The right knowledge and methods for salaried investors to start investing in real estate

Real estate investment is gaining popularity as an effective strategy for building retirement assets, with an increasing number of salaried workers starting to invest with the aim of generating additional income or building future assets. Salaried workers have advantages such as stable income, easier access to financing, and the ability to delegate property management to others, making real estate investment a viable option that can be pursued alongside their primary careers. However, real estate investment is by no means a “get-rich-quick” scheme. Given the significant loans involved, often in the tens of millions of yen, the risk of failure increases without proper knowledge and careful planning. In fact, cases of failure are not uncommon, such as purchasing properties with negative cash flow, incurring unexpected repair costs, buying at prices higher than the market rate, or taking on unrealistic loans. In this article, we will clearly explain the basic knowledge required for salaried investors to start real estate investment and the key points to avoid failure. We will focus on the fundamentals of property selection and financial planning, key points of risk management, and the considerations and benefits of outsourcing management to a property management company. We will also detail the perspectives and decision-making criteria that should be adopted when utilizing a property management company. Finally, we will provide clear steps and practical advice to help readers take immediate action. By acquiring formal knowledge and establishing a solid plan, it is possible to succeed in real estate investment even while working at a company. Let's take a look at this step by step.

Basic knowledge of property selection

It is no exaggeration to say that the success or failure of real estate investment depends on which properties you choose. In order to obtain stable rental income over the long term, it is important to evaluate properties from various angles and select the most appropriate ones. Key points to check when selecting a property are as follows.

• Property type and size: First, decide on the type of property you want to invest in. Consider whether you want to invest in a condominium unit (one unit in a condominium building), a single-building apartment/condominium, or a single-family home or parking lot. Condominium units have lower initial costs and are suitable for beginners, but their income potential is limited. Single-building purchases are expensive, but they allow you to diversify vacancy risks across multiple units and offer significant income opportunities. Choose a type that aligns with your budget and goals. Also, consider whether to opt for a new or used property. Used properties tend to be cheaper than new ones and offer higher yields, but they also come with higher maintenance risks. On the other hand, new properties provide the reassurance of lower maintenance costs in the short term and easier tenant recruitment, but they are more expensive and have lower yields.
• Location and demand: A good location is the most important factor in real estate investment. Check the distance from the station, access to the city center, the availability of commercial and public facilities in the surrounding area, safety, and proximity to schools and hospitals, and select an area with high rental demand. However, just because an area is popular does not necessarily mean it is safe, as needs may vary depending on commuting and school convenience and the surrounding environment. Identify the target tenant demographic (e.g., singles, students, families, business travelers) and assess whether the property offers an appealing living environment for that group. For example, properties near universities are suitable for students, those near office districts are ideal for single professionals or young working adults, and residential areas are better suited for families. It is crucial to analyze the demand accurately. Additionally, research the number of competing properties in the area and the vacancy rate to ensure there is no oversupply.
• Condition and age of the building: Do not jump at the surface-level numbers, but be sure to check the condition of the building itself. For used properties, check whether the previous owner maintained the property properly (cleaning status and whether there are records of regular inspections). Additionally, Japan's earthquake resistance standards were significantly strengthened in 1981 (Showa 56), so it is important to confirm whether older buildings meet the new earthquake resistance standards (post-1981). This not only provides reassurance when recruiting tenants but also reduces the risk of the property sustaining severe damage and becoming inoperable in the event of a major earthquake or other disaster. In older properties, even if not visible, there may be hidden issues such as aging plumbing or faulty equipment, which could lead to significant repair costs in the future. During property viewings, thoroughly inspect the condition of water supply and drainage systems, electrical systems, structural cracks, and signs of water leakage. If necessary, consider requesting a professional inspection (building inspection) for added peace of mind.
• Rent market rates and profitability: Research the rent market rates in the area of the property and calculate the yield (profitability) based on the sales price and rent. Generally, yield is divided into “surface yield” and “net yield,” with the former calculated as annual rent income divided by the property price, and the latter as (annual rent income minus expenses) divided by the property price. For example, if the property price is 100 million yen and the annual rental income is 6 million yen, the surface yield is 6%, but after deducting annual expenses of 1 million yen, the net yield becomes 5%. The net yield, which takes into account expenses, is the true indicator of profitability, so it is important to estimate necessary expenses such as management fees, maintenance costs, and property taxes before evaluating the property. Be cautious of properties that advertise abnormally high surface yields. There is a possibility that the rent is set unreasonably high to make the yield appear better, and if the rent remains unchanged, there is a risk of prolonged vacancies. Do not blindly trust the numbers in advertisements; instead, develop the habit of recalculating the appropriate rent based on the local market and conducting a cash flow simulation.
• On-site inspection and surrounding environment: Even if a property appears attractive based on online information, it is essential to visit the site in person to confirm the details. Walking around the area will reveal the atmosphere, noise levels, proximity to the nearest station, and the quality of sunlight and views—information that can only be obtained on-site. For single-occupant properties, check if there are convenience stores or restaurants nearby, and for family-oriented properties, verify if schools, parks, and supermarkets are within walking distance. Ensure that the facilities necessary for the target demographic are available. Since the appearance of the area may vary depending on the time of day or whether it is a weekday or weekend, it is advisable to visit at multiple times if possible. Inspect the property itself, including its exterior and interior, to verify details that cannot be captured in photos or floor plans. Only after conducting such on-site investigations should you make the final decision on whether the property is suitable for long-term, stable management.

