When considering a move into a rental property, many people are surprised by how high the upfront costs can be. If you understand the typical amounts and ways to save in advance, you can avoid unnecessary expenses. This article explains the types and typical ranges of upfront costs involved in a rental contract, along with five ways to keep those costs down.
How much are the upfront costs for a rental contract?
A general guideline for upfront costs is 4 to 5 months’ rent. On top of that, you also need to budget for moving costs and the purchase of new furniture and appliances.
Main types of upfront costs and typical amounts
- Security deposit (shikikin): 1 to 2 months’ rent (refunded at move-out after deducting restoration costs)
- Key money (reikin): 1 to 2 months’ rent (non-refundable; properties with no key money are increasing)
- Advance rent and prorated rent: the following month’s rent, plus a prorated amount if you move in partway through the month
- Brokerage fee: 0.5 to 1 month’s rent plus consumption tax (the legal maximum is 1 month’s rent)
- Guarantor company fee: 0.5 to 1 month’s rent (annual renewal fee of about 10,000 yen)
- Fire insurance premium: 15,000 to 20,000 yen (renewal every two years is common)
About cleaning fees and lock replacement costs
Cleaning fees typically range from 30,000 to 40,000 yen and may be charged at move-in. Even if you clean the unit thoroughly yourself, it is usually difficult to reduce the cost of professional cleaning. Lock replacement costs are generally around 10,000 to 20,000 yen, and who pays depends on whether the replacement is done at move-out or at move-in. Guidelines from Japan’s Ministry of Land, Infrastructure, Transport and Tourism state that “it is reasonable for the landlord to bear the cost,” but you still need to confirm the contract terms.
What are five ways to reduce upfront costs?
1. Choose a real estate company with low brokerage fees
Brokerage fees can be as high as one month’s rent, but some companies offer lower rates, such as 0.5 month’s rent. If you sign directly for a property managed in-house, the brokerage fee may be zero.
2. Choose a property with low or no deposit and key money
So-called “zero-zero properties” are becoming more common, but you may be charged repair costs separately when you move out. Be sure to check whether joining a guarantor company is mandatory and whether there is a penalty for early cancellation.
3. Take advantage of rent-free properties
Properties that offer 1 to 3 months of free rent after move-in can effectively reduce upfront costs. However, be careful, because if you cancel within a certain period, you may be charged for the free-rent period.
4. Move in during the off-season (around April to August)
If you avoid the busy moving season (December to March) and move in during the off-season, you will find more properties with lower deposits and key money, and moving companies also tend to charge less.
5. Negotiate with the owner or real estate company
The best time to negotiate is after you have chosen the property and received the estimate. In general, negotiations are more likely to succeed during the off-season.
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Frequently Asked Questions (FAQ)
Q1. What is the difference between a security deposit and key money?
A security deposit is a “deposit” that is refunded at move-out after restoration costs are deducted. Key money is a gratuity paid to the landlord and is not refunded.
Q2. Can upfront costs be paid by credit card?
That may be possible depending on the real estate company. Please confirm in advance. The benefit is that you may be able to pay the upfront costs while receiving reward points.
Q3. Is it necessary to join a guarantor company?
Some properties do not require it if you have a joint guarantor, but today more and more properties make joining a guarantor company mandatory.
Q4. What should you watch out for with rent-free properties?
Watch for penalties for early cancellation. Also, because free rent is offered instead of lowering the monthly rent, the total cost may be higher if you stay for a long time.
Q5. Do you always have to pay the lock replacement fee?
Guidelines from Japan’s Ministry of Land, Infrastructure, Transport and Tourism state that it is reasonable for the landlord to bear the cost, but if the contract says the tenant must pay, payment is required. Be sure to confirm before moving in.
