When starting a real estate investment while working, professional restrictions andpersonal credit and income requirements may make it difficult to proceed with the investment. Below is a summary of occupations that are likely to be restricted by work rules and regulations prohibiting side hustles, as well as cases in which credit and income requirements may increase the hurdles to loan approval (you will ultimately need to check your own employer's regulations).
Civil servants (national and local civil servants): Civil servants are prohibited by law (National Civil Service Law and Local Civil Service Law) from having a side job. As a result, there are strict restrictions on real estate investment. However, according to the National Personnel Authority's rules and regulations, a small-scale real estate rental business is not considered a side job. Specifically, it may be allowed if the scale is "less than 5 houses for detached houses" or "less than 10 apartments for condominiums" (National Personnel Authority Rule 14-8, Notice of Operation (2023-04)). It is also recommended that annual rental income be less than 5 million yen, and that the employee not engage in property management himself/herself (outsource the management work to a contractor). If these conditions are exceeded, it is considered a side business and is subject to prohibition. If a public official wishes to invest in real estate, he or she must carefully consider the legal requirements.
National Public Service Law, Article 103 (1947-10) / Local Public Service Law, Article 38 (1950-12)
Employees of financial institutions (bank employees, securities company employees, etc.): Employees in the financial industry such as banks and securities companies are professionally subject to very strict internal investment trading rules. For example, most companies prohibit or require prior notification of stock or FX trading to prevent insider trading. As for real estate investment, the response differs depending on the internal rules of each financial institution, but there are some cases in which internal rules prohibit investment in general (only exceptionally permitted in the case of acquisition by inheritance, etc.). Therefore, those who work for a financial institution must thoroughly check the instructions and regulations of the internal compliance department.
Professionals (lawyers, certified public accountants, doctors, etc.): Unlike civil servants, lawyers, accountants, doctors, and other professionals are not legally prohibited from having a second job. Therefore, real estate investment is basically possible as an investment of one's own assets. In fact, it is said that these nationally licensed professionals have high creditworthiness and stability, and since there is no mandatory retirement age, they are said to be easy to obtain loans. However, there may be cases in which side jobs are restricted by the internal rules of the organization to which you belong, such as the law firm, accounting firm, or hospital where you work. Also, since these professionals have busy day jobs, they need to be careful that their real estate rental business does not interfere with their day jobs. Depending on the type of work, it may be advisable for these professionals to check with their employers or affiliated organizations in advance to confirm whether or not they are allowed to work on the side.
(*In addition to the above, some general private companies also have regulations prohibiting side jobs. However, in many cases, real estate investment is considered "asset management" and does not constitute a side job, but each company has its own interpretation, so it is important to check in advance).
During the loan approval process for real estate investment loans, items related to the borrower's personal creditworthiness, such as income, job stability, and debt status, are strictly checked. If you do not meet these requirements, you may not be able to receive a loan, making it difficult to invest in real estate. Here are some of the main cases
Short tenure: If you have not been employed for a long time, you are more likely to receive a negative evaluation from financial institutions regarding your ability to maintain a stable income in the future. Many financial institutions consider a minimum of two to three years of employment as a condition for a loan, and if you have not been with your employer for a short period of time, you may be considered unstable enough to withstand long-term repayment. In particular, if you have just changed jobs and have been with the company for only a very short time, the hurdles to loan approval will be much higher. If you have been with the company for less than one year, you are likely to struggle in the loan approval process.
Unstable employment status (irregular employment, self-employment, etc.): If you are working in an employment status other than full-time, it is also likely to work against you in the loan approval process. If you have employment with a fixed term, such as temporary or contract work, or if your income fluctuates easily as a freelancer or self-employed worker, financial institutions will be cautious about your ability to continue repaying your loan. In fact, full-time employees of large companies have an advantage in the screening process, while those working for small and medium-sized companies or self-employed tend to be disadvantaged. If your income is unstable, your professional attributes will be strictly scrutinized to determine whether you are expected to be able to repay the loan in a stable manner, which is a major barrier to the loan approval process.
Low annual income: Real estate investment loans often require an annual income above a certain level, and a low annual income tends to be judged as insufficient for repayment. Generally speaking, an annual income of at least 7 million yen is considered a good indication of smooth passage through the loan approval process, while an annual income of around 5 million yen may not be enough to pass the loan approval process. Although standards vary by financial institution, for example, some city banks set the minimum annual income in the 5-6 million yen range. If your annual income does not meet these standards, it will be difficult to start real estate investment unless you supplement your income with more personal funds or use public financial institutions (such as Japan Finance Corporation).
If you have many other loans: If you already have multiple loans such as a mortgage, car loan, or credit card loan, it will also be detrimental to your chances of being approved for a new real estate investment loan. The ratio of debt to annual income (repayment burden ratio) is considered high, and the screening process tends to become more difficult when the total amount of debt exceeds eight times your annual income. In fact, some financial institutions set the maximum amount of total debt at "10 to 20 times your annual income," and if your debt exceeds this amount, you will not be approved for a new loan even if you are not in arrears with your repayments. Even if the individual's annual income is high, if the existing loan burden is large, he or she is considered to be "at high risk of future delinquency," increasing the likelihood that a new real estate investment loan will be denied. Therefore, it is advisable to sort out other borrowing situations and lower the repayment ratio before starting investment.
High age: The age of the borrower also affects the loan's availability. It is especially difficult to obtain loan approval from a bank for a long-term plan where the borrower is over 80 years old when the loan is fully repaid. This is because financial institutions place importance on stable income during the repayment period, and they are concerned about the risk of reduced income due to retirement if the applicant is older. Many financial institutions set the upper age limit for full repayment at around 80 years old, and it is generally difficult to get approved for a plan that exceeds this age limit (some institutions allow applicants to be under 85 years old). Therefore, when taking out a real estate investment loan in your 50s or 60s or later, you should pay attention to your age at full repayment.
Bad Credit: A blemished personal credit history can be a fatal obstacle to loan approval. If you have a history of financial problems (e.g., long-term delinquency or debt consolidation), it will be extremely difficult to obtain a new loan. Even if it is not that serious, a history of credit card delinquencies or too many loans will also lower your creditworthiness. Financial institutions also check applicants' credit information to see if there are any problems. For example, having a number of unused credit cards may be considered a risk, so it is important to keep a good credit history by canceling unnecessary cards. Since credit conditions are checked more strictly in the real estate investment loan process than in the mortgage process, if you have any concerns about your credit report, you should improve it beforehand.
As mentioned above, real estate investment is basically free, except for some occupations such as civil servants, but each company has its own employment regulations and side business rules. Even if there is no legal problem, some companies may have their own restrictions on side jobs, or require notification if the size of the company exceeds a certain level. Therefore, before actually starting to invest in real estate, be sure to check what the regulations are at your place of employment. If necessary, it is a safe bet to consult with your supervisor or the human resources department to clarify whether or not permission or notification is required. It is also important to consult with financial institutions in advance about financing aspects based on your own income, employment, and credit situation, and to make a reasonable plan. Since conditions vary depending on individual circumstances, please make sure to check the rules at your place of employment and thoroughly review your own attributes before investing in real estate.