In recent years, investing in one-room apartments has gained attention as a way for salaried workers to earn extra income or prepare for retirement. It is easy to start with low initial costs and is often advertised as “possible even with an annual income of XX million yen” and “tax-efficient,” making it popular among real estate investment beginners. However, there are also many voices from the internet and experts warning against it, such as “Don't invest in one-room apartments” and “It's not recommended for beginners.” In fact, according to the National Consumer Affairs Center, consultations regarding “investment apartments” from young adults in their 20s increased from 160 cases in 2013 to 405 cases in 2018, a 2.5-fold increase, indicating that many people regret their decisions after signing contracts. In this article, we will explain in detail why one-room apartment investment is often advised against, including the risks and issues that make it prone to failure (vacancy risk, rent decline, increasing maintenance costs, difficulty in exit strategies, etc.). We will also discuss the differences between new and used one-room apartments, the social issues surrounding sublease contracts and excessive sales pitches, as well as actual failure cases and the perspectives of experts and public institutions. Beginners should correctly understand the risks and realities before making their own investment decisions.
While one-room apartment investment may seem attractive due to its perceived ease and stable income, it actually carries the following representative risks. Beginners should be aware of these points, as they can lead to failure if not fully understood.
One-room apartments are small-scale properties targeting single individuals, so there is a risk of vacancies. Especially in areas with many students or single workers, vacancies are more likely to occur due to life events such as graduation or transfers, leading to frequent tenant turnover. Once a unit becomes vacant, rental income ceases until a new tenant is found. Since expenses such as loan repayments, management fees, and property taxes continue, there is a risk of incurring losses if the vacancy period prolongs. In fact, “prolonged vacancies” is one of the top reasons for failure in real estate investment, highlighting the significant impact of zero rental income. Reducing vacancy risk requires careful location selection, but this can be challenging for beginners and may become a major factor in revenue deterioration.
In rental management, it is also important to note that rent tends to decline over time. Generally, the rent for a one-bedroom apartment is said to decrease by approximately 1% annually, with a rate of about 2.2% per year for the first 3 to 10 years, approximately 0.9% per year for the next 10 to 20 years, and about 0.7% per year thereafter. In other words, rents begin to decline immediately after purchase, and there is a high risk that the initially anticipated income will not be achieved. If the cash flow is break-even or even slightly in the red at the time of purchase, the cash flow will continue to deteriorate as rents decline. Especially for new single-room apartments, which have higher sales prices, the initial yield is set low from the start, making them more susceptible to negative net cash flow after deducting loan repayments and expenses due to rent declines. Since rent decline risk is unavoidable for long-term ownership, optimistic cash flow simulations should be avoided.
As the building ages, structural deterioration progresses, leading to increased burdens from repair costs and maintenance expenses. Even in one-room apartments, regular major repairs (such as exterior wall repairs or equipment replacements) are unavoidable, and the monthly repair reserve fund payments may also increase in the future. Older properties lose competitiveness compared to newer ones, and in many cases, renovations or equipment updates are necessary when recruiting tenants. Such cost increases due to aging can squeeze profits and significantly reduce the expected return on investment. Additionally, costs for replacing equipment that was functional at the time of purchase (such as water heaters or air conditioners) will also arise as the property ages. Some beginners may think, “Since it's a condominium, maintenance costs won't be a significant burden,” but even in one-room investments, actual expenses for equipment failures and ongoing maintenance costs such as management fees and taxes are inevitable. As a result, many investors end up facing unexpected costs and operating at a loss, highlighting the importance of not underestimating the risks associated with age-related cost increases.
In real estate investment, there are situations where you may need to sell the property (exit) to realize profits or cut losses. However, one-room apartments face the issue of low liquidity, making it difficult to find buyers when selling. This is particularly true for properties in regional cities or areas outside popular regions, where market demand is limited, increasing the likelihood of being unable to sell at a fair price. One-room apartments are not suitable for families as residential properties, and the main buyers are limited to investors, making them more susceptible to market conditions. Additionally, even if purchased as new construction, they are classified as used properties immediately after purchase, leading to a significant decline in asset value. Newly constructed one-room apartments are often said to lose 20–30% of their value upon purchase, and in some cases, the remaining loan balance may exceed the property's value, leaving investors unable to sell due to an “overloan” situation. This difficulty in establishing an exit strategy is another risk of investing in one-room apartments, potentially leading to long-term capital lock-up. The lack of flexibility to dispose of assets in emergencies makes “low liquidity” a significant drawback for beginners.