As described above, when selecting a property, it is important to comprehensively assess the location, demand, condition of the building, and profitability, and make a decision based on whether it can generate stable income over the long term. By prioritizing the perspective of potential tenants, you can avoid major mistakes and clear the first hurdle.

Foundations of Financial Planning and Investment Budget

Next, we will explain the basics of financial planning (finance plan). Real estate investment often involves the use of investment loans, which entail long-term borrowing and repayment of large amounts of money. To ensure stable operations, it is essential to establish a detailed financial plan before purchasing and set a reasonable borrowing amount and repayment plan.

• Balance between equity and borrowing: First, determine the amount of equity you can prepare (down payment and miscellaneous expenses), and cover the remaining amount through financing from financial institutions. For salaried employees, there are general guidelines for the amount of financing available based on factors such as annual income and years of employment. The more equity you have, the lighter the monthly repayment burden and the more favorable the loan approval process, but it is also important to maintain sufficient cash on hand while leveraging appropriately. While it is possible to secure financing with zero down payment, this typically comes with stricter loan interest rates and terms, as well as higher risks of cash flow strain, so caution is advised. A common guideline is to pay a portion of the property price (around 20%) as a down payment and finance the remainder through a loan, but it is important to assess your own circumstances and determine a feasible plan.
• Monthly repayment plan: When utilizing financing, it is essential to confirm in advance that the monthly loan principal and interest payments can be fully covered by rental income. This is a key point that banks also emphasize during their review process. For the target property, calculate the net income by subtracting management fees, maintenance reserves (for apartments), management commission fees, taxes, and other expenses from the estimated rental income, and compare this with the monthly loan repayment amount. Simulate whether the cash flow will be positive (the budget is in the black). Ideally, the cash flow should be manageable even if interest rates rise or temporary vacancies occur, without needing to cover the shortfall from your main income. For example, if you take out a loan with a variable interest rate, consider the risk of interest rate increases and analyze scenarios to ensure that you can still make the payments even if the repayment amount increases. The repayment period is also important. While a longer term makes monthly payments easier, it also increases the total interest paid. Set an appropriate term based on your available funds and future plans.
• Miscellaneous expenses and running costs: In addition to the property price, various initial expenses such as brokerage fees, registration fees, loan processing fees, fire insurance premiums, and real estate acquisition taxes are incurred when purchasing real estate. Furthermore, after purchase, there arefixed asset tax and city planning tax (annual),management fees and repair reserves (monthly) for apartments, building maintenance and repair costs, advertising fees (AD) when recruiting tenants, and restoration costs when tenants move out, among otherrunning costs. In the financial plan, it is crucial to include all these expenses in the income and expense calculations. Omitting expenses can lead to the situation where the actual net income is lower than expected. Especially for older properties, it is advisable to estimate higher amounts for maintenance reserves and contingency funds to prepare for future major repairs. By confirming that the actual yield after deducting expenses is sufficient, rather than focusing solely on the surface yield, you can reduce the risk of acquiring a property that generates losses.
• Cash flow and contingency funds: It is common practice among professional investors to understand the annual and monthly cash flow of investment properties and to allow for flexibility in the income and expense plan. Rather than considering the purchase as the end of the process, it is important to continuously monitor the balance between income and expenses after the start of operations and revise the plan as necessary. For example, if maintenance costs are higher than expected or interest rate hikes are anticipated in the coming years, consider prepaying loans or adjusting rent to adapt to changing circumstances. If monthly cash flow is tight, you won't be able to withstand unexpected expenses. Therefore, it's essential to set aside emergency reserves to cover such expenses. As a general rule, aim to have enough cash on hand to cover at least several months' worth of loan repayments or vacancy periods. A funding plan isn't set in stone once it's created. By regularly reviewing and adjusting it, you can achieve stable, long-term investment management.
• Loan Negotiation and Comparison of Terms: When company employees apply for an investment loan, they often receive loan referrals through real estate companies with which they have partnerships. However, it is also a good idea to approach multiple financial institutions on your own. Financial institutions offer a variety of terms, such as interest rate types (fixed or variable), loan terms, loan-to-value ratios (full loan or down payment required), and collateral evaluations. Even a small difference in interest rates can result in a significant difference in total payments over the long term, so it is important to negotiate the most favorable terms possible. Be honest about your personal information, such as years of employment and annual income, and consult with the financial institution honestly. Obtaining a preliminary review (pre-approval) in advance to understand how much financing you can obtain will also make property selection smoother.

