For those of you who are engaged in busy daily work as attorneys, effective asset formation that takes advantage of your high income is an important issue. Especially in recent years, many lawyers have turned their attention to real estate investment due to increasing tax burdens and uncertainty about the future.
This article details five reasons why busy lawyers should consider real estate investment. We will also introduce specific investment strategies that take advantage offinancing conditions andlegal knowledge that take advantage ofthe high attributes unique to lawyers.
According to the latest survey by the Japan Federation of Bar Associations, the average annual income of lawyers is 25.58 million yen, with a median income of 14.37 million yen. On the other hand, the Basic Survey on Wage Structure (2021 edition) reported that the average annual income of male lawyers was 9.7 million yen and that of female lawyers was 8.79 million yen.
The difference in these figures is due to differences in survey targets and tabulation methods, but in any case, lawyers are positioned as a high-income profession. In particular, attorneys with between 25 and 30 years of experience reported an average income of 46.99 million yen and a median income of 30 million yen, which is by far the highest level among other professions.
| Lawyers' Annual Income by Years of Experience | Average annual income | Median |
|---|---|---|
| 25 years or more but less than 30 years | 46.99 million yen | 30 million yen |
| Working lawyers (60-64 terms) | 9.4 million yen | -9.4 million yen |
| Working attorneys (55-59 terms) | 8.63 million yen | -Overall average (Nichibenren survey) |
| Overall average (Japan Federation of Bar Associations survey) | 25.58 million yen | 14,370,000 yen |
However, high income comes with a commensurate tax burden. Japan's income tax system is based on a progressive taxation system, with tax rates rising with higher income. The current income tax rates are as follows
| Taxable income | Income tax rate | Resident tax rate | Total tax rate |
|---|---|---|---|
| Less than 1,950,000 yen | 5% (5% of total taxable income) | 10% (tax rate on the amount of 1.95 million yen or less) | 15% (15%) |
| Over 1.95 million yen but less than 3.3 million yen | 10% 10% (%) | 10% 10% | 20% 20% |
| Over 3.3 million yen but less than 6.95 million yen | 20% 20% | 10% 20% | 30% 30% |
| Over 6.95 million yen but less than 9 million yen | 23% 10% 30% | 10% 33% 33% | 33% 10% 10% 33% |
| Over 9 million yen but less than 18 million yen | 33% 10% 33 | 10% 10% | 43% 10% |
| Over 18 million yen but less than 40 million yen | 40% 10% 40 | 10% 50% 50% | 50% Over 40 million yen |
| Over 40 million yen | 45% 10% 10% 50% Over 40 million yen | 10% 50% | 55% (taxable income of over ¥15 million) |
When taxable income is around 15 million yen, the effective tax rate reaches 43%. This means that approximately half of the income earned is taxed.
In order to reduce this high tax burden and achieve efficient asset building, many high-income lawyers are turning to tax-saving measures through real estate investment.
Lawyers are representative of a profession that is valued by financial institutions as having "high attributes. Along with doctors and tax accountants, they are positioned as professionals who can expect high long-term income, and enjoy extremely favorable conditions in the screening process for real estate investment loans.
Specifically, the following preferences are available
While the standard loan limit for a typical salaried worker is 7 to 10 times his/her annual income, it is not uncommon for lawyers to receive loans of 15 to 20 times their annual income. A lawyer with an annual income of 15 million yen can invest more than 200 million yen in real estate and achieve large-scale asset building in a short period of time.
One of the greatest advantages of real estate investment is the tax-saving effect of depreciation. The value of the building portion is considered to decrease over time, and this decrease can be recorded as an expense.
We will explain how depreciation works with specific examples:
| Property Information | Property Details |
|---|---|
| Property Value | 50 million yen |
| Building price | 30 million yen (Land: 20 million yen) |
| Structure | RC (useful life of 47 years) |
| Annual depreciation | Approx. 640,000 yen (30 million yen / 47 years) |
An attorney with an annual income of 20 million yen (taxable income of 15 million yen, tax rate of 33%) purchases the above property:
Annual tax savings = 640,000 yen x 33% = approximately 210,000 yen
Furthermore, by purchasing an existing property, it is possible to shorten the depreciation period and obtain even greater tax savings. In the case of a 20-year-old RC condominium, the remaining useful life is 27 years, and the annual depreciation expense increases to approximately 1,110,000 yen.
Annual tax savings = 1,110,000 yen x 33% = approximately 370,000 yen
This tax saving effect is realized by adjusting the loss from employment income when real estate income is in the red. In other words, the actual tax burden can be significantly reduced due to depreciation expenses that do not involve cash outlay.
The specialized legal knowledge that lawyers possess is a significant advantage in real estate investment. Legal risks that are often overlooked by ordinary investors can be avoided in advance to realize safer and more profitable investments.
Specific situations in which we are utilized:
Ability to scrutinize contracts
Ability to handle problems
Responding to legal amendments
With this knowledge, it is possible to acquire "properties with a reason" at a fair price, which general investors tend to avoid, and generate a large profit by resolving legal issues. In fact, there have been many reported cases where properties with inheritance problems or properties with undetermined boundaries were acquired at 70-80% of market value by utilizing the expertise of attorneys to resolve the issues.
