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PASSIVE INCOME IN RENTAL PROPERTY: WHAT IS IT AND IS IT REALLY ATTAINABLE?

At some point, you have probably heard of passive income. You got interested in it and tried to find ways how to earn it. Well, who doesn’t want additional gains without exerting too much effort and time? It may sound too good to be true. But hey, passive income is indeed a great way to supplement your current earnings.

What is passive income, anyway?

Passive income is the earning obtained from rental properties or any enterprise in which the investor does not need to be actively involved. Many people are getting aware of how passive income works and how it can help to secure their retirement years. Its diverse opportunities give the investors peace of mind when it comes to the financial aspect of their lives. Generally, passive income is the great strategy to boost your retirement savings and reach your financial goals faster.

There are a lot of passive income streams that can help you grow your wealth. But among all of these investment streams, the best way to produce passive income is through rental properties. However, investing in rental properties is not the same as other financial streams, such as stocks and bonds.

 

HOW CAN YOU EARN PASSIVELY FROM RENTAL PROPERTIES?

 

Investing in rental properties will take time before you can start. If you are new to this type of investment, you should find a property in an accessible location with a decent and stable road. It is also advisable to pay in cash. Choose a property with a price of about 70% of its value in the market. Having debt to invest in real estate property is not a good idea, especially if you are a beginner investor.

Rental property investment also needs an in-depth understanding of its processes and nature itself. This means that rental properties require investors to take an active role and treat it as a business. From searching through properties to addressing repairs, it involves the investors at a certain level. But once you get your rental running, monthly earnings will surely get into your pocket without doing any daily work.

 

THE ESSENTIAL KEY TO BUILDING A SUCCESSFUL PASSIVE INCOME FROM RENTAL PROPERTIES

 

There is no shortcut to success. Whatever goal you may have, you must strive and persevere first before you can reach your goal. Managing rental properties is an excellent strategy to earn monthly profits. But then, being the landlord comes with various responsibilities that tenants look forward to.

The essential key to building a successful passive income from rental properties lies in planning and building a sound strategy. As mentioned above, you have to treat this type of investment as a business. Thus, as the investor and owner of the property, you need to craft and create your own business methods.

 

Do your research.

You can start by doing your research on a property that has the potential to generate revenue. You also have to learn the relevant laws and policies in your local area about being a landlord. There are certain rules that a landlord needs to follow to prevent future implications, or worse, lawsuits.

 

Gather information from the real estate market.

Knowing and understanding your target market will help you find and choose the best property to hold passive income. Think out of the box and place yourself in the shoes of your potential tenants. How can you get the right tenants? What are the important things that they expect from a rental property? As the landlord, how can you make them stay for a long period?

It is also helpful to glean information from the neighbourhood. Make yourself aware of the local real estate values and trends. Considering these will assist you to establish a fair judgment, supporting you to create a reliable investing decision.

 

Create a sound business strategy.

A sound business strategy includes the management of your finances and other paperworks, as well as dealing with your tenants. As you can see, rental properties are not absolutely passive. They still need proper supervision to avoid losing their passive income potential. They indeed have a complicated process. Nevertheless, when you do it right, rental property investment is definitely attainable, and it can guarantee you a long term revenue stream.

CAN FOREIGNERS GET LOANS TO BUY JAPANESE PROPERTY?

Investing in real estate properties is not easy, but it can be rewarding in so many ways. Many wealthy people have claimed that property investment is the best way for wealth creation. It can provide the investors various benefits such as a diversified portfolio, cash flow stability, and long-term high returns. But acquiring real estate under your name is not as simple as buying a stock. There are legal processes to undergo before owning a property.

In most Asian countries, it is complicated for foreigners to purchase real estate properties due to several state restrictions. However, Japan is different – it allows non-Japanese to own real estate without the need for citizenship or visa. The same process applies to them as to Japanese buyers. In simple terms, foreigners can own real estate – land included –  in Japan.

Recently, many foreigners got interested in Japan’s real estate investment. They have observed that the value of real estate in the country is relatively cheaper compared to any other country. For any real estate investor, this is an excellent opportunity to have a diversified investment portfolio. But looking for the best Japanese property is not the only thing that investors must consider. Foreign investors also take into account the method of financing that they are going to use.

 

I’m A Non-Japanese Buying A Japanese Property. How Can I Finance It?

 

Of course, before buying a property, you need to consider your financing. If you have sufficient cash to purchase a Japanese property, you can anticipate a faster and smoother transaction. But what if you do not have enough cash on hand as of the moment? Getting loans will probably cross your mind. But is it possible for a foreigner to get a loan approved in Japan?

The answer is an absolute yes. If you are a foreigner, you can get a loan to finance your ideal Japanese property. In Japan, there are financial institutions that offer mortgage loans to non-Japanese and assist them with their loan applications.