An appropriate funding plan is the foundation and safety net of real estate investment. By planning meticulously before purchasing, you can minimize unexpected issues after purchase and achieve stable operations. In fact, many salaried employees who have failed in real estate investment cite “insufficient cash flow simulations” or “taking on an unrealistic loan” as the cause of their failure. To avoid this, do not rely solely on your primary income, conduct careful simulations, and make investment decisions based on a solid financial plan.

Risk Management in Real Estate Investment

Real estate investment involves various risks, but if you understand them in advance and take appropriate measures, there is no need to fear them. Here, we will explain the representative risks and their management methods. Risk management is an essential skill for investors, so let's review each one carefully.

• Countermeasures against vacancy risk: Rental income depends on rent from tenants, so if units remain vacant, income will cease, and during that time, loan repayments and expenses will continue to accumulate. The first step in reducing vacancy risk is to select properties with high demand during the property selection phase (as mentioned earlier, location selection and target market definition are crucial). Additionally, setting appropriate rent levels is essential. Setting rents too high compared to market rates can prolong the time needed to find tenants and extend vacancy periods. Set rents that align with market conditions based on surrounding property values, and consider adjusting them flexibly after the rental period begins if necessary. Enhancing the property's appeal through interior renovations and upgrades is also effective. For example, even older properties can gain competitiveness and attract tenants sooner by replacing walls and floors and adding popular amenities like air conditioning and heated toilet seats. Once a vacancy arises, immediately begin recruiting the next tenant and collaborate with the property management company to actively promote the property. Agility in avoiding prolonged vacancies is crucial.
• Rent default risk: There is a possibility that tenants may default on rent payments. Continued defaults can impact the owner's cash flow. To mitigate this risk, it is important to conduct strict tenant screening and utilize a rent guarantee company. Selecting reliable tenants (those with stable income and employment, and with or without a guarantor) can reduce the risk of default. Rent guarantee companies, which are increasingly used in lease agreements, provide peace of mind by covering payments if tenants become unable to pay. It is also important to confirm whether the management company has a system in place to handle initial responses (such as reminders or communication with the guarantee company) in the event of non-payment. Additionally, it is advisable to establish connections with reliable professionals who can assist with legal procedures (such as eviction lawsuits) in case of emergencies.
• Interest rate risk: If you have a variable-rate loan, be mindful of future interest rate increases. There is no guarantee that current low interest rates will continue indefinitely, and if rates rise by even a few percentage points, your monthly payments could increase, potentially straining your cash flow. As a precaution, consider choosing a fixed-rate loan or making early repayments to reduce the principal. With a fixed-rate loan, your monthly payments will remain the same even if interest rates rise, providing peace of mind. Even if you choose a variable-rate loan, making prepayments while interest rates are low can reduce future interest burdens. Additionally, if you own multiple properties, diversifying your borrowing conditions (borrowing from different financial institutions or with different interest rate types) can help mitigate risk. It is advisable to monitor interest rate trends and consider switching to a fixed-rate loan or renegotiating interest rates as needed.
• Repair risks and deterioration: Buildings deteriorate over time and problems arise. Unexpected repairs are often necessary for issues such as water leaks, water heater malfunctions, roof leaks, and pest infestations. To prepare for such repair risks, it is essential to carry out regular maintenance. For example, regular cleaning of common areas to maintain aesthetics, inspecting plumbing systems every six months to catch small leaks, and conducting regular checks of rooftops and exterior walls for early repairs can prevent major issues. Particular attention should be given to plumbing systems, roofs, and exterior walls, as deterioration in these areas can lead to high repair costs. When purchasing a property, establish a long-term maintenance plan, estimate the timing and costs of future major repairs (such as exterior painting, waterproofing, or equipment replacement), and set aside a reserve fund. Additionally, there are insurance products available that cover equipment failures or provide owner-specific coverage as an add-on to fire insurance, so consider utilizing these as needed. By making consistent maintenance efforts, you can extend the lifespan of the building and ultimately maintain or enhance its asset value.
• Asset value fluctuation risk: The asset value (sale price) of real estate fluctuates depending on economic trends and supply-demand balance. If the surrounding environment deteriorates or population decline reduces demand after purchase, there is a risk that property prices may decline. However, in real estate investment aimed at rental income, there is no need to be overly concerned about short-term fluctuations in appraisal values. The focus should be on whether stable rental income can be obtained over the long term. As long as the purchase price is appropriate and the required yield is not excessively high, the property is unlikely to suffer a fatal blow even in the event of a major market crash. However, if you are considering future sale as an exit strategy, it is advisable to avoid properties with excessively low liquidity (such as extremely remote properties or those with specialized uses), check regional redevelopment plans and demographic trends, and consider resale value to ensure peace of mind. Maintenance, as mentioned earlier, contributes to maintaining the property's asset value, and renovations to enhance its value can also be effective when necessary.
• Disaster risk and insurance: Natural disasters such as earthquakes, typhoons, fires, and floods can damage properties or disrupt income. Insurance is an essential precaution in this regard. In addition to fire insurance, consider flood insurance in areas prone to flooding, and earthquake insurance in earthquake-prone Japan. Having appropriate insurance in place can help minimize economic damage by covering repair or reconstruction costs in the event of a disaster. It is important to confirm the risk zone of the property's location on a hazard map in advance and ensure that the insurance coverage is adequate. Additionally, efforts such as raising tenants' disaster awareness and enhancing the durability of facilities (e.g., installing fire extinguishers in restaurant tenants) can also help mitigate risks.

