Wednesday, March 16, 2011

More Navigating of Property Deposits

Several months ago, we outlined some of the major points of the monetary deposits you'll be likely to make when you rent an apartment in Japan. After some more first-hand experience on the matter, we have some more details to add, and in the next post, we'll share some money-saving strategies to use in your apartment hunt.
Furthering the discussion of shikikin (敷金) and reikin (礼金), which we covered in our last article, note that landlords tend to trend their shikikin and reikin habits in different regions and neighborhoods. For example, in one neighborhood, it may be thought standard for an apartment to carry 3 months' shikikin and 1 month's reikin. In another neighborhood just across the city, most properties might carry 1 months' shikikin and 1 month's reikin.

It certainly doesn't mean there aren't exceptions to this rule, and you may run across a no-shikikin, no-reikin property right beside a 3-months', 3-months' monster. It's just worth considering how certain regions or neighborhoods seem to run in trends.

Outside of shikikin and reikin, there are a bunch of other fees that factor in to the final property deposit. You will probably be asked to pay chuukai tesuuryou (仲介手数料). This is a cut of money given to the real estate agent for showing you around, processing paperwork, and contacting the building owner on your behalf. Even if you find the apartment online yourself and just contact the agent to make a purchase, you will be charged this amount.

Each agency has its own 仲介手数料 policy. For some, it is a flat rate for every contract. Minimini charges, I hear, 40,000 yen no matter what property you decide on. Apamanshop is said to be more expensive, around 70,000 yen. For other agencies, 仲介手数料 is based on your monthly rent. For example, if your apartment will be 55,000 yen per month, the 仲介手数料 will be 55,000 yen. (And often, the agent will ask you to pay tax on that amount to boot.)

However, you have more bargaining power here than an agent will let on--check out our next article for money-saving tips.

Anyway, after that, you'll be charged for fire insurance, or kasai hoken (火災保険). This is often mandated by the municipality in which you live and unavoidable. It is a yearly charge running around, in my experience, the 10,000 yen mark in big cities.

Next, recently landlords require renters to have guarantor company insurance, hoshou gaisha hoken (保証会社保険). I had heard of guarantor companies before, in the sense that they are available for people who cannot provide a guarantor (i.e., a financially established Japanese citizen) when they look at apartments.

However, this hoshou gaisha hoken is different. Even after you provide a legitimate guarantor, landlords are asking for you to buy insurance just in case you default on your rent payments. In essence, you are paying a company to follow up on you if you don't pay your rent on time. (Ridiculous.)

If your agent has personal connections with the landlord, it is possible he can ask for this insurance to be waived. But, I was told in my search that some 80 to 90% of rental properties have over the last couple years begun requiring this guarantor company insurance.

Anyway, the hoshou gaisha hoken cost depends on which insurance agency is used. Some of them charge a lump sum on signup and no additional payments later, and others charge annually. The price is based on your rent. In examples I saw, a 50,000 yen per month apartment cost 20,000 yen the first year and 10,000 yen each subsequent year to insure. It scaled to 30,000 yen the first year (and 10,000 yen each subsequent year) on an apartment that cost 60,000 yen per month.

Finally, on your upfront costs the landlord is going to ask you to pay through the first full month's rent in advance. This means that if you start renting an apartment for a portion of a month (with a move-in date of, say, January 15), the agent will ask you to send the rent for January 16-31 as well as all of February's rent at the time of contract.

All in all, when playing the new apartment game, you may want as much as six months' worth of the monthly rent available, on-hand in order to meet the down payment on your apartment. Yes, I understand what an astronomical figure this is. Older apartments and apartments in less pristine condition will require less set-up money because of lower monthly rent and smaller shikikin and reikin deposits. And, as our next article shows, it may be possible to sneak out of some of that obnoxious chuukai tesuuryou money.

After you have hammered out the initial payment, read the contract carefully for other fees. Sometimes a landlord will request a "renewal fee" in which you have to pay some 10,000 yen to "renew" your apartment contract each year. Sometimes the renter will get pegged with the cost of changing locks on the apartment building when they leave. There are lots of ways to hide additional fees, and you need to check the contract carefully to know what you're getting in to.

Some alternatives to this kind of set-up money are monthly apartment companies like Leopalace. However, be very careful about contracts for monthly apartments. Often they will draw renters in with promises of "no shikikin" only to charge you a "cleaning fee" when you move out of the apartment: You end up paying shikikin, you just pay it at the end of your rental period and under a different name.

If you have any comments or experiences to share, please leave them in the comments below. I hope this article was helpful, and keep an eye out for next week's post on saving money in the apartment search game.

1 comment:

  1. Lease guarantee company helps the tenant to get the place of their liking. If they hold no good credit history.