depending on economic conditions and supply-demand balance, the asset value of purchased properties may decline. If the sale price falls below the purchase price, this results in capital loss (sale loss). This is similar to the price fluctuation risk associated with stocks, but real estate has lower liquidity, so there is also the risk of being unable to sell at the desired price and having funds tied up. As a countermeasure, it is important to prepare an exit strategy in advance. For example, if you are considering future capital gains, you can choose properties that are priced below market value at the time of purchase, or opt for properties in areas or of sizes that are easier to resell. Additionally, investing with the mindset of “holding onto the property for the long term if necessary,” based on a reasonable long-term investment premise, is another strategy. By avoiding overly short loan terms and ensuring sufficient monthly repayment capacity, you can avoid the need to sell hurriedly during poor market conditions. While the risks of property price fluctuations are difficult to control, they can be mitigated to some extent by focusing on location selection and the appropriateness of the purchase price. Acquiring high-quality properties at reasonable prices that are likely to maintain or increase in value in the future will help reduce exit risks.
As described above, real estate investment involves various risks, but many of these risks can be mitigated through prior research, planning, and appropriate management. By correctly understanding the risks and taking precautions, you will be able to continue stable rental operations.
Finally, we will summarize the key points that beginners should keep in mind to succeed in real estate investment. While taking advantage of a favorable financial background with an annual income of over 20 million yen, it is important to remain vigilant and thoroughly follow the basics to achieve success.
It is no exaggeration to say that property selection is everything in real estate investment. Even with limited experience, choosing a good property can help avoid major mistakes, but selecting the wrong property can lead to difficulties even with high income and financial strength. Consider the following points carefully when selecting a property.
Real estate investment is a long-term endeavor. It is crucial to establish a detailed funding plan and cash flow simulation in advance and manage the property according to the plan.
The management structure after purchase is also a critical factor in the success or failure of an investment. Beginners should avoid attempting self-management and instead consider entrusting the task to a reputable professional with a proven track record.
We have covered the key points of property selection, financial planning, and rental management. Even if you are starting real estate investment with a high income and strong creditworthiness, by not becoming complacent and ensuring you have a solid grasp of these fundamentals, you can minimize risks and build assets steadily.
As a beginner, there will be many things you do not understand, but please seek assistance from real estate companies, financial institutions, and experienced investors to accumulate knowledge and experience. Real estate investment is not about seeking quick profits in the short term, but rather a means of building assets steadily over the long term. With sufficient preparation and planning, it can be a viable option for those with an annual income of 20 million yen or more to establish a new source of income through rental income. We hope this article will serve as a reference for taking the first step toward achieving your goals.