As mentioned above, risks are diverse, but the key is to “prepare in advance for risks that can be anticipated.” Those who fail tend to overlook risks and proceed optimistically, while wise investors always keep the worst-case scenario in mind and take proactive measures. With proper risk management, real estate investment can be a more stable asset management option compared to other investments. With thorough preparation, you can approach long-term investment with peace of mind.

Utilizing property management companies: Benefits and considerations

For salaried investors, deciding how to handle property management after purchasing a property is a major challenge. Given the demands of their primary jobs, it is practically impossible to handle tenant recruitment, rent collection, complaint resolution, and building maintenance on their own. In many cases, this leads to outsourcing these tasks to a real estate management company (rental management company). By entrusting property management to professionals, real estate investment can be described as a “hands-off investment.” However, not all management companies are the same, and the choice of company can significantly impact investment outcomes. This section explains the benefits of using a management company, as well as key considerations and criteria for selecting one.

Benefits of Using a Management Company

Outsourcing rental operations to a management company offers the following advantages, particularly for those with full-time jobs:

• Time and effort savings: This is the biggest advantage. Rental management involves a wide range of tasks, including posting rental ads, conducting property viewings, handling lease agreements, collecting rent, responding to tenant inquiries, resolving complaints, overseeing move-outs and arranging property restoration, as well as coordinating building cleaning and inspections. Handling these tasks on your own is no easy feat, but by entrusting them to a management company, owners can ensure swift responses even if they don't live near the property. This is a significant advantage for properties located far away.
• Utilization of specialized knowledge and networks: Property management companies are professionals in rental management. They have a wide range of networks for attracting tenants, including listing on major real estate portal sites and sharing information with other brokerage firms. Even if you have limited ability to attract tenants on your own, a property management company can efficiently advertise your property. They also have extensive knowledge of contract procedures and legal matters, handling everything from contract preparation and renewal procedures to legal responses in case of disputes. In case of equipment malfunctions, they can quickly arrange for repairs through their network of partner companies, providing management services that leverage the expertise of professionals. Even late-night responses or emergency visits, which can be difficult for a single owner to handle, can be entrusted to companies with 24/7 call centers, providing peace of mind for tenants.
• Reduced vacancy periods: By entrusting your property to an excellent management company, you can expect to fill vacancies quickly thanks to their strong tenant placement capabilities. The sales capabilities of a rental management company can be judged by factors such as the status of property listings on major rental portal sites, the average occupancy rate of managed properties, and the strength of their relationships with brokerage companies. Companies with strong tenant placement capabilities receive a high number of responses after starting recruitment and can secure tenants relatively quickly, thereby minimizing vacancy periods and reducing gaps in rental income. In particular, companies with a large number of managed properties and extensive experience are familiar with the rental demand in the surrounding area and can support tenant placement through appropriate rent setting and renovation proposals.
• Peace of mind in handling issues: In rental property management, various inquiries and issues from tenants (such as noise complaints, equipment malfunctions, or interpersonal conflicts) may arise. For property owners who are not familiar with real estate, handling these issues individually can be challenging. However, if a management company can handle such issues on a one-stop basis, it provides significant reassurance. If the management company has a 24/7 emergency contact number and can handle initial responses to tenant complaints, property owners do not need to worry about being called out late at night or on weekends. Additionally, depending on the nature of the issue, the management company can promptly take appropriate actions (such as arranging repairs or contacting the police), minimizing damage and maintaining tenant satisfaction.
• Stable operations and business expansion: By outsourcing management tasks, property owners can focus on their core business and reduce mental stress. The time saved can be reinvested in expanding the investment scale, such as purchasing additional properties. While self-management may be limited to one or two units, using a management company allows for efficient management of multiple properties. It is also possible to divide roles, with professionals handling day-to-day operations while owners focus on strategic planning and property selection. In essence, a management company serves as a “partner in real estate management,” and partnering with a good company can provide reliable support over the long term.

As outlined above, utilizing a management company offers the benefits of “reducing effort,” “leveraging professional expertise,” and “maximizing revenue opportunities.” For salaried employees in particular, it can serve as a powerful ally in securing an additional income stream while maintaining their primary income.

Key Considerations and Cautionary Points for Selecting a Management Company

However, entrusting everything to a management company does not guarantee peace of mind. Management companies vary in quality, and choosing the wrong one could result in disadvantages such as “vacancies remaining unfilled despite entrusting them” or “poor response leading to frequent tenant complaints.” We will summarize the main criteria for selecting a management company and points to consider.

