With the declining birthrate and aging population, Japan's rental market is facing a major turning point. The oversupply of properties is increasing not only in rural areas but also in central Tokyo, making vacancy countermeasures an urgent issue for many landlords. On the other hand, the number of foreigners living in Japan to work or study is increasing year by year, and their demand for rental properties is growing to a scale that cannot be ignored. However, the reality is that many landlords are hesitant to accept foreigners due to concerns about language barriers and differences in culture and customs.
In this article, INA & Associates, Inc. will explain specific management know-how to successfully accept foreign tenants and improvevacancy andoccupancy rates based on the real estate management expertise we have cultivated over the years. From data-based analysis of market trends to tenant screening and contracting practices, as well as specific methods for preventing problems, we provide information that all landlord associations can put into practice starting tomorrow. We hope that through this article, you will understand that accepting foreign tenants is one of the effective strategies in rental management.
Why accepting foreign tenants is the trump card for vacancy countermeasures
As Japan's total population enters a phase of decline, it is expected to become increasingly difficult to maintain demand for rental housing from domestic tenants alone. In this market environment, the presence of foreign tenants is an extremely important factor in achieving stable rental management.
According to statistics from the Immigration and Residency Management Agency, the number of foreign residents as of the end of 2023 reached approximately 3.41 million, a record high. The increase in the number of mid- to long-term residents for the purpose of employment is particularly significant, and they are seeking stable residences. This increasing trend is expected to continue, and the rental market for foreigners will continue to expand.
In addition to the direct benefit of filling vacancies, the following advantages exist in accepting foreign tenants.
| Advantages | Specifics | Impact on Management |
|---|---|---|
| 1. Development of a new demand segment | Vacancies that could not be filled by Japanese tenants alone can be filled by increasing foreign demand. | This directly leads to shorter vacancy periods and stable rental income. |
| 2. Possibility of long-term occupancy | Unlike foreign students and technical intern trainees, foreigners who build their careers in Japan as professionals or high-level human resources tend to stay in the apartments stably for a long period of time. | This reduces the cost of restoring the property to its original condition and the cost of advertising for new tenants. |
| 3. Relatively high rent | The supply of properties specialized for foreigners is still low, especially in central Tokyo, where demand exceeds supply. Therefore, tenants may be found even at rents slightly higher than the market rate. | This is expected to improve the profitability of the property and shorten the payback period of the investment. |
In this way, accepting foreign tenants is not just a simple vacancy countermeasure, but has the potential to improve the quality of rental management itself.
Practical points to keep in mind when accepting foreign tenants
In order to smoothly accept foreign tenants, it is essential to accurately understand the unique practical points that differ from those of Japanese tenants, and to follow the appropriate procedures. Here, we will explain the specific procedures for four particularly important steps.
How to Confirm Status of Residence
The first and most important step is to verify residency status. If an illegal alien is allowed to move in, the landlord risks being held legally liable himself. Always ask the applicant to present his/her resident card and confirm the following points.
- Type of status of residence: Check if the applicant has a status that allows him/her to work, such as "Permanent Resident," "Long-term Resident," or "Technical/Humanities/International Services.
- Period of stay (expiration date): Check whether the term of the lease contract exceeds the period of stay. Even if renewal is expected, the expiration date should be used as the basis for the decision.
- Whether or not there are any restrictions on work: If you have permission to engage in activities other than those permitted under the status of residence, such as "studying abroad" or "staying with family," your ability to pay rent must be carefully screened, as there are restrictions on the hours you can work.
Setting criteria for tenant screening
Tenant screening should not be based on nationality, but only on the individual's ability to pay and reliability, in a fair manner. The following criteria can be established to ensure an objective screening process.
- Proof of income: We will ask you to submit a certificate of employment or pay stub issued by your employer to confirm that you have a stable income.
