Rent Out Your Japan Property Before Moving In? Read This First

Written By

Yuko Wada

Published On

December 11th, 2025

Introduction

The plan sounds straightforward: buy a property in Japan, rent it out for a few years to generate income and offset costs, then move in when ready to relocate or use it as a vacation home. This strategy appeals to many property buyers who want their investment to start paying for itself immediately while maintaining future flexibility.

The reality is more complicated than it appears. Japan’s rental market operates under fundamentally different legal and cultural frameworks than most Western countries. The country’s tenant protection laws are among the strongest in the world, and the rental culture prioritizes long-term stability over flexibility. What seems like a simple timeline can quickly become a legal and financial challenge without proper understanding of how Japan’s leasing system actually works.

This article explains the legal realities, practical challenges, and alternative strategies anyone considering this approach should understand before making a purchase decision.

Why a Limited-Duration Rental Strategy Is More Complex Than Expected

In markets like the United States, Canada, or Australia, landlords regularly offer one or two-year leases with the expectation that both parties can reassess at the end of the term. Flexibility is built into the system, and ending a tenancy after the agreed period is relatively straightforward.

Japan operates differently. The rental market here is structured around long-term occupancy. Most Japanese renters expect to stay in a property for five years or longer, and the entire leasing ecosystem reflects this expectation. Time-limited rental arrangements are uncommon and often viewed with caution by prospective tenants.

The reason lies in Japan’s high moving costs and cultural expectations. When tenants see a listing that explicitly limits occupancy to two or three years, they typically move on to properties offering more stability. This cultural preference creates a practical problem: advertising a property with a known end date means working with a significantly smaller tenant pool, potentially facing longer vacancies, or accepting lower rent to attract applicants.

Understanding Japan’s Two Lease Types (This Is Critical)

Japan’s residential leasing system offers two distinct contract structures, and understanding the difference between them is essential for anyone planning a time-limited rental strategy.

A. Ordinary Lease (普通借家契約 / Futsū Shakka Keiyaku)

This is the standard rental contract in Japan and the default option in nearly all residential leases. Under an ordinary lease:

The contract automatically renews unless both parties agree otherwise or the landlord can demonstrate legitimate justification for refusing renewal.
Tenants have extremely strong legal protections. Courts heavily favor tenants in disputes.
Landlords need “正当事由” (seitō jiyū)—legitimate justification to refuse contract renewal or initiate eviction. This legal standard is intentionally high and typically requires demonstrating factors such as the landlord’s genuine need to use the property personally, offering substantial financial compensation to the tenant, or proving the tenant violated contract terms.
Ending a tenancy after a few years can be very difficult unless tenants agree to leave voluntarily or the landlord can meet the demanding legal threshold.

According to Japan’s Land and Building Lease Act (Shakuchi Shakka Hō), landlords cannot simply decide they want their property back after a predetermined period. Even when an owner’s intention to eventually use the property personally has been clearly communicated, that intent alone does not automatically constitute legitimate justification under Japanese law. Courts evaluate each case individually, considering factors like the landlord’s actual circumstances and need, the tenant’s living situation, length of occupancy, and whether adequate compensation has been offered. The owner’s desire to move in is considered as one factor in the 正当事由 evaluation, but courts weigh it against the tenant’s right to housing stability.

B. Fixed-Term Lease (定期借家契約 / Teiki Shakka Keiyaku)

This contract type offers a clear end date with no automatic renewal. When the lease term expires, the tenant must vacate the property. This appears to be the ideal solution for limited-duration rental strategies.

However, there are significant practical drawbacks:

The tenant pool for fixed-term leases is considerably smaller. Most Japanese renters actively avoid these contracts because they offer no long-term security.
Below-market rent may be necessary to attract tenants willing to accept a fixed-term arrangement.
Many quality tenants won’t apply. Families with children in school, professionals seeking stability, and anyone planning long-term residence will often skip listings with fixed-term contracts entirely.
Corporate tenants may be more receptive, though even companies often prefer ordinary leases for employee housing.

Fixed-term leases are legal and enforceable, but they come with real market consequences. Property owners may face extended vacancy periods or need to accept tenants with fewer options in the rental market.

Japan’s High Initial Cost Structure (Why Tenants Avoid Time-Limited Rentals)

One reason Japanese renters prioritize long-term occupancy is the extraordinarily high cost of moving into a rental property. Understanding this cost structure is essential to understanding why limited-duration rental strategies face tenant resistance.