• Scope of services that can be outsourced: Management companies vary in their areas of expertise and services offered. Some companies provide comprehensive management services, including property cleaning and equipment inspections, while others specialize in tenant recruitment and contract management, with cleaning and repairs available as optional services. It is important to confirm whether the company can cover all the services you wish to outsource. For example, if you want to outsource cleaning inspections for a property in a remote location, choose a company with strong building management capabilities. If tenant placement is a priority, select a company with strong leasing capabilities. If the scope of services does not align with your needs, unexpected additional costs or efforts may arise.
• Management fees and cost-effectiveness: The management fees paid to a property management company are generally around 5% of the monthly rent. For example, if the monthly rent is 100,000 yen, the management fee would be approximately 5,000 yen per month. While this amount may seem small at first glance, what is important is whether the services provided justify the cost.
• Companies offering extremely low fees may compromise service quality by cutting costs on labor. Conversely, excessively high fees can burden costs and squeeze profits. Obtain quotes from multiple companies and compare the balance between fee levels and service content. Avoid making decisions based solely on cost; instead, choose a company that provides “adequate services at reasonable rates.”
• Tenant placement ability and occupancy rate: A high occupancy rate, which directly impacts profitability, is a key consideration when selecting a property management company. Confirm whether the company has an average occupancy rate of 95% or higher for its managed properties and whether it proposes specific tenant recruitment strategies during the leasing process. Good management companies may disclose occupancy rate data for their managed properties or the average vacancy period.
• Additionally, past performance in securing tenants for other properties (how quickly they can fill units in similar areas or with similar construction years) is also a useful reference. Specifically, differences in sales ability can be seen in whether they actively list property information on major real estate portal sites, use creative photos and promotional comments to convey the property's appeal, and maintain good relationships with other brokerage companies to secure tenant cooperation. When asked about strategies to improve occupancy rates, avoid companies that cannot provide clear answers or performance data, and instead choose companies with proven expertise in quickly filling vacancies.
• Management track record and reliability: Companies with a proven track record in terms of the number of properties managed and years of experience have accumulated expertise through handling a wide variety of properties. Companies that have been operating for many years on a certain scale are more reliable than newly established companies with an extremely small number of managed properties. Companies with a proven track record may also disclose occupancy rate data for managed properties or the number of units by area on their websites, and such transparency is a sign of confidence in their performance.
• Additionally, it is important to verify whether the company has an organizational structure that allows for the systematic sharing and handover of property information, rather than relying on individual staff members. A company with a well-established communication system ensures that even if a staff member is absent, other team members can understand the situation and respond appropriately. In the event of a staff member's resignation or transfer, the handover process will be smooth. During interviews, ask about the staff's attitude and the company's internal systems to assess whether they are a reliable team of professionals.
• Emergency response capability: Confirm whether there is a 24/7 contact window or emergency response service available in case of sudden problems (such as equipment malfunctions or accidents) during nighttime or holidays. A system that can quickly and accurately handle problems will enhance tenant satisfaction and provide peace of mind for property owners. For example, there have been cases where a water leak at night was not responded to promptly, resulting in further damage. Inquire about emergency contact procedures and past response examples to verify the company's reliability.
• Financial Stability of the Company: While this may not be a point you consider carefully, the financial condition of the management company itself is actually important. If the management company goes bankrupt, there is a risk that the security deposits and rent paid by residents may disappear without being settled. Additionally, delays in rent payments have been reported in companies facing financial difficulties.
• Listed companies or those affiliated with major groups are generally more reliable, but there are also smaller companies that have built trust through years of profitable operations. If possible, check information from credit investigation agencies or the Teikoku Databank rating, or review the financial statements to assess the company's financial health. Online reviews are mixed, so use them as a reference and confirm that there are no suspicious rumors.
• Verify the contract terms: Finally, when signing a property management contract, carefully review the terms of the contract. Important details such as management fee rates, payment methods, rent payment dates, scope of services, expenses to be borne by the owner, and termination conditions (notice period for termination and whether liquidated damages apply) should be clearly stated. Clarify any unclear points before signing the contract and ensure you fully understand the terms before finalizing the agreement.
• Particular caution is required if a sublease (bulk lease) contract is proposed. Subleasing guarantees a fixed rent even during vacant periods, but it also carries risks such as clauses in the contract allowing adjustments to the guaranteed rent or restrictions on early termination. Understand the advantages and disadvantages and choose the method that best suits your needs.

As such, selecting a property management company requires a comprehensive assessment of price, track record, service content, and compatibility. Avoid companies that offer low prices but poor service, and instead choose a reliable company even if it costs a bit more. This will lead to maximized returns in the long term. Additionally, after signing the contract, do not simply leave everything to the management company; it is important to receive regular reports and maintain open communication. As an owner, it is important to stay informed about the property's condition and proactively consult and request improvements for any concerns. By utilizing a property management company as a “good partner” and focusing on strategic aspects, you can become a successful real estate investor.

Practical Steps for Successful Real Estate Investment

Finally, we will outline the specific steps that salaried investor should take to start real estate investment in chronological order. By following these steps, you can proceed with the preparation for property acquisition and management in a planned and steady manner. Please use this as a checklist.

