The nightmare begins
Regular readers may remember that I bought a manshon last year, and renovated it by installing inner windows and a second door at the entrance. I am very happy with my new home and was not planning to make any changes.
Earlier this month my wife told me that it was extremely important to her for us to build a house on her parents’ land so that we could live with them as they get less able to take care of themselves.
Ooops.
And thus the nightmare begins. We are hoping to build the house next year, so this is the first of what I imagine will be a number of posts documenting our experiences. Feel free to come along for the ride or share your advice in the comments.
ββWe already have the land (it’s where my in-laws live now) but have the added complication of having to demolish their house and maybe have the land prepared for a new building. We are told this will not be cheap.
Over the last three weeks or so we have gotten used to the idea (and had a couple of fights along the way…), started thinking about what kind of house we want, and started talking to house builders.
One pleasant surprise has been that every time we visit a model house or talk to a house builder rep we seem to get a better idea of what we want. It’s a process of getting new information (seeing designs or asking questions) and improving our mental model.Β
We started off thinking we wanted two bungalows. This turned out to be expensive and complicated. Then a single bungalow divided into two living areas. Ditto. Then a two-story house divided into two separate homes. This leaves us with useless space a few years down the line though.
Our latest thinking is a two story house with a large common area downstairs, then two sets of stairs to completely separate areas upstairs: a master suite and a guest flat. When we move in my in-laws can live in the master suite and we can live in the guest flat. Eventually we’ll move into the master suite and visitors can use the guest flat.
I’m excited at how we’re getting closer to a workable design.
We’ve talked to about ten house makers, of which two are possible candidates. One thing we learned quickly is not to give them many contact details, as they can be quite annoying. I tend to just provide an email address now, otherwise they will 1) call you at night, or 2) turn up at your home uninvited.
Ultimately I’d like to find 3-4 serious contenders before making a final choice. We’re inclined to go with smaller, local companies rather than the big national chains.
I’ve also been looking at financing. There are lots of online calculators. The Rakuten Bank one seems to show that I can borrow up to 57 million yen at 1.06% fixed for 35 years. This is at the same time both terrifying and kind of interesting.
There is also a special tax break at the moment for parents to give their children money for the purpose of building a house. Currently it seems they can give up to 15 million yen tax free as a one-time lifetime gift. I’m pretty sure my in-laws are not in a position to do this, but it’s an option worth exploring.
There are also government funds for building ‘zero-emission houses’ and two-family homes that we might be eligible for.
So far one company gave us a ball-park figure of 40 million to clear the land and build a two-family home with decent insulation, solar panels, and batteries. We’ll see what the more detailed quotes look like when we get a bit further along in the process.
One thing I am already noticing is how exhausting this process is. Each visit to a house maker takes several hours, and I can see us getting to the point where we are so sick of the whole process that we just say yes to get it to stop. Have to watch out for that.
How about you? Any advice for us as we head into the house-building nightmare?
Looking forward to following the process. Would be very interested to know the costs of demolishing a house and preparing land. We are not planning on doing that any time soon but if we ever sell this house, I wonder whether it would be better for us to demolish first and sell the land, or sell the land with the old house on it. As a purchaser would likely demolish anyway, they might be put off by the house being on the land and expect a cheaper price as they will have to pay for the demolition. I wonder which way would work out better for a seller.
Not sure, but I would assume it would be equal, or vary slightly by buyer preference.
We’ve been told that nothing we do to our manshon will change the price it will sell for (so those windows were a bit of a waste!), it will be determined by the size and location only…
Also really depends on what the house is made of (my in-laws’ one is has a steel frame, which makes it much more expensive to get rid of) and the condition of the land.
Apparently old houses here in Sendai have 13mm connections to the water main, and now they have to be 20mm, so if the connection is old we’ll have to dig up the road in front of the house (also expensive).