When a tenant signs a lease in Japan, they typically pay:

Security deposit (敷金 / shikikin): Usually one to two months’ rent, theoretically refundable but often partially withheld for cleaning and repairs.
Key money (礼金 / reikin): One to two months’ rent paid to the landlord as a non-refundable payment. This custom has historical roots and remains common in many markets.
Real estate agent fee: One month’s rent plus consumption tax.
Guarantor company fee: If the tenant uses a professional guarantor service (increasingly common), expect 50-100% of one month’s rent initially, plus annual renewal fees.
Fire insurance: Typically ¥15,000-20,000 annually.
First month’s rent and potentially advance rent.

Total move-in costs often reach five to six months of rent. For a property renting at ¥150,000/month, a tenant may need to pay ¥750,000-900,000 upfront just to move in.

Given these costs, Japanese renters treat moving as a major financial decision. They want to stay in a property long enough to justify the initial expense. When they see a lease limited to a few years, they calculate that they’ll face these costs again soon afterward. For most people, that’s simply not attractive when alternative properties with indefinite lease terms are available.

This cost structure fundamentally shapes renter behavior and expectations in ways that directly conflict with time-limited rental strategies.

Foreign Owner Challenges

Operating as a property owner from abroad or as a foreign national in Japan introduces additional complications beyond standard rental market challenges.

Communication & Language Barriers

Japanese law requires that lease agreements, property disclosures, and key legal documents be provided in Japanese. While some agencies and management companies can work bilingually, the legal framework assumes Japanese-language communication. If disputes arise, legal proceedings will be conducted in Japanese.

Owners who aren’t fluent need to rely on translators, bilingual property managers, or legal representatives, all of which add costs and potential communication gaps. Tenants may be hesitant to rent from a landlord they cannot communicate with directly, especially if maintenance issues or disputes arise.

Non-Resident Landlord Tax Withholding (源泉徴収)

When the property owner is a non-resident for Japanese tax purposes (非居住者), Japanese tax law creates an additional complication that significantly impacts the tenant pool.

Under the Income Tax Act, tenants renting from non-resident landlords are legally required to withhold 20.42% of the rent payment and remit it directly to the tax office. This means:

If monthly rent is ¥200,000, the tenant must pay ¥159,160 to the landlord and ¥40,840 to the tax office.
The tenant bears responsibility for calculating, withholding, remitting the tax, and filing the required paperwork each month.
This obligation applies whether the tenant is an individual or a corporation.

This withholding requirement creates serious practical problems:

Corporate tenants often refuse to rent from non-resident landlords because the administrative burden and compliance risk are too high for their accounting departments.
Individual tenants are frequently confused or unwilling to take on this tax responsibility, especially when simpler rental options are available.
Real estate agencies may decline to represent non-resident landlords because tenant resistance makes properties harder to rent.
Property management companies need specialized knowledge to handle these arrangements properly.

The result is that non-resident landlords face a substantially smaller tenant pool and may experience longer vacancy periods or need to reduce rent to compensate for the added complexity. Many agencies steer non-resident landlords toward individual Japanese tenants rather than corporate leases, which ironically are often the more stable, higher-paying tenant category.

Foreign owners who plan to remain non-residents while renting out property should factor this limitation into their investment calculations. In some cases, establishing Japanese tax residency (which has its own requirements and implications) may be necessary to access the full rental market.

Result: Compounded Challenges

These factors compound the already-limited pool of tenants willing to accept fixed-term or time-limited leases. Owners may find themselves excluded from corporate tenant arrangements that would otherwise provide stable, higher-paying renters. The combination of foreign ownership, non-resident status, and time-limited lease structure can create significant difficulty in finding and retaining quality tenants.

Tenant Rights and Eviction Realities

Even with careful lease structuring and clear communication of intentions, Japan’s legal system provides tenants with extraordinary protection. Understanding these rights is critical to realistic planning.

Under Japanese law, residential tenants cannot be easily removed from a property, even when lease terms technically allow it. Courts evaluate eviction or non-renewal requests based on the totality of circumstances and consistently prioritize tenant housing stability.

If an owner uses an ordinary lease and attempts to refuse renewal after a few years, demonstrating legitimate justification (seitō jiyū) requires evidence such as:

The landlord’s genuine, urgent need to personally occupy the property, which courts assess based on actual circumstances such as current housing situation, family needs, or other compelling factors.
Substantial financial compensation offered to the tenant to offset their moving costs and disruption, often equivalent to six months to one year of rent or more.
Documented tenant breach of contract, such as non-payment of rent, property damage, or illegal use of the premises.