Typically, there are general prerequisites for housing loan applications. And for applicants, some of these prerequisites include the age, years of employment, annual income, and the eligibility to take out Group credit life insurance. However, these requirements vary depending on the financial institution you have applied for a loan. Some of the Japanese banks that offer mortgage loans to foreign residents are:

Prestia SMBC Trust Bank

Shinsei Bank

Tokyo Star Bank (Japanese Site)

 

English language information is available on these banks’ mortgage products. However, take note that all legal documents, as well as the terms and conditions, will be in the Japanese language. English translations are usually for general guidance only. If you are planning to get a mortgage loan with a Japanese financial institution, it is your advantage if you are fluent in Japanese.

Additionally, most of the Japanese banks require that the foreign applicant of mortgage loan has either:

  • Permanent Residency status
  • a Japanese spouse; or
  • a residence period in Japan long enough to be eligible for applying for Permanent Residency status

It is better to consider these when applying for a mortgage loan. Typically, Japanese financial institutions require these prerequisites to reduce the risk of payment delays. Your residency and employment status will give them guaranty that you can pay, and you have a genuine personal background. When you have at least one of these criteria, your chance for loan approval will be higher.

 

I don’t meet any of these prerequisites, but I want to invest in Japanese real estate property. What should I do?

 

Perhaps, you are just looking for a Japanese property as an additional investment. You probably heard as well that the borrowing rates in Japan are usually lower than the other countries. The benefits can entice you, but with these criteria, you will feel restricted to build your wealth in Japan real estate market.

Is there another way to invest in Japanese real estate property?

Yes, there is.

Japan Property Investments is a platform that provides foreigners like you to invest in the Japanese real estate market without the hassle of getting a loan. JPI helps foreign investors to grow their wealth through Fractional Property Investment. It is a simple and low-cost way of investing that guarantees you quality properties with the potential to generate income. With this type of investment, you can purchase a Japanese property and earn passively at your own convenience.

 

Want to expand your wealth with Fractional Property Investment? JPI can definitely help you. The JPI team is just one email away. Remember, time is vital when it comes to investments and wealth creation. Every second counts.

WHY DO PROPERTY PRICES ALWAYS TEND TO RISE?

At some point, you have probably wondered why the value of real estate always goes up. Whenever it crosses your mind, you might think that it is because of the high demand for real estate properties.

In the law of supply and demand, prices will rise if there is a high demand for a product or service but low supply in the market. Conversely, if there is a low demand but more supply, prices will fall. This is also true for the real estate market. Many people tend to buy properties as time goes by. Thus, many property developers build more to meet the rising demand of the people.

However, these properties take time to complete. And due to this, property prices rise because the available, completed properties are not enough to meet the demand as quickly as possible. Now, you might ask: what causes the demand for properties to go up?

 

There are several reasons that make the demand for properties increase.

 

But the common reasons that most people know is because of overpopulation and immigration. Those can be potential factors. However, in the general sense, they do not represent to be the only reason for the soaring demands of properties. It can also be due to the financialisation of the housing market.

As defined by the InvestorWords, the housing market is the “general market of houses being purchased and sold between buyers and sellers either directly by owners or indirectly through brokers.”

Meanwhile, financialisation of the housing market happens when the financial institutions, such as banks, keep on lending money to people so they can afford to buy properties. To put it simply, the demand for properties still depends on the financial sectors’ decision of how much money they are willing to lend.

Anyone who can meet the qualifications and requirements of a certain financial institution can get a mortgage or loan to purchase a property. For most people who cannot afford a house based on savings, this is a practical way, as they can pay back over a long period of time.

 

So, how does financialisation affect the property prices?

 

The value of properties tends to increase if more people are capable of getting a loan or mortgage from financial institutions. When there are plenty of lending banks and building societies willing to provide attainable terms, more people will buy a house.

Typically, banks also influence property prices when they set the key interest rate in the economy. If the interest rate is low, the cost of borrowing to purchase a house is likewise low. This circumstance can also encourage more people to borrow money, resulting in higher demand. Hence, the higher the demand is, the higher the prices will rise.

 

What determines how much banks will lend?

 

Usually, banks determine the amount of loan they will provide to a borrower based on some of these factors:

  • Regulations
  • Status of the economy in general
  • Governmental support

For banks, they are more likely to lend out mortgages because they are less risky than other types of loans. It is because if the borrower failed to repay, banks have the right to take back the property as the collateral.

 

Another Fundamental Reasons of The Property Price Increase

 

The demand for housing may increase if there are more single-person households. It means that in one property, there is only one person who lives in it. Another factor is the acquisition of many properties by only one person. These events will affect the growth of the demand for properties, hence rising the house prices.

The property prices will also change and soar high if there are fewer houses built, but there are more people who need it. When the supply of houses is low, people tend to compete by increasing their budget for buying a property. They often provide more money they are willing to spend to win over their ideal house.

Housing bubbles can also be a reason for rising house prices. The housing bubbles occur when house prices have soared higher just because people think prices will continue to increase. People will experience exuberant spending to the point of collapse. When the demand finally decreases or stagnates while the supply increases, typically, the house prices will fall sharply – thus, the bubble bursts.