While one-room apartment investment may seem straightforward, there are significant differences between “newly constructed apartments” and “used apartments.” While each has its advantages, both are subject to issues related to investment efficiency and risk.
In either case, it is risky to simply assume that “new construction is safe” or “used is reliable.”
When discussing one-room apartment investments, it is also important to address the social issues surrounding sublease contracts (rent guarantees) and excessive sales pitches. These are not inherent issues with the investment scheme itself but rather industry practices that beginners are prone to getting caught up in.
Sublease contracts (where a company guarantees rent even if the unit is vacant) may seem attractive to owners at first glance. Indeed, they offer the advantage of guaranteed rent income for a certain period and reduced management hassle. However, in recent years, numerous disputes over rent reductions have emerged in connection with subleasing. Cases have been reported where companies initially offer high guaranteed rent but later unilaterally demand reductions citing reasons such as “increased vacancies” or “declining market rent,” and in the worst cases, even terminate the contract. In fact, the Consumer Affairs Agency has reported cases where owners were told that rent income would be guaranteed, only to find out later that the guarantee had an expiration date and was terminated midway, resulting in a deficit in their income. If the sublease operator goes bankrupt or faces financial difficulties, not only will the rent payments cease, but the contract itself may become invalid, leaving the owner at risk of suddenly losing their income. To prevent such situations, the so-called “Sublease Reform Law” was enacted in 2020, imposing an obligation on operators to explain future rent fluctuation risks in writing. The Consumer Affairs Agency has also issued a warning, advising consumers to “ensure they fully understand the contract terms and risks of rent reductions before signing.” Sublease contracts are by no means “vacancy guarantee = security,” and a calm judgment that takes into account the limitations and risks of the guarantee is necessary.
Another social issue related to one-room apartment investments is aggressive sales tactics. There have been numerous reports of unscrupulous agents persistently pressuring people to sign contracts over the phone or in person, or continuing sales calls until late at night. The Ministry of Land, Infrastructure, Transport and Tourism has officially issued a warning, stating that “complaints about persistent phone calls related to the sale of investment apartments have been increasing recently.” Under the Real Estate Brokerage Act, it is illegal to make definitive claims about uncertain future benefits (e.g., “You will definitely make a profit,” “Principal guaranteed”) or to continue solicitation even after the other party has refused. However, in reality, sales pitches and solicitation that disregard the law are widespread, and inexperienced beginners are particularly vulnerable to such tactics. Many reports have been received of people being pressured into signing contracts with sweet talk like “If you don't sign now, you'll lose out” or “Anyone earning an annual income of ◯◯ million yen can become a landlord,” and being unable to make a calm judgment on the spot. For example, in one case, a sales representative summoned a person to a restaurant and refused to let them leave until they signed a contract, resulting in the purchase of an expensive apartment. While such unscrupulous operators are a minority, they are difficult for beginners to distinguish. As a precaution, verify the real estate agent's license number, and if the sales tactics are overly aggressive, report them to the local government or the Ministry of Land, Infrastructure, Transport and Tourism. The most important thing is to avoid being swayed by “get-rich-quick” schemes and instead take the time to consult with experts or public agencies. The Consumer Affairs Agency and the National Consumer Affairs Center also repeatedly urge consumers to refrain from signing contracts and seek advice if they feel even the slightest suspicion. For beginners, it is crucial to avoid being swayed by aggressive sales pitches and to make decisions after conducting thorough research on your own.
Investing in one-room apartments is often marketed as a way to achieve “passive income with stable returns” or “low-risk, long-term rental income.” However, the actual return on investment (ROI) is not particularly high, and the investment efficiency remains questionable.