The owner’s stated intention to eventually use the property is considered as part of the 正当事由 evaluation, but courts weigh multiple factors including how long the tenant has lived there, their personal circumstances, whether adequate compensation has been offered, and the relative necessity of each party’s housing needs. Simply having planned to move in after a few years is rarely sufficient by itself.

If eviction litigation becomes necessary, expect:

Legal proceedings lasting six months to over a year
Legal fees of ¥500,000-1,000,000 or more
Potential requirement to pay the tenant’s moving expenses and compensation
No guarantee of success

Even with a fixed-term lease, if errors were made in the contract structure, required notifications weren’t properly provided, or the landlord accepted rent beyond the contract end date, courts may convert it to an ordinary lease or require tenant compensation.

The fundamental principle: Japan’s legal system treats housing stability as essential, and property owners bear significant responsibility for that stability.

Rent Increases Are Difficult in Japan

Beyond the challenge of ending a tenancy, many property buyers misunderstand how rent adjustments work in Japan. Unlike markets where annual rent increases are standard practice, Japan treats rent as a relatively stable obligation.

Under the Land and Building Lease Act, landlords can request rent increases only when:

Taxes or property costs have substantially increased
Market rents in the area have risen significantly
The current rent is substantially below comparable properties

Even when these conditions are met, landlords cannot unilaterally increase rent. They must negotiate with the tenant. If the tenant refuses, the landlord can petition a court for a rent adjustment, but this process is expensive, time-consuming, and uncertain.

In practice, many Japanese landlords keep rents stable for years or even decades, particularly for good tenants. Annual rent escalations of 2-3%, common in the U.S. and other markets, are virtually unheard of in Japan’s residential sector.

This matters for investment planning because rental income cannot be assumed to increase to offset inflation or rising costs. The rent set initially is likely the rent received for the entire duration of the tenancy, regardless of how long it lasts.

Considering Minpaku (180-Day Vacation Rental) as an Alternative

Given the challenges of traditional residential leasing with limited durations, some property buyers explore vacation rental strategies under Japan’s Housing Accommodation Business Act, commonly known as the minpaku law.

Under this framework, property owners can legally operate vacation rentals for up to 180 days per calendar year without obtaining a hotel license. Key features include:

Advantages:

No tenant rights issues. Guests are temporary occupants, not legal tenants, eliminating eviction concerns entirely.
Complete flexibility. Owners can operate minpaku during months they’re not using the property personally and block dates for personal use at any time.
Potential to offset costs. Even with the 180-day cap, income from peak tourism seasons can help cover property taxes, management fees, and maintenance expenses.
Full control over the property. No need to negotiate with tenants or worry about lease termination.

Limitations and Challenges:

180-day annual cap is strictly enforced. Exceeding this limit without proper licensing can result in penalties. Operating year-round requires either a 特区民泊 (Special Zone Minpaku) designation in designated areas or a full hotel business license under 旅館業法, each with significantly more regulatory requirements.
Building restrictions. Many condominiums explicitly prohibit minpaku in their management rules (管理規約). Verification is essential before purchase.
Zoning restrictions. Some residential areas prohibit vacation rentals entirely under local ordinances.
Management requirements. Owners must designate a property manager (who can be themselves if residing in Japan, or a licensed management company if abroad), handle guest communications in potentially multiple languages, and maintain emergency contact availability.
Neighbor relations. Vacation guests can create noise and disruption issues that strain relationships with neighbors and building management.
Regulatory registration. Properties must be registered with local authorities, and registration numbers must be displayed in all listings and at the property.

For a deeper explanation of the differences between 180-day minpaku (民泊), 特区民泊 (Special Zone Minpaku), and hotel licensing under 旅館業法, including which option might work best for different property types and locations, see our detailed guide: Minpaku in Osaka: Complete Guide to Starting Your Airbnb Business in Japan (2025)

Minpaku offers genuine flexibility for owners planning eventual personal use, but it’s not viable for every property. Building rules, zoning regulations, and local market conditions must all be verified before purchasing with this strategy in mind.

Should Property Buyers Still Proceed with a Time-Limited Rental Strategy?

The core question remains: given these challenges, should someone proceed with purchasing a property in Japan if the plan involves renting it temporarily before personal use?

The honest answer depends on risk tolerance, timeline flexibility, and specific circumstances.