One of the most important factors for lawyers is time efficiency. Real estate investments can be managed almost entirely as passive investments by outsourcing to an appropriate management company.
Outsourced Management Automates Operations
| Management Services | Details of Outsourcing | Degree of attorney involvement |
|---|---|---|
| Tenant Recruitment | Advertisements, handling of previews | None |
| Rent collection | Monthly rent collection and reminders | None |
| Building management | Cleaning, facility inspection, repairs | Approval of important matters only |
| Move-in and move-out procedures | Contract preparation, settlement of security deposits | None |
| Troubleshooting | Tenant complaints, neighborhood problems | Involved only in legal issues |
Management consignment fee is about 5% of rent income, but by paying this fee, the investment can be continued with only 1-2 hours of checking work per month.
Comparison with Stock Investment
| Investment Method | Daily time investment | Degree of expertise required | Response to market fluctuations |
|---|---|---|---|
| Real Estate Investment | 1-2 hours per month | Low (use of management company) | Long-term stability |
| Stock investment | 1-2 hours per day | High (market analysis required) | Responding to daily fluctuations |
| FX/Virtual currency | Several hours per day | Extremely high (24-hour market) | Constant monitoring required |
Thus, real estate investment is the most suitable investment approach for "busy lawyers". It allows you to focus on your core business while securing a steady additional income.
Due to recent global inflationary trends, the real value of cash and deposits is diminishing. Real estate investment acts as an inflation hedge and is extremely effective in preserving long-term asset values.
Stability of rental income
One major advantage of real estate investment is the stability of rental income. Unlike dividends from stocks or interest from bonds, rents are less susceptible to economic fluctuations and provide stable income over the long term.
Actual yield data:
| Property Type | Surface Yield | Real Yield | Vacancy rate |
|---|---|---|---|
| Condominiums | 3～5% (3.5～5%) | 2.5～4% (2.5～4%) | 5～10% (5.5～10%) |
| Condominiums | Approx. 8 | 6 to 7% 6 to 7 | 3-8% of the total |
| Apartment building | Approx. 8% 6 to 7 | 6 to 7% 5 to 12 | 5～12% (yield of 6%) |
A lawyer with an annual income of 20 million yen who invests 100 million yen in real estate can earn an annual rental income of 6 million yen (6% yield), which is a stable income equivalent to 30% of his/her main business income.
Furthermore, real estate is extremely effective as an inheritance tax measure. While cash inheritance is valued at face value, real estate is valued at 70-80% of its fair market value for inheritance tax purposes, which can lead to significant tax savings.
For lawyers who are new to real estate investment, we recommend starting with condominium unit investment. You can start with a relatively small amount of money and minimize the management effort.
Conditions of recommended properties
| Item | Recommended conditions | Reason |
|---|---|---|
| Location | Within 10 minutes walk from station | Stability of rental demand |
| Age of building | 10 to 25 years old | Balance between price and yield |
| Exclusive area | 25～40 sq.m. | High demand for singles |
| Structure | RC or SRC construction | Durability and financing terms |
| Yield | Real yield of 3% or more | Profitability |
After gaining some experience, consider investing in a single building. You can expect greater tax savings and profitability.
Advantages of investing in a single building
For attorneys with abundant financial resources and experience, investing in commercial real estate and development projects is also an option.
Characteristics of Commercial Real Estate Investment
A1. Yes, if done properly, it can provide significant tax savings. However, the higher the taxable income, the greater the tax savings. Lawyers with annual incomes of 10 million yen or more will be able to enjoy ample tax-saving benefits.
The important thing is to invest for the primary purpose of long-term asset building, rather than for the sole purpose of tax reduction. The secret to success is to consider tax reduction as a secondary benefit.
A2. By outsourcing to a management company, you can continue to invest with only 1-2 hours per month of checking. Many attorney-investors are investing in real estate without interfering with their day jobs.
Key points in selecting a management company:
A3. If you take advantage of our lawyers' high qualifications, you can start with as little as 1 million yen as a down payment. However, considering safety, we recommend a down payment of 10-20% of the property price.
Recommended investment size by annual income:
A4. Vacancy risk can be greatly reduced by choosing the right location. Selecting a location within a 10-minute walk from a station and in an area with a low population decline rate will ensure long-term rental demand.
Also, by owning multiple units, you can diversify your income and minimize the overall impact even if one unit becomes vacant.
A5. It is important to borrow at fixed interest rates and to consider in advance strategies for early repayment when interest rates rise. Due to the stable and high income of attorneys, even a slight rise in interest rates is not expected to pose a significant obstacle to continued investment.
In addition, rising real estate prices will ensure that an exit strategy through refinancing or sale is an option.
For busy lawyers, real estate investment is an extremely effective means of asset building for the following five reasons
The real estate investment market in 2025 is expected to remain favorable for both buyers and sellers. Take advantage of this opportunity to both reduce your tax burden and build assets through planned real estate investments.
However, real estate investment involves risks. When considering an investment, it is always important to seek professional advice and develop a strategy that is appropriate for your financial situation and investment goals.
Next Steps
Attorneys interested in investing in real estate are encouraged to take the following actions first
INA&Associates, Inc. supports real estate investment strategies for attorneys to take advantage of their high income. Please feel free to contact us for an individual consultation.