Several thoughts…first, old people need to be on the first floor. Consider a stairless entrance and doorways wide enough for wheelchair access. Second, who owns the land and house when the parents die? How do estate taxes work in this situation? Third, consider a separate kitchen and bath….expensive, but nice to have options for privacy. Finally, hope you can do it on a ten-year mortgage because it’s hard to predict how long you will be able to work at current capacity (Not that you haven’t thought THAT one through!).
Thanks, Cynthia π
1) yep, got that one covered
2) we’re having a family meeting about that with my wife’s parents and her brother -I’m not willing to do anything unless we sort it out
3) apparently you can treat things as ‘inherited in advance’ but I’m not sure of the details
4) we’ll have two kitchens/baths
5) I will take the 35-year mortgage with pleasure at 1% -we’ll make sure we can pay it off if we want to/need to but I think we can get more investing the money than paying off the loan early
We built 3 years ago, and for the first (5?) years of having built a new house we can deduct a huge amount off our taxes – in fact we haven’t had to pay any taxes on our net profit of our business for the past 3 yeras. Keeping in mind that the person whose name the mortgage is in will get these benefits. We plan to pay off our mortgage at an accelerated rate after the 5 years have passed.
Hi Michael, the tax write-off is 1% of the loan for ten years, so don’t rush to pay it off too soon π
As far as I know, it’s nearly impossible to get a housing mortgage at less than 35 years. On the other hand, it’s really easy to pay down the mortgage and either reduce the monthly payments or reduce the mortgage length (this is called ηΉ°δΈγθΏζΈ). My initial 35 year mortgage is now 20. Also, there doesn’t seem much benefit to getting a fixed mortgage in Japan right now. We checked with my wife’s brother in law who works for the BOJ and he recommended a variable rate mortgage because Japan is still desperate to have more construction and to get banks to lend more money. It’s always a risk of course but if you’re figuring on paying off the mortgage within 10 years it’s probably cheaper in the long run.
Hi Matt
I’m not so sure about it being difficult to get different mortgage lengths. The government backed ones (Flat 35) are fixed-length, but anything else is flexible. When we got our loan last year they asked us how long we wanted it to be for and I went with 30 years.
When we borrowed 9.9 million last year for the manshon I was happy to get a variable rate mortgage. Figure rates aren’t going anywhere anytime soon and in a pinch we could pay it off easily.
If we’re going to be borrowing 40 million though, that changes things. I like to think about acceptable outcomes. Paying 1% instead of 0.5% is acceptable to me. I know I can afford it. Getting a variable rate and having it shoot up (not likely but anything is possible over 35 years) is not acceptable. We could pay it off but it would devastate our savings. So I am strongly inclined to go for a fixed rate at the moment.
You might enjoy perusing this blog: https://catforehead.com/
They went through the process of building their own house in Japan and documented it.
Thanks, Jesse!
I’m a big fan of Philip Brasor and have been following that blog for years π
I recommend AERA Home; we used them and their “Clarge” building, which is a closed-cell foam panel + spray foam insulated house wrapped in aluminum, and the cost was just slightly more than another company; also we got a 3kw solar system as a “gift”. The company is good, and their product is excellent… plus we know the CEO. http://aerahome.com/product/clarge/
Instead of thinking how you can fit your life into the house later, how about pre-planning to how renovating the house to your life as you get older in the years down the road? Have you thought about two adjacent living areas separated by a non-structural wall? In the future you could have the wall removed and the result would be a very large living area. Also, two kitchens separated by only a wall could offer a really easy way to tear down the wall and remodel for a huge open-concept kitchen/living area (piping etc. would be easy), too. In that sense building one house with mirror living areas might be a good idea, leaving the option to open the place up in the future. 2nd floor kitchens and bathrooms cost quite a bit more… so we decided against that.
Thanks Michael
Lots to think about there. We’ll definitely check out Aera (their website seems to check a few boxes for me with insulation, ventilation, etc.)
