Moving into a rental property involves upfront costs in addition to rent, including a security deposit and key money. Many people know these terms in a general sense, but few fully understand why they are required and how far they can be negotiated. This article explains the basics of security deposits and key money, along with practical ways to reduce upfront costs wisely.
What are a security deposit and key money?
What is a security deposit?
A security deposit is money placed with the landlord to cover restoration costs at move-out or unpaid rent. When you move out, the remaining balance is returned after repair and cleaning costs are deducted. If repair costs exceed the deposit, the difference will be charged separately.
What is key money?
Key money is a non-refundable gratuity paid to the landlord as thanks for renting out the room. It is not returned. The practice remains from the postwar housing shortage era, and in the Kanto region it is often treated as a set with the security deposit.
What are guarantee money and fixed deduction? (in western Japan)
In western Japan, including Kansai and Kyushu, “guarantee money” is often used instead of “security deposit.” Guarantee money basically serves the same role as a security deposit, but if there is a “fixed deduction” clause, a set amount will be deducted unconditionally when you move out. Be aware that the fixed deduction portion will never be refunded.
What is the typical amount for a security deposit and key money?
Typical amounts are generally as follows.
- Security deposit: 1 to 2 months’ rent
- Key money: 1 to 2 months’ rent
In recent years, more properties have been offered with no key money, and the trend toward lower upfront costs has continued. In addition to the security deposit and key money, you also need to account for the brokerage fee (0.5 to 1 month’s rent), advance rent, fire insurance, and guarantee fees.
Can security deposits and key money be negotiated?
Negotiation itself is possible, but timing and conditions matter.
Conditions that make a property easier to negotiate
- The vacancy period has been longer than two months
- The key money is two months’ rent or more
- The rent is above the surrounding market level
- First floor, north-facing, Japanese-style room, older building, far from the station, or few nearby facilities
Tips for negotiation
- Raise the issue before signing the contract (before advance preparations are complete)：Negotiation is generally not possible once the procedures are finished
- Limit your negotiation point to one item：Multiple requests are more likely to be rejected
- Show your intention to move in immediately after the negotiation
- Ask politely and with a respectful attitude
- Target the slower season in July and August：Negotiation is harder during the busy seasons (spring and autumn)
What is a zero-zero property?
A zero-zero property is a rental property with both the security deposit and key money set at 0 yen. These properties have increased as vacant homes have grown and competition to secure tenants has intensified. Their biggest advantage is that upfront costs can be kept to around 2 to 3 months’ rent.
However, even with a zero-zero property, repair and cleaning costs at move-out may still be charged separately. Be sure to confirm the move-out cost terms before signing the contract.
Other ways to reduce upfront costs
- Choose a real estate company with a low brokerage fee（some charge only 0.5 month）
- Set your move-in date at the start of the month（so prorated rent does not apply）
- Choose a property with free rent（1 to 2 months rent-free after move-in）
- Look for properties that can be rented with only a personal guarantor（so no guarantee fee is required）
Frequently Asked Questions (FAQ)
Q. What is the difference between a security deposit and key money?
A. A security deposit is money from which the remaining balance is returned at move-out, while key money is a non-refundable gratuity.
Q. Do zero-zero properties still cost money at move-out?
A. They can. Because there is no security deposit, repair and cleaning costs may be billed separately at move-out, so please confirm the contract terms in advance.
Q. Can I negotiate key money down to 0 yen?
A. It may be possible in some cases, but it is difficult for popular properties or during busy seasons. Properties with a long vacancy period and slower seasons are easier to negotiate.
Q. How are guarantee money and fixed deduction in Kansai different from a security deposit in Kanto?
A. Guarantee money serves the same role as a security deposit, but if there is a fixed deduction clause, a set amount is deducted unconditionally at move-out. This fixed deduction portion will never be refunded.