1. Information Gathering and Learning: Start by acquiring the correct knowledge about real estate investment. Read relevant books and specialized magazines, attend real estate investment seminars, and research success stories online to acquire basic knowledge. Especially for salaried investor-targeted information sources, examples of common mistakes made by company employees and tips for success are often shared. It is also advisable to understand the basics of taxes and laws. By arming yourself with knowledge, you will be less susceptible to fraudulent solicitations and improve the accuracy of your investment decisions.
2. Set goals and develop a strategy: Next, clearly define your investment goals. Everyone has different objectives, such as “I want to earn an additional income of X dollars per month,” “I want to invest for the long term as a substitute for my pension,” or “I want to sell for a profit in X years.” Decide whether you are focusing on income gains (rental income) or capital gains (sale profits), and envision how many properties you want to own by when. Once your goals are set, your strategy will naturally follow. For example, if your goal is long-term stable income, you might adopt a strategy of accumulating condominium units in urban areas. If your goal is to expand your portfolio, you might start with a single-building apartment complex. It is important to establish a clear direction that aligns with your risk tolerance and life plan.
3. Develop a financial plan: Based on the information detailed in the previous section on financial planning, establish an investment budget and cash flow plan by considering factors such as the amount of your own funds, loan availability, monthly repayment simulations, and expected return on investment. This will give you a rough idea of the price range of properties you can afford. For example, if you have 〇 million yen in your own funds and can secure a loan of 〇 times that amount, what is the total budget? If the expected return on investment is △%, what will the annual cash flow be? Plan these figures in detail. We will calculate multiple scenarios and assess whether the plan can withstand not only optimistic but also pessimistic scenarios. At this stage, it is important for those with families to share the plan with their partners and obtain their understanding.
4. Loan consultation and preliminary review: Once you have a solid financial plan, consult with a financial institution about financing. Contact banks and credit unions that are active in real estate investment loans and provide them with information such as your annual income, years of employment, and desired loan amount to get a general idea of your eligibility for a loan. It is also effective to apply for a preliminary review (preliminary screening) at an early stage. If you pass the preliminary review, you will receive confirmation that you are eligible for a loan of up to a certain amount, making your property search more realistic. At the same time, communicate your preferences regarding interest rates, loan terms, and other conditions to increase your options. Even if you are working with a real estate company that offers partnered loans, contacting the bank directly beforehand can enhance your negotiation power.
5. Setting property conditions and conducting market research: It is now time to start searching for specific properties to purchase. First, make a list of your desired property conditions. These should include the area (along a specific train line, within an hour's commute from work, etc.), property type (apartment, house, etc.), age (within a certain number of years), size (at least a certain number of square meters), and yield (at least a certain percentage). Set conditions that align with your strategy. However, be careful not to narrow down your criteria too much, as this may result in no suitable properties being found. Instead, prioritize your criteria and remain flexible. Once your criteria are set, conduct market research to develop an understanding of current market conditions. Search for properties that match your criteria on real estate portal sites (Rakumachi, Kenbiya, HOME'S, etc.) to get a sense of price ranges, yield levels, and property trends. Concurrently, contact reliable real estate companies (specializing in investment properties) and share your preferences to receive property information. By reviewing a wide range of market information, you will develop the ability to discern between undervalued gems and overpriced risks.
6. Selection of potential properties and site visits: Once you find a property that seems promising, request detailed information without hesitation. Obtain property documents (rental rolls, income statements, property overviews, etc.) from the seller or broker, and recalculate the yield and income. Ask any questions you may have. And be sure to conduct a site visit. Inspect the property and its surroundings in person to confirm there are no issues. If possible, research the rental market in the surrounding area (such as the presence of rental signs and the rent range of nearby properties). For used properties, observe the condition of the building, common areas, and management status. If necessary, commission a professional building inspection to confirm there are no major defects, which will provide greater peace of mind.
