Apartment management is a relatively solid investment option with limited risk. While it offers many benefits such as monthly rental income and tax reduction effects, it also comes with various risks from an investment and management perspective. When unexpected problems arise, many owners may not know how to handle them properly. This article explains the risks and troubles that can occur in apartment management, and introduces recommended consultation resources and free consultation services for different situations.
What Kinds of Risks Exist in Apartment Management?
Apartment management has 8 representative risks, including increased vacancies, rent decline, and repair costs. It is important to understand these in advance and take preventive measures.
Increased Vacancies
The greatest risk in apartment management is an increase in vacancies. Main causes include building deterioration over time, location conditions, oversupply of apartments in the surrounding area, and population decline. Since increased vacancies can trigger other risks, early action is necessary, such as differentiating from competing properties and broadening the target tenant base.
Rent Decline
When vacancies persist, it becomes necessary to lower rents to attract tenants. Once rents are lowered, they cannot easily be raised again, so careful judgment is required.
Loan Repayment Risk
If vacancies and rent declines continue, rental income may be significantly impacted, potentially leading to an inability to make payments. A management plan that assumes a realistic vacancy rate is essential.
Rent Arrears
Rent arrears of 3 months or more constitute grounds for terminating a lease agreement, but the owner must bear the unpaid rent up to that point. Using a rent guarantee company is an effective countermeasure.
Repair Costs
As a building ages, repair costs for bathrooms, kitchens, exterior walls, and other areas can grow significantly. Long-term repair planning and securing funds are important.
Rising Interest Rates
If you have a loan with a variable interest rate, there is a risk that rising rates will increase your repayment amount. Effective countermeasures include increasing the proportion of your own capital and considering a fixed interest rate.
Over-Loan
This is a situation where the remaining loan balance exceeds the sale price when selling an apartment. It tends to occur during inheritance, and the countermeasure is to increase your own capital and keep borrowings small.
Natural Disasters
Earthquake and fire insurance are essential. Use hazard maps, consider ground improvement, and take everyday precautions to minimize damage.
Where Should You Turn When You Have Trouble with Apartment Management?
The best consultation resource varies depending on the nature of your concern. The following are the main options.
Construction Companies
Suitable for building-related consultations. Compared to major house builders, they can construct buildings at lower prices and are known for flexibly accommodating client requests.
Property Management Companies
The most common consultation resource, handling all aspects of real estate transactions including rental brokerage, sales brokerage, tenant recruitment, and contract work. Choosing a reliable management company is important for achieving stress-free property management.
Financial Institutions
The place to consult regarding financing. Compare and consider multiple financial institutions such as city banks, credit unions, and the Japan Finance Corporation.
Tax Accountants / Certified Public Accountants
Specialists in tax-related matters. For individuals and small businesses, a tax accountant is suitable; for large-scale operations, a certified public accountant is appropriate. They can also advise on tax reduction strategies and tax filing.
Financial Planners
You can receive comprehensive advice on money, management, and life planning. Ideal for consulting on asset management and financial planning with an eye toward the future.
The Flow of Apartment Management and the Right Consultation Resource for Each Situation
In apartment management, the right person to consult differs between "before starting" and "after starting" operations.
Consultation Resources Before Starting
| Consultation Topic | Recommended Resource |
|---|---|
| Land utilization plan | Construction companies, contractors, house builders, real estate companies |
| Financing | Financial planners, banks, major house builders |
| Rent setting | Real estate companies, financial planners |
| Tax strategy | Tax accountants |
| General management advice | Major house builders |
| Construction | Major house builders, contractors |
Consultation Resources After Starting
| Consultation Topic | Recommended Resource |
|---|---|
| Tenant recruitment / vacancy countermeasures | Real estate companies |
| Disputes between tenants | Management companies |
| Rent arrears disputes | Property management companies |
| Building management / repairs | Management companies, real estate companies |
What Free Consultation Services Are Available?
For resolving apartment management troubles, make use of consultation services that are available free of charge.
Japan Legal Support Center (Houterasu)
A legal trouble consultation service established by the government. Offices are located in each prefecture, and you can consult with lawyers and judicial scriveners free of charge. Phone consultations are available weekdays 9:00–21:00 and Saturdays 9:00–17:00. Email consultations are accepted 24 hours a day, 365 days a year.
Real Estate Transaction Association
An industry association for real estate businesses located throughout the country, where dedicated staff well-versed in real estate-related regulations will hear your concerns. Some branches also offer free consultations with lawyers.
Real Estate Distribution Promotion Center
Provides a free telephone consultation service available to anyone. However, matters already in litigation are not eligible for consultation.
National Tax Agency Phone Consultation Center
A consultation service for tax procedures such as tax returns and blue-form returns. You can also consult about the documents required when starting apartment management.
What Are the Benefits of Attending Apartment Management Seminars?
By attending seminars, you can expect to obtain timely information, receive advice based on real-world experience, and connect with fellow real estate investors.
How to Choose an Effective Seminar
- Choose seminars with themes that match your management philosophy and plans
- Seminars with specifically written announcements tend to be higher quality
- Also check the instructor's investment experience and reviews
Key Points for Choosing the Right Consultation Resource for Apartment Management
To choose the right consultation resource, it is important to clarify the problem you want to resolve, organize your own wishes, and compare multiple consultation options.
- Clarify the problem: Writing down your concerns on paper makes them easier to communicate
- Communicate your wishes: Having a vision for the future enables constructive discussions with your consultant
- Compare multiple consultation resources: Check track records and strengths, consult with several parties, and compare their advice
In apartment management, the appropriate consultation resource differs depending on the nature of your concern. By knowing which resource is right for each situation, you will be able to get accurate advice and resolve troubles quickly.
Frequently Asked Questions (FAQ)
Q. What is the most important risk to watch out for in apartment management?
Increased vacancies are the greatest risk. Not only do they reduce rental income, but they can also trigger other risks such as rent decline and difficulty repaying loans. Early action through differentiation strategies and expanding the tenant base is therefore essential.
Q. Who should beginners in apartment management consult first?
For overall management advice, major house builders are recommended; for financial planning, financial planners or banks are a good choice. It is advisable to consult multiple resources and compare their advice.
Q. Are there places where I can get free consultation about apartment management troubles?
The Japan Legal Support Center (general legal troubles), Real Estate Transaction Association (real estate-related), Real Estate Distribution Promotion Center (phone consultations), and the National Tax Agency Phone Consultation Center (tax-related) are all available free of charge.
Q. Where should I turn if a tenant falls behind on rent?
First consult with your property management company and ask them to handle the demand for payment. If you are self-managing, issue the demand yourself, and if the situation drags on, it is recommended to seek legal advice from the Japan Legal Support Center.
