2021.10.04UPFRONT COST OF RENTING AN APARTMENT IN JAPAN
What is the actual upfront cash you have to come up with when you move into an apartment in Japan? What are some future costs to consider? And what are some ways to reduce your initial out-of-pocket costs when renting an apartment?
How to estimate your upfront move-in costs
First, let’s assume you’re looking to move into an apartment where the advertised rent is ¥60,000. You will also have to budget the following in this hypothetical case:
First month’s rent = ¥60,000
Deposit (one to two month’s rent) = ¥60,000 to ¥120,000
Key money (one to two month’s rent) = ¥60,000 to ¥120,000
Agent’s commission (one month’s rent + tax) = ¥64,800
Guarantor company fee (one month’s rent + tax) = ¥64,800
Property maintenance fee = ¥3,000 to ¥5,000
Renters/Fire insurance = ¥20,000 (for a two-year policy)
Lock exchange fee = ¥12,000
In this case, you’ll have to pay between ¥344,600 and ¥466,600 in upfront cash to the landlord and your agent, which is about 5.5 to 7 times the rent! You will also have to set aside money for furniture and appliances (curtains, refrigerator, washer, etc.).
First month’s rent and pro-rating
In almost all cases when you lease an apartment in Japan, you will have to pay the next month’s rent before the last day of the current month. If you move in during the middle of the month, your rent will be pro-rated by the number of days you actually rent the first month. Also, your rent will be calculated from the day your lease starts, not your actual move-in date.
This is called shikikin (敷金) in Kanto (the Greater Tokyo area and surrounding prefectures) and hoshoukin 保証金 in Kansai (Kyoto, Osaka, Kobe and surrounding prefectures). In Kanto, the deposit is usually one to two month’s rent. It is often higher in Kansai.
Your landlord holds your deposit throughout the term of your lease, and will use the money to cover any unpaid rent or to pay for repairs beyond normal wear-and-tear and cleaning fees when you move out.
In Tokyo, there is a local ordinance that was enacted to prevent disputes between tenants and landlords on this issue: unless you have done clear damage to the apartment, the landlord is supposed to deduct a cleaning fee from your deposit and return the balance to you when you vacate the property.
This is a gratuity you pay to your landlord, and it will not be returned to you when you vacate your apartment. Key money is called reikin (礼金) in Kanto and is usually about one to two month’s rent; it is typically much higher in Kansai.
Key money is often explained as a cultural custom or as a relic of the era of rapid post-war economic growth, when Japan experienced acute housing shortages in urban areas. Prospective tenants would pay key money to landlords to get to the head of the line.
But there is also an economic rationale for key money: tenants, as a practical matter, have a right to renew in perpetuity under Japanese law, so landlords demand extra compensation to account for this option to renew.
In general, the average amount of key money charged by landlords tends be higher in Kansai (which includes Osaka, Kyoto, and Kobe). This article looks at the main differences between key money and deposit between Tokyo and Osaka.
Not every landlord charges key money, so restricting your search to a “no key money” apartment is one way to lower your upfront costs.
This is the fee you pay to your agent for their service. By law, the maximum that your agent can charge you is one month’s rent plus consumption tax.
Some agents do not charge a commission at all or only half a month’s rent, and you can certainly lower your out-of-pocket costs by searching for properties where the agent has waived their fee.
Guarantor Company Fee
A guarantor is a person who is responsible for your rent in case you default on payment.
Not every landlord requires a guarantor, but almost all places do. Also, if there is a particular apartment you really want to move into which requires a guarantor, you will not have a choice but to find a guarantor to co-sign your application. Japanese nationals often use a family member as their guarantor. As a foreigner, you may be asked by the landlord to provide the name and contact info of your company, manager or school as your guarantor.
However, you may not be able to or want to have your housing tied to your place of work. In this case, you can use a guarantor company. The guarantor company will charge you a fee, usually about one month’s rent, to act as the guarantor for your application. Usually, you will also have to pay a renewal fee to the guarantor company every two years, so remember to budget for this.
If you use a guarantor company, you will most likely also be required to have an emergency contact person in Japan as part of your lease application.
Property Maintenance Fee
This fee pays for the maintenance of the common areas (hallways, elevator, etc.) in your building. Sometimes it is included in the advertised rent, and is not shown as a separate charge.
In the US, UK and Australia, this fee is known as a CAM (Common Area Maintenance) fee.
Property or Fire Insurance
Almost all residential leases in Japan are signed for initial two-year terms. You will also be required to take out property or fire insurance when you sign your lease. The cost is usually about ¥20,000 for a two-year policy, and you will be required to renew your insurance every time you renew your lease.
Lock Exchange Fee
It is common for landlords to charge the tenant moving in for the cost of exchanging the lock(s) on the property.
Lease Renewal Fee
Almost all residential apartment leases in Japan are renewable leases signed for an initial two-year term.
One thing to be aware of is that lease renewal fees are very common in Japan, although there is no law saying that they have to be a standard part of a rental contract. In greater Tokyo, this fee is usually one month’s rent.
If you think that you might want to stay in your apartment for longer than two years, try to negotiate with the landlord before you sign the contract to have the lease renewal fee removed. Once you sign a contract requiring you to pay a renewal fee, you are legally bound by it.
Otherwise, remember to set aside money for renewing your lease when it expires.
How to lower your move-in costs
If you are planning on staying in Japan for less than two years, which is usually the minimum length of a residential apartment lease, you can avoid many upfront costs by staying in a guesthouse, sometimes called a “gaijin house.” In this type of budget accommodation, you’ll have a bed in a dormitory-style bedroom and have shared use of bathroom facilities and a kitchen. Many guesthouses are very centrally located, with convenient access to trains and shopping. You give up some private space in return for much lower move-in costs, low monthly rent, and convenience.
Designer Share Houses
For a little higher rent than you would pay at a guesthouse, share houses offer private bedrooms with shared communal spaces, often with designer touches. Share houses typically do not charge key money or a deposit, and the minimum lease term is usually one year.
No Key Money Apartments
If you want to save on upfront costs but do not want to stay in shared housing, then try limiting your search to “no key money” and “no deposit required” apartments, as these can be two of the most expensive upfront costs.