7. Cash flow simulation and final decision: Once you have a clear idea of the purchase price and financing terms for the property you are considering, conduct a detailed cash flow simulation. Include all factors such as the purchase price, down payment and loan amount, interest rate and repayment period, expected rent, management fees, and taxes to create an annual cash flow statement and long-term cash flow forecast. Verify that the cash flow meets your initial expectations and that the return on investment meets your target. Additionally, we conduct stress tests, such as scenarios with a vacancy rate of X% or an interest rate increase of Y%, to assess resilience. If the simulation results are satisfactory, we make the final decision to purchase. If there is any hesitation, return to the basics and review your goals and strategy. If you are still unsure, it may be necessary to have the courage to walk away. Purchasing only properties that meet your criteria and where you have full confidence in the numbers is the golden rule for avoiding failure.
8. Purchase application and contract procedures: Once you have decided to purchase, first submit a purchase application form (purchase offer) through the real estate agent. If price negotiations are required, present your desired price at this stage. Once an agreement is reached with the seller on the terms, formally conclude the real estate purchase contract. Receive an explanation of important matters, sign and stamp the contract, and pay the deposit. Ensure you thoroughly review the contract contents and resolve any uncertainties before proceeding. After that, following the final review by the financial institution and approval of the loan, you will sign the loan agreement (loan contract). On the day of property handover, you will settle the remaining balance, complete the transfer of ownership registration, and receive the keys to the property, officially becoming the owner. The real estate agent or bank will guide you through the process from contract to handover, but be sure to promptly prepare any necessary documents.
9. Deciding on management policies and preparing for entrustment: Once you have acquired the property, you should immediately decide how to manage the rental property. If you have already selected a reliable management company, you should enter into a management entrustment contract promptly after the handover. If you are currently recruiting tenants, you should discuss the rental conditions with the management company, and if there are already tenants, you should have the management company handle the name change on the lease agreement and notify tenants of the bank account for rent payments. If you plan to utilize a sublease agreement, review the terms again and proceed to formalize the contract. If you choose self-management, you will need to take over communication with tenants and set up various payment accounts. In any case, ensure that the management structure is in place by the time operations begin. Also, complete the necessary procedures for fire insurance, earthquake insurance, and other insurance policies required for property ownership at this stage.
10. Operational Start and Business Monitoring: The rental business is finally underway. Once rent payments begin to be transferred from tenants, record monthly income and expenses and verify that they align with the plan. Review the monthly reports (income and expense details, tenant status) sent by the management company and inquire about any unclear points. Annual tax filing preparations are also required, so organize expense receipts and manage accounting. During operations, if any issues or decisions arise, do not act unilaterally; consult with the management company or experts and address them accordingly. It is also important to visit the property regularly to check its condition. For example, there may be issues that can only be noticed on-site, such as whether common area lights are working or weeds are left unattended. Even if you rely on the management company, taking the initiative to check the property yourself contributes to maintaining its value. Additionally, compare the initial income and expense plan with actual results every six months to a year. If there are significant discrepancies, analyze the causes and use the findings to adjust future strategies (such as considering rent adjustments or additional investments). By continuously maintaining this PDCA cycle, the accuracy of real estate investments will improve, bringing you closer to success.

