What Real Estate “Gurus” Say About Renting Your Primary Residence

You may have heard real estate “experts” argue that you should never own your primary residence and instead rent while investing in income-generating properties. Their reasoning is usually based on several key points:

1. Opportunity Cost: The money tied up in a down payment, which in most countries is significant, and home equity could be invested elsewhere for higher returns, such as in stocks, bonds, or rental properties.
2. Liquidity: Real estate is illiquid, meaning it can take time and effort to sell if you need access to cash. Renting, on the other hand, keeps your assets more liquid.
3. Maintenance and Hidden Costs: Home ownership comes with ongoing expenses like property taxes, maintenance, and repairs, which can eat into your financial returns.
4. Flexibility: Renting allows you to relocate easily for career opportunities or lifestyle changes without the burden of selling a property.

While these arguments hold weight in many countries, they often don’t apply in Japan due to its unique financial landscape. With residential mortgage interest rates below 1% and the ability to buy a home with little or no down payment, the opportunity cost of home ownership is significantly reduced. Additionally, low borrowing costs mean that your monthly mortgage payments can be comparable to—or even lower than—rent, allowing you to build equity without sacrificing liquidity or flexibility.

The flexibility argument is valid to an extent, but there’s always a price to pay for flexibility. Inflation, which is now starting to take hold, means your landlord can increase your rental costs in the future. While the landlord is responsible for maintenance costs, renters in Japan typically pay one month’s additional rent every two years to cover renewal fees.

Moreover, rising property prices in cities like Tokyo and Osaka mean that waiting could eventually price you out of the market. We’ve seen this happen to several clients over the last few years—they decided to wait, only to find themselves priced out of their preferred neighborhoods when they attempted to reenter the market.

In Japan, buying a property can actually give you more flexibility. You have options to rent it out in the future, or sell it and cash out your equity, or use the profits to buy a new property if you outgrow it or want to live elsewhere.  In addition, when selling residential properties also have an important tax benefit that rental properties do not: If your capital gain from the sale of your primary residence is less than JPY 30 million, you will owe no capital gains tax.

In Japan, buying your primary residence can be both a practical and financially savvy decision.

The Case for Renting in Japan

Renting a home offers flexibility and fewer upfront costs, making it an attractive option for many people. For those who only plan to be in Japan for a short period (1–5 years), renting is often the better choice, as they are less likely to access preferential loan terms from banks.

In Japan, banks assess the borrower more strictly than the property itself and tend to prefer borrowers who are stable and likely to stay in Japan long term (e.g., permanent residence holders). While other visa holders may still qualify for loans, the terms (down payment, interest rates) may make buying less attractive. For more information, read our article Unlocking Japanese Property Loans.

For those on expat packages where the company covers rental costs, buying a home may not make financial sense if it means losing that benefit. We recommend setting up a financial consultation with us to evaluate whether buying or renting is the better option in such cases.

Here are some of the key advantages of renting:

1. Lower Initial Costs: Renting typically requires a security deposit and a few months’ rent upfront, but this is usually far less than the down payment and closing costs associated with buying a home.
2. Flexibility: If you’re unsure about your long-term plans or expect to move frequently, renting allows you to relocate without the hassle of selling a property.
3. Maintenance-Free Living: As a renter, you’re not responsible for major repairs or maintenance. If something breaks, it’s usually the landlord’s responsibility to fix it.
4. No Market Risk: Renters aren’t affected by fluctuations in property values, which can be a concern for homeowners.

However, renting also has its downsides. Over time, rental payments build no equity, and you may face rising rent costs. Additionally, you’re subject to the rules and decisions of your landlord, which can limit your freedom to customize your living space.

While landlords in Japan are responsible for repair costs, maintenance is generally low-cost. Units are often empty when rented out, with only the air conditioner and gas heater for the landlord to worry about. If your washing machine or refrigerator breaks, it’s on you to fix it. When you move out, the landlord will use your deposit to cover any damage and cleaning costs.