- Japanese language ability: It is important for smooth communication that the applicant has enough Japanese language ability to understand the contents of the contract and the rules during the tenancy. It is advisable to confirm this through a simple question and answer session.
- Guarantor: Ideally, the guarantor should be a Japanese national living in Japan with a stable income or a foreigner with permanent resident status. If this is difficult to secure, the use of a rent obligation guarantee company, as described below, is mandatory.
Use of a Rent Obligation Guarantee Company
For foreign tenants for whom it is difficult to secure a joint guarantor, it is recommended that the use of a rent guarantee company be a prerequisite for the contract. This will greatly reduce the risk of rent delinquency in the event of an emergency. In recent years, an increasing number of guarantee companies specialize in foreign tenants, and they offer multilingual support and have their own screening know-how.
Multilingual Support for Contract Documents
Although Japanese is the original language used for lease agreements and important matters explanatory documents, it is advisable to have translated versions in major languages (e.g., English, Chinese, Vietnamese) to facilitate understanding of the contents. It is also effective to use the multilingual version of the "Standard Contract for Rental Housing for Foreign Residents" provided by the Ministry of Land, Infrastructure, Transport and Tourism.
These practical flows are organized in the table below.
| Steps | Items to be implemented | Confirmation / Points to be noted |
|---|---|---|
| 1. Acceptance of application | Fill out application form, request submission of required documents | Residence card, passport, proof of income, etc. |
| 2. Document verification | Check status of residence, period of stay, and whether or not there are any work restrictions. | Be careful not to forge residence cards. |
| 3. Tenant screening | Screening for ability to pay, Japanese language ability, and joint guarantor | Be careful to avoid discriminatory treatment |
| Use of Guarantor Company | If you do not have a joint guarantor, we will guide you to join a guarantee company. | Select a guarantee company that can handle foreign residents. |
| Conclusion of contract | Explanation of the contents of the contract (using the multilingual version), signing and sealing | Careful explanation of rules and manners |
Management know-how to prevent problems before they occur
When accepting foreign tenants, many landlords are concerned about preventing problems after they move in. In many cases, misunderstandings arising from differences in culture and lifestyle often lead to unexpected problems. However, with advance measures and proper communication, these risks can be adequately managed.
Common Trouble Cases and Their Causes
The first step is to understand what kinds of problems can occur. The following is a summary of typical cases and the cultural differences behind them.
| Trouble Cases | Main Causes and Cultural Background |
|---|---|
| Noise problems | Differences in perception of the noise of daily life, such as inviting friends over at night for parties, wearing shoes indoors, etc. |
| Garbage disposal | Insufficient awareness of rules, such as complicated rules for garbage separation that are difficult to understand, and failure to follow garbage disposal days and times. |
| Unauthorized subletting or living together | Cases of sharing a room with friends or relatives without permission, which is common in the home country. |
| Restoration to the original condition when moving out | The concept of "restoration to original condition" is lacking, and it is difficult to distinguish between damage caused by intentional or negligent acts and deterioration over time. |
In most cases, these troubles are not caused by tenants with malicious intent, but simply due to ignorance of Japanese rules and customs.
Specific Measures to Prevent Trouble
The key to preventing problems is careful explanation and follow-up at the time of contract and during the tenancy. Please refer to the checklist below and take measures to prevent problems.
| Countermeasure items | Specific actions |
|---|---|
| Clarification of multilingual rules | Make especially important rules such as garbage disposal, noise, use of common areas, etc., multilingual with illustrations and photos, and explain and distribute them at the time of contract. |
| Orientation at the time of moving in | Build a relationship of trust by providing information on daily life, such as handing out a local garbage collection calendar, showing the location of nearby supermarkets and hospitals, etc. |
| Establish a communication system | Clearly communicate with the management company and landlord by providing a contact number (phone, email, SNS, etc.) where they can easily consult with the management company and landlord, and communicate with them on a regular basis. |
| Building bridges to the community | Introduce local international exchange events and community association activities to help tenants integrate into the local community. |
Management System for Successful Acceptance of Foreign Residents
Dealing with foreign tenants through self-management requires a lot of effort, including language support and emergency response to problems. An effective solution is to outsource to a property management company with a proven track record in managing leases for foreign tenants.