My wife and I built a house in Nara about five years ago. Like you seem to be doing, we went through a small local chain. In our case, the land had previously been occupied by a large school building that had been sold to a local architect who then turned it into five new housing lots. We went through 15 to 20 different designs with the real estate agents before settling on a design, but they were very accommodating. This is the real advantage of going through a small company. On the other hand we were always trying to find out what “standard” meant. I wanted an attic: “this is not standard.” I wanted a nice wooden staircase and balustrade. Bigger balcony. Skylight. Same response. Choosing room doors, window sills, wallpaper, bathtub…the sheer number of options was overwhelming.
One thing I decided to do early and I definitely recommend was to visit the construction site on a regular basis and talk with the carpenters and electricians. I also bought them some snacks and sakΓ© (this is apparently a custom). They appreciated it. Also, don’t forget to get the appropriate purification goods from the local Shinto shrine prior to breaking ground. Most companies will refuse to break ground until certain rituals are conducted.
Yeah, I am not looking forward to the options at all π
I will, of course, keep you ‘posted’ π
You may be able to get a better mortgage rate through work.
That’s a very good point, Kevin. Thanks!
I keep an eye on the offers through the kyosai, but they tend to be from the big national banks, which at the moment don’t have deals as good as the smaller, regional ones.
Plus I am still traumatized from my eight-month battle with the kyosai office over family allowances, and I never want to see them again π
Actually, that might make for a good (very niche) blog post!
That’s a very good point, Kevin. Thanks!
I keep an eye on the offers through the kyosai, but they tend to be from the big national banks, which at the moment don’t have deals as good as the smaller, regional ones.
Plus I am still traumatized from my eight-month battle with the kyosai office over family allowances, and I never want to see them again π
Actually, that might make for a good (very niche) blog post!
If you want to check out many of the possibilities: https://www.curbed.com/2017/5/31/15719310/japanese-house-architecture-design-exhibit-barbican
Very cool article π
Don’t really fancy the windowless one though!
Can definitely feel decision fatigue coming on now…
Careful!!!!
Right now it’s all exciting and your marriage is great and you plan to live in Japan forever… all that can change very quickly… you can find yourself divorced, getting older and as such finding it more difficult to stay employed… and stuck with a house that isn’t worth what’s left on the loan…. Sorry to be so negative, but this is the situation I find myself in. I never thought I’d get divorced, but I did! I thought I would never leave Japan, but now I can’t wait to get away from here. I’m lucky enough to have great options for work and a future overseas, but my beautiful house here is now a giant pain.
Hi Wish
Really sorry to hear that. It’s a good point and one that people need to consider.
Have a read through the blog and you’ll see that I am obsessive about running scenarios. In this case my wife and I have been married for fourteen years and we’re working towards financial independence.
Worst case scenario (divorce and I want to leave Japan), she could keep the house and we could go our separate ways. We each have our own saving and retirement accounts.
By retirement account what do you mean?
Hi Jon
Stuff we can’t get at until retirement age. iDeCo, national pension, Medium-Small Business saving scheme…
We built a house for my family of 4 and my Japanese in-laws some 25 years back. One large house with shared bathroom/kitchen with them downstairs and us upstairs. My sister-in-law did the same with her in-laws (it is handy when their father is a architect/carpenter). From those (admittedly limited) experiences I would strongly recommend that you all ask yourselves whether can you really live with each other happily, 24-7 for the next xx years?
It soon became apparent from the in-laws weekend trial stays that things would not work out. I love them dearly but their lives and ours were too different, and neither party could or should change since home is where you get to be the way you want to be. Right? I ended up buying land for them to build on a minute’s stroll away which was a much better solution. But only 8 years later, cancer and dementia have made that house vacant. And our house now has 5 empty bedrooms since our kids have moved away. After a few years of struggling my sister-in-law’s family also moved out and into a tiny apartment to escape and regain their privacy. They, like us, never regretted getting away. If you must live together, take the Don’s advice a build a bloody big wall to give all parties their own space. Good luck!
Thanks for sharing your experiences, Bob. I may have been taking that aspect of the whole thing too lightly…
I’ll definitely keep it in mind as we move forward with the project.
Good luck. Built a house with my wife and it was hard enough agreeing with her on all the details without having to deal with in-laws too!