Higher-risk approach: Purchasing with firm plans to move in after a specific number of years, using an ordinary lease, and assuming the tenancy can be ended on schedule. This strategy has significant risk of failure. The owner may be unable to move in as planned, forced into expensive legal proceedings, or required to pay substantial compensation to tenants.

Moderate-risk approach: Using a fixed-term lease, accepting that below-market rent and longer vacancy periods are likely, but successfully finding tenants willing to accept the arrangement. This can work, though returns will be lower than standard investment properties, and challenges may still arise depending on building management rules or tenant quality.

Lower-risk approach: Verifying that minpaku is permitted for the property, operating vacation rentals within the 180-day limit, and using the income to offset carrying costs while preserving complete flexibility for personal use. This requires more active management but eliminates tenant rights issues entirely.

Important considerations before purchasing:

Confirm building rules. Review the condominium management regulations (管理規約 / kanri kiyaku) to verify whether vacation rentals are permitted and whether the building has any restrictions that would affect rental plans.
Understand zoning and local regulations. Not all residential areas permit minpaku or other rental strategies. Verify local ordinances before committing.
Calculate realistic costs. Factor in property management fees (typically 10-15% of rent for traditional leasing, higher for minpaku), property taxes, building management fees, and potential vacancy periods.
Plan for contingencies. What happens if a tenancy cannot be ended when desired? Can the owner afford to rent separate accommodation while owning this property? Is the personal-use timeline flexible enough to extend by several years if necessary?
Consider tax residency implications. Non-resident owners face the withholding tax issue that significantly limits the tenant pool. Will the owner establish Japanese tax residency? What are the implications?

If the property is being purchased primarily as an investment and the personal use component is flexible and distant, traditional leasing may work with proper structure. If personal use within a specific timeline is important, either avoiding traditional leasing entirely (leaving the property vacant, using it only for personal visits, or operating within minpaku limits) or accepting significant timeline flexibility is necessary.

Conclusion

Purchasing a property in Japan with the intention of renting it for a few years before personal use is legally possible but operationally more challenging than many buyers anticipate.

Japan’s tenant protection laws are designed to prioritize housing stability, and the rental culture expects long-term occupancy. Time-limited rental arrangements conflict with both legal frameworks and market expectations. Fixed-term leases offer a legal path but come with significant market disadvantages. Ordinary leases expose owners to genuine risk that tenancies won’t end on the desired timeline.

For foreign or non-resident owners, the tax withholding requirement adds another layer of complexity that further limits the tenant pool and can make corporate leases nearly impossible to secure.

Minpaku provides an alternative that may better align with eventual personal-use goals, but only if the building and location permit it, and only with more active management requirements.

Before proceeding with any property purchase in Japan, particularly one involving rental income before personal use, consulting with qualified professionals who understand both the investor perspective and Japanese legal realities is essential. This includes bilingual real estate advisors, tax specialists familiar with non-resident implications, and legal counsel who can review specific contract structures and building regulations.

Understanding these factors clearly before purchase allows for realistic planning and helps avoid costly surprises down the road.

Key Takeaways

Japanese rental law strongly protects tenants. Ending a tenancy after a few years can be difficult even with proper planning.
Ordinary leases automatically renew unless the landlord can demonstrate legitimate justification for non-renewal, which courts evaluate based on multiple factors including the landlord’s circumstances and adequate compensation.
Fixed-term leases avoid renewal issues but significantly reduce the tenant pool and may require below-market rent to attract applicants.
Moving costs in Japan are extremely high (5-6 months’ rent), making renters avoid properties with time-limited lease terms.
Rent increases are difficult and cannot be done unilaterally like in many Western markets.
Non-resident landlords face tax withholding requirements (20.42% withheld by tenants) that substantially reduce the tenant pool, particularly corporate tenants.
Foreign owners face additional challenges including language barriers, tax complications, and reduced tenant access.
Minpaku (180-day vacation rental) may offer more flexibility for owners planning future personal use, but building rules and zoning must be verified first.
Verify everything before purchase: building regulations, zoning laws, tax residency implications, and realistic timelines.
Plan for flexibility. If moving in on a specific date is essential, traditional leasing may not support that goal.

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Disclaimer: This article provides general information about Japanese real estate and rental laws for educational purposes. It is not legal, financial, tax, or investment advice. Regulations vary by municipality, individual circumstances differ significantly, and tax implications depend on residency status and other factors. Before making any real estate investment or leasing decision in Japan, consult with qualified bilingual professionals including real estate advisors, tax specialists, and legal counsel who can address your specific situation and current regulations.