First, even when looking at the surface yield (annual rental income ÷ property price), the average is not particularly high. In central Tokyo, the average for new one-room apartments is around 3–4%, and for used properties, around 4–5% is a general benchmark. In regional areas, yields may be slightly higher, but this comes with increased vacancy risks. A surface yield of around 5% means that even if purchased with your own funds, the annual investment return would be limited to 5%. Furthermore, when deducting expenses such as management fees, maintenance reserves, property taxes, and fire insurance premiums, the actual yield (net yield) often settles around 3%. This is not a particularly high figure when compared to other financial products (such as stock dividends or bond yields), and there is a possibility that the returns do not adequately compensate for the risks involved.
Moreover, many beginners purchase properties with a full loan (almost no down payment), in which case the loan interest must also be deducted from the monthly rental income. Even under current low-interest-rate conditions, loan interest rates of 1–2% are typical, so after deducting this from the net return, the actual net profit left in hand is very minimal. As mentioned earlier, even a slight vacancy or a decrease in rent can quickly lead to a loss. On the other hand, investors are taking on the risk of borrowing tens of millions of yen, so the risk-return ratio is not balanced.
Furthermore, caution is needed regarding the overreliance on tax benefits. Salespeople may claim that “you can reduce taxes through depreciation” or “it can serve as life insurance.” However, since the building cost ratio for condominium units is not particularly high, it is difficult to claim significant depreciation expenses, resulting in limited income tax reduction effects (tax savings). Even if you claim a loss through depreciation and receive an income tax refund, this merely offsets losses from your main business income, which is counterproductive. In fact, as mentioned earlier, the low profitability of one-room apartment investments often leads to a situation where investors rely on tax refunds to cover losses, resulting in regret later on. The Financial Services Agency has also pointed out that “investors in real estate for investment purposes should recognize that it is a business activity and carefully consider the feasibility of long-term income and expense plans as well as risks.” Rather than focusing solely on yield and jumping in lightly, it emphasizes the importance of evaluating investment efficiency and risk management based on net profits.
In summary, one-room apartment investments can be classified as low-return, medium-risk investments. They are by no means “safe investments for beginners,” and starting without understanding the reality often leads to inefficient management.
There are many people who have failed in one-room apartment investments. According to a survey, approximately 40% of real estate investors with experience answered that they had “failed at least once.” Common reasons for failure included “higher-than-expected costs,” “the property did not appreciate in value,” and “prolonged vacancies,” which are precisely the risks mentioned earlier that materialized in many cases. Below are some common examples of failures.
The lesson to be learned from these failure cases is that failure to understand risks and inadequate income and expenditure planning can be fatal. Some experts explicitly state that they do not recommend investing in one-room apartments.
Public agencies are also issuing warnings. As mentioned earlier, the Consumer Affairs Agency and the Consumer Affairs Center have reported an increase in cases of young people falling victim to such schemes, and the Financial Services Agency has sounded the alarm about investing through reckless borrowing. In other words, despite the sales pitch that “one-room apartment investment is safe even for beginners,” in reality, many people are experiencing failure and regret.
In summary, we have explained the main reasons why people say “don't invest in one-room apartments.” From the risks of income deterioration, such as vacancy risks, rent declines, and increased maintenance costs, to the issues specific to new and used properties, and social concerns such as sublease contracts and deceptive sales tactics, there are numerous points that beginners should be aware of. While one-room apartment investment may seem like an attractive option for starting with a small amount, it hides numerous drawbacks, as outlined above.
Real estate investment is not an easy way to make money, and even a small one-room apartment involves running a rental business. Without this awareness, blindly following sales pitches will likely lead to failure. Especially for beginners in real estate investment, it is crucial to sincerely consider the reasons why people say to avoid it, and make a comprehensive judgment that includes not only the benefits but also the risks and costs. Even if you are strongly interested, it is recommended to take a step back, consult with an expert, and compare it with other investment options. To protect your valuable assets, avoid impulsive one-room apartment investments and make careful decisions.