I built with a big name that builds houses that last, but they kept us on a tight leash in terms of schedule and I felt there was never quite enough time to properly think about all the things I really wanted. But I love my house as it turned out, so they probably managed to properly get my main priorities covered and the little things don’t matter so much.
I got a 34 year loan refinanced thru SBI Net Bank at fixed 1.00% last year. Almost perfect timing…
The initial tax break is good (although personally I think a very bad policy for this country) but if one’s loan balance is big (huge for me given I bought land too) I think it’s better to pay off faster rather than invest. There are mortgage calculators that show the effect of periodic early mortgage payments, and the interest payments saved is money that is totally guaranteed, and pretty huge. Will be doing a bit off both.
That is a nice rate! Good to hear about your experience.
Right now I am planning to pay the minimum for the first ten years, then see what we feel like doing.
We’ll invest in the meantime and see how we do compared to the loan. If we get anything close to historical returns it will probably be better to invest, but there is a big psychological element too π
For design ideas, I got loads from this book:
http://www.notsobighouse.com/
We went with a small housemaker as the big guys just didn’t listen to us. We’d have an hour meeting with the sales guy and he’d pass the info on to the architect, and it just seemed like things got lost. The small place we went with only had the owner and the sales guy was also the architect. The only thing I regret about my home is not having one or two more awning windows.
https://modernize.com/windows/types/awning-windows
During the rainy season when it’s really hot at night, you can’t really open regular windows as the rain gets in.
I got the flat 35 loan. The bank tried really really hard to get us onto a variable rate loan.
Hi Akatani
Those books look really good. Funny how a ‘not so big house’in the US is just a normal house here π
We’re planning to have a decent ventilation system, so no need to open windows. Planning to have big floor to ceiling ones. to take advantage of the views…
Yeah, fixing the loan at 1% or so seems like a no-brainer. Pay slightly more in the worst case scenario, and a lot less in the best-case (interest rates go up to several percent).
” I can borrow up to 57 million yen at 1.06% fixed for 35 years.”
This is shear insanity. I simply can not fathom how the housing market in industry in Japan exists. How it is not in flames self devouring itself.
I have heard this plenty. So many people (have to) take out 35 to 40 years mortgages on their house in Japan. Depending on which source you look at the, the average age of a house in Japan is 38 or sometimes pegged at a whopping… hold your breadth for this…. 39 years.
I understand your situation. You need a house. But I have seen so many other situations, where it seemed unnecessary. My in-law-cousins(?) had a baby so… demolish a perfectly good livable house and take out a 40 year mortgage and build a new house. WHAT?! My head almost exploded. Their old house was old, but it was perfectly fine. I spent more than a few holidays there. No rot, termites, sagging floors, etc. None of that. The house had a decade left easy, maybe 15-20 years if they actually put some cash into it along the way. But nope. They would rather have a new house as a symbol for their new baby… Thats cute…. and symbolic, but what about the unnecessary 40 year loan they just took out that will also symbolically be a shadow over this babies financial future.
This has to be one of the main reasons Japan holds so much private dept. Low interest rates for these 40 year loans on buildings that will just get torn down and then another 40 year loan and house. Its an endless cycle passed on from generation to generation. What is left to the children when parents pass. More times than not, a loan. Or a house that “needs” to be torn down.
I know, right?
I think the key is 1) making sure you can actually afford it, 2) making sure it’s worth it to you, and 3) being aware that houses in Japan are depreciating assets.
For us, we have 1) and 3). I’m not too sure about 2), but if it’s important enough to my wife I’m willing to be flexible on this one.
Still have a lot of thinking and learning to do before we sign any contracts though…
At the end of the day you are paying to live in a pleasant space. The mortgage is considerably less than you would pay in rent (if you could find somewhere similar to rent, which is very rare in Sendai at least) so as long as you are planning to stay somewhere forever the numbers kind of work.
Very different from property in the UK or similar markets though!
Hi
If found it useful to talk to people who built a house and ask what else they should have done. You can’t decided perfectly the first time how to build the perfect house.
