How to Generate Income from a Vacant House: Risks, Subsidies, and Strategies

The number of vacant houses continues to rise across Japan. Leaving a vacant house unattended creates a threefold loss for owners: collapse risk, higher tax burdens, and neighborhood disputes. On the other hand, if it is used appropriately,it is possible to preserve asset value and secure rental income and sale proceeds. This article explains the risks of leaving a vacant house unused, the available utilization options, and how subsidies can be used.

What happens if a vacant house is left unused?

If a vacant house is left unused, the following serious risks can arise.

• Collapse risk: Without ventilation, cleaning, and maintenance, deterioration progresses quickly. The risk of collapse also increases during natural disasters such as earthquakes and typhoons
• Increase in fixed asset tax: If the local government does not recognize the property as “residential land,” the preferential fixed asset tax treatment may be removedup to six timesthe amount could become
• Neighborhood disputes: Complaints from nearby residents may arise due to odors, decay, or unauthorized entry

What subsidies are available for utilizing a vacant house?

The national government and local municipalities are actively advancing vacant house measures, and the following support programs are available. When considering utilization, owners should be sure to confirm subsidy information with their local municipality.

• Subsidies for vacant house renovation and refurbishment
• Support for market circulation through vacant house bank registration
• Subsidies for demolition work
• Tax incentives (such as special deductions on the transfer of a vacant house that meets certain requirements)

Three effective ways to make use of a vacant house

Rent it out as a landlord

This approach uses the existing building for rental management. If the building is in good condition, it can be started at a relatively low cost.Whether it should be used for residential or business purposes should be determined based on the property’s location and scale.vacant house renovation investmentcan also be combined with this approach to improve the property’s competitiveness.

Sell it

There are three ways to sell a vacant house.

• Sell it as land with an old house on it: This avoids demolition costs, but maintenance and management must continue until a buyer is found
• Sell it as vacant land: This makes it easier to find a buyer and supports a quicker sale, but demolition costs will be incurred
• Have a real estate company buy it: This is the fastest option, but the purchase price will be lower than through brokerage

Demolish it and utilize the land

If deterioration is severe, making use of the cleared land after demolition is a practical option. In urban areas,coin parking or construction of rental apartmentscan be effective. In regional areas, researching surrounding demand is essential, and leasing the land to a convenience store can also be an option.

Advantages and disadvantages of utilization

Advantages

• The property’s value as a building can be maintained
• An increase in fixed asset tax burden can be avoided
• The risk of neighborhood disputes can be eliminated
• Rental income, sale proceeds, and land utilization returns can be generated

Disadvantages

• An initial investment is required to put it to use (such as renovation and demolition costs)
• Vacancy risk and management costs arise in rental operations

Frequently Asked Questions (FAQ)

Q. What does it mean when fixed asset tax on a vacant house can become six times higher?

Residential land is subject to fixed asset tax relief measures (the residential land special provision). If a property is designated as a specified vacant house, this preferential treatment may be removed, which can cause the assessed taxable value to rise significantly.

Q. What is a vacant house bank?

It is a matching service for vacant house information operated by municipalities or real estate companies. It connects owners who want to sell or lease with people who want to buy or move in. Many of these services can be used free of charge.

Q. What preparation is required to rent out a vacant house?

The basics include confirming seismic resistance and overall safety, inspecting and repairing plumbing and electrical systems, and considering whether to outsource rental management to a real estate company. Owners should also confirm whether subsidies are available.

Q. How much does demolition usually cost?

For a detached wooden house, a total floor area of 100 to 150 square meters typically corresponds to roughly JPY 1 million to JPY 2.5 million. Municipal demolition subsidies may be available, so we recommend confirming this in advance.