The above outlines the specific steps to begin real estate investment. While each step may seem tedious, they are not difficult if approached systematically. The initial purchase of the first property may feel like the biggest hurdle, but with thorough preparation and careful decision-making, it can be overcome. By proceeding with a cautious “better safe than sorry” approach, you can avoid critical mistakes. After purchase, leverage professional expertise to manage the property and gain experience over time.

Summary and next steps

We have provided a detailed explanation of the basic knowledge and tips for success that salaried investors should know when starting real estate investment, from the perspectives of property selection, financial planning, risk management, and management company utilization. Finally, we will review the key points.

• Acquire the right knowledge: Before starting to invest, make sure you have sufficient basic knowledge and do not neglect information gathering. Knowledge is the best defense, so take your time to learn without rushing.
• Be cautious when selecting properties: Evaluate location, demand, building condition, and profitability from multiple angles, and select properties suitable for long-term stable operation. The key point is to consider whether the target demographic would want to live in the property, rather than whether you would want to live there yourself.
• Funding plan and cash flow simulation: Balance your own funds and loans, and limit the amount you borrow to what you can comfortably repay. Conduct thorough cash flow simulations before purchase to confirm that cash flow will remain positive. Include initial costs, ongoing expenses, and vacancy risks in your planning.
• Prepare for risks in advance: Identify major risks such as vacancies, delinquencies, repairs, interest rate hikes, and disasters, and implement specific measures for each. Vacancy prevention (selecting properties that match demand and setting appropriate rent) and insurance coverage are particularly important.
• Utilize property management companies wisely: Outsource rental management to a reliable property management company and focus on strategy and decision-making. When selecting a property management company, compare services, fees, track record, and responsiveness to choose a partner you can work with long-term. While delegating tasks, the owner should remain engaged with the property to maintain a healthy management system.
• Act efficiently: Develop an action plan following the steps outlined in this article and proceed steadily, one step at a time. Consult experts when unsure and avoid taking risks based on your own judgment. A well-planned approach with flexibility increases the likelihood of success.

Real estate investment does not require daily monitoring of market trends like stocks or FX trading. It is an investment method that leverages the stability of income typical of salaried employees to build assets steadily. With the right knowledge and preparation, it is by no means difficult. In fact, there are many advantages specific to salaried employees (such as access to financing and flexibility in time commitment). The key is to plan carefully without rushing, combining the caution of “crossing the bridge after checking it is solid” with the initiative to seize opportunities. Using the knowledge gained from this article, take the first step toward real estate investment. With the right approach, real estate investment can become a reliable and practical asset management strategy for salaried employees. Start taking action today toward the goal of future stable income. Best of luck.