In Japan, they say the 3rd house you build will be perfect. I bought a house that was the 2nd built house. I agree, it is almost perfect. Just a few things I wish were different but ..oh well, I can live with it.
Hearing people’s experience of what else they should have done , or what should not have done, … some people do not build things because of the money, but to add it later will cost more.
I recently heard a complaint about heated floors. If you do the whole house, then in the room where you keep food, the food will go bad quickly. Often Japanese store veggies and tsukemono in the cold room of the house.
I like our heating system, I like having all-denka house. But other people have different opinions.
Good luck building your house.
Thanks, Peggy! That is very helpful advice. I have been talking to a few people I know who built houses, and of course all the comments here are helpful too.
We saw a model house the other day where the pantry (food storage room) was outside the thermal envelope and thus unheated, for that same reason.
I also plan to have an all-electric house. Seems easier and more disaster-proof π
Good luck and loads of patience to you and everyone else involved!!
We bought a relatively new house (4yrs old) and did some renovations. We added a radiant heating system in some rooms. The boiler runs on kerosine, but the company also has one that uses electricity. So no hot, dry air being blown around during the winter. I think the system would work even better if it had been built-in. That is, the radiator placement would be ideal for each area. The company name is γγΌγ¨γΉ (PS) and the website is http://www.ps-group.co.jp/pscompany/index.html.
They have heated towel racks, too! Lots of colors for the radiators to coordinate with the room.
We have floor heating in the living and dining areas. We use the floor heating in the dining area as the main heating for that area. We rarely use the heating in the living area because we have a thick carpet there and you have to be sitting on the rug to feel the warmth, it doesn’t heat the air.
Large built-in pantry in the kitchen and large linen closet in the vanity area (none of that “fold the large bath towels into little wads” crap).
And, there can never be too many electrical outlets. There should always be an outlet below a light switch (and at least 2 above the kitchen counter). I hate having to unplug something to do the vacuuming.
Thanks, Catherine! I get the feeling we’re going to need lots of patience…
Really good point about the electrical outlets. I wonder if it is worth building a LAN into the building too?
Very interest article, and good luck with the building. Have you talked with Marc Helgesen about it? I think his house was prefab and made by a Canadian company. Also, you might want to consider using the guest room as a way to make money using AirBnB, or even your mansion, after you move to the house. The laws on AirBnB are relaxing because of the Olympics.
Sounds like a major project,
Thanks, Steve! Lots to think about π
We’re planning to sell the manshon as it is currently worth more than the mortgage… not sure how long that will last!
One more thing…I just saw this article this morning. Even though it’s aimed at the US home owner, you might find it amusing and informative.
https://theconcourse.deadspin.com/the-nine-scariest-ass-things-about-owning-a-house-1795849602
The Nine Scariest-Ass Things About Owning A House
Wow, this does sound devastating. Wasting all of that money on manshon rennovations and tearing an old house down and building a new one with a bunch of space you’re not going to need in the future…it just seems out of character for you, Ben. Did your wife tell you about this before you decided to rennovate your current manshon? This just sounds to me like one of those typical Japan moments where you think everything is going smoothly until someone steps in with the big “By the way…”
Making sound decisions and well on your way to becoming financially independent? By the way, sorry I didn’t bring this up sooner, but we have to move and build a new house.
One more payment to go on your mortgage? By the way, this year is the year of the rooster, which means everyone gets a random 10 more years tacked on…
So many random things happen in Japan that it makes planning for the future scary thinking since any minute the rug could get pulled out from underneath, like what happened to you.
Ha, ha, indeed. It did feel a bit like Groundhog Day for a bit there.
This only came up last month so it was a bit of a shock and not at all what I was planning, but my wife and I have been talking it through so we are figuring out how to make it work.
Should have a new blog post soon with our progress!
I suspect this is not just a Japan thing, and random stuff pops up to derail you all the time in any country: http://awealthofcommonsense.com/2017/05/when-your-financial-plan-gets-thrown-out-the-window/
The trick is to roll with it and adjust the plan π