Selection Criteria for Property Management Companies
The key to success lies in selecting a management company that has not only a large number of units under management, but also the following criteria.
| Selection Criteria | Points to check |
|---|---|
| Track record in handling foreign residents | Check the number of foreign residents the company has managed and brokered for. |
| Ability to handle multiple languages | Does the company have staff who can speak English, Chinese, Vietnamese, and other major languages? |
| Trouble handling system | Does the company have a 24-hour call center or a dedicated trouble resolution team? |
| Leasing Ability | Does the property have partnerships with universities or companies that have strong networks with international students and workers? |
Comparison of self-management and outsourced management
There are advantages and disadvantages to both self-management and outsourced management. Please select the management system that best suits your situation.
| Management Method | Merit | Disadvantages |
|---|---|---|
| Self-management | High profitability due to no management fees Direct communication with tenants |
A lot of effort is required to deal with language barriers and troubleshooting. Requires specialized knowledge and know-how |
| Outsourced management | ・ Experts handle the management, so it is hassle-free and reliable. ・ Full range of services, such as late payment guarantees and equipment guarantees |
Management fees (generally around 5% of rent) are required. Quality of service varies depending on the management company. |
Summary: Accepting foreigners is an investment in the future
In this article, we have explained how accepting foreign tenants is an effective vacancy countermeasure in modern rental management, as well as the specific know-how required to put this into practice.
In the major trend of demographic change, foreign tenants are no longer "special. They are important members of the local community, and are an excellent customer segment in the rental market. Rather than being overly fearful of language and cultural barriers, it is possible to prevent problems by being appropriately knowledgeable and prepared.
Thorough verification of residency status, objective tenant screening, use of rent guarantees, and careful communication. Faithful implementation of these basics will lead to improved occupancy rates. We believe that accepting foreign tenants is not only a measure to prevent vacancies, but also an "investment for the future" to increase the value of properties and realize stable rental management over the long term by embracing diversity.
We encourage you to take the first step by using this article as a guide. If you have any specific questions about how to proceed or individual matters, please join our landlord association (INA Network). As long as you follow our rules, we will answer all your questions and provide you with all the support you need.
Frequently Asked Questions
Q1. What is the biggest risk in accepting foreign tenants?
A1. The biggest risks are rent arrears and trouble due to lack of communication. For rent arrears, the risk can be greatly reduced by requiring the tenant to join a rent obligation guarantee company. In addition, since most problems are caused by a lack of understanding of cultural and customary differences, it is extremely important to provide careful explanations in advance, such as by handing over a rule book prepared in multiple languages at the time of contracting.
Q2. How can I confirm the status of residence?
A2. When applying to move in, please be sure to have the applicant present the original "residence card" and keep a copy. There are three points to be confirmed: "type of status of residence," "expiration date of period of stay," and "whether or not there are any restrictions on employment. The Immigration and Residence Management Agency provides a service on its website that allows you to check the validity of your resident card number, and we recommend that you use this service as well.
Q3. What should I do if I cannot understand the language?
A3. It is effective to use a smartphone translation application or a management company with a multi-lingual call center. In addition, for particularly important precautions, such as garbage disposal rules, it is helpful to prepare a finger pointing confirmation sheet with many illustrations and photos to aid smooth communication.
Q4. How can I reduce the risk of rent delinquency?
A4. The most reliable way is to require tenants to join a rent guarantee company. In addition, it is fundamental to make sure that documents proving the stability of your place of employment and income are verified at the tenant screening stage. In addition, setting up direct debits from your payroll account will also help prevent delinquent payments.
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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