Buying an old home. Loan.

[Bubblegun]

I am looking at some property, and I don't know what is the best way for us to buy the house.
The property is old,( in Japanese eyes) about 32 years old. and valued at about 14,000,000 yen.
We have about 20 million yen saved, and we could either buy it outright, leaving about 6 million yen left in our kitty or take out a mortgage with a 2 million deposit, and allow the 18 million yen to continue to grow in the S&P 500.

My instinct is to put in an offer below their asking price, but not sure how much.
Is it ok to offer below their asking price? and if so, by how much? Your experiences would be helpful.

Also, more of a financial conundrum, I see the 20 million sitting there, and I see it growing at 6-7% annually. Handing the lot over seems painful, but also having a long mortgage seems equally painful, but allows the money to still grow for another 20-odd years.

Thanks in advance.

[northSaver]

I think making an offer on the property depends on a few things, such as how long it's been available, how much you really want it, and how much you think it's actually worth. In our case the house had been put on the market the same day we saw it (not advertised yet, the agent phoned us about it), it seemed cheap for the size and location, and it fitted our needs perfectly (a large property that we could use for both house and school). So we bought it immediately at the asking price. If your property's been on sale for a while then I'd probably make an offer of at least 10% lower. But it's hard to say without being in your shoes.

Most people here were tell you that it is better to invest your money rather than tie it up in a mortgage. Statistically that's true. But it does depend a bit on how old you are and whether you can emotionally handle a decade of no growth in the stock market (it does happen sometimes) and/or a strengthening yen which might negate any gains. It's a tough one, and very much a personal decision. We were lucky in that my wife's parents lent us the money at zero interest (now paid back). Might your in-laws be in a position to do so too? Good luck!

[Tsumitate Wrestler]

How old are you and what percentage of your income do you and your partner save on a monthly basis? How would that change with a mortgage?

Selling down your savings when rates are so cheap would not typically be recommended.

I'd very happily borrow at current rates and invest that money if they would let me!

.

[Bubblegun]

I think making an offer on the property depends on a few things, such as how long it's been available, how much you really want it, and how much you think it's actually worth. In our case the house had been put on the market the same day we saw it (not advertised yet, the agent phoned us about it), it seemed cheap for the size and location, and it fitted our needs perfectly (a large property that we could use for both house and school). So we bought it immediately at the asking price. If your property's been on sale for a while then I'd probably make an offer of at least 10% lower. But it's hard to say without being in your shoes.

Most people here were tell you that it is better to invest your money rather than tie it up in a mortgage. Statistically that's true. But it does depend a bit on how old you are and whether you can emotionally handle a decade of no growth in the stock market (it does happen sometimes) and/or a strengthening yen which might negate any gains. It's a tough one, and very much a personal decision. We were lucky in that my wife's parents lent us the money at zero interest (now paid back). Might your in-laws be in a position to do so too? Good luck!

Thanks for your input. Yes, it is hard to know what to do. I was thinking about making an initial offer of about 10% below their asking and see if they would take that,then if rejected come up a bit to a 5% discount. This has just been put on the market, in an area we have been looking at. So i guess it will be a discussion to be had. I have no idea about my wifes family financial position, but it's a discussion we will have.

[Beaglehound]

Do you have an agent working for you? They should know the market better than you and be well placed to know what a realistic offer is. On the loan or savings question, I totally get why people would say it's better to take a loan in Japan but we bought our place outright. We were both already in our early 50s and were more comfortable that way, saving the hassle of applying for a loan too.

[Bubblegun]

How old are you and what percentage of your income do you and your partner save on a monthly basis? How would that change with a mortgage?

Selling down your savings when rates are so cheap would not typically be recommended.

I'd very happily borrow at current rates and invest that money if they would let me!

.

We're in our mid 50s, and we save 15% of our income.

How would that change with a mortgage?

I'm assuming you're thinking if we stopped saving and used it to pay the mortgage. It would make the payments on a 30-year mortgage appear low. About 20,000 yen a month. or we could increase the payments and end the loan in about 15 years (ish).
Selling down our NISA and investments is the RUB I am having. I think Buffet or Munger said, "Don't disturb the compounding".So I am onboard with your idea against selling.
But it seems to be a little battle at the moment, buying a house, knowing it will depreciate.( which goes against all the ethos here) and paying rent to a landlord which again, seems like losing money.(again, against our ethos).

[Bubblegun]

Do you have an agent working for you? They should know the market better than you and be well-placed to know what a realistic offer is. On the loan or savings question, I totally get why people would say it's better to take a loan in Japan but we bought our place outright. We were both already in our early 50s and were more comfortable that way, saving the hassle of applying for a loan too.

No, we don't have an agent, and we will need to find one.

I totally get why people would say it's better to take a loan in Japan but we bought our place outright. We were both already in our early 50s and were more comfortable that way, saving the hassle of applying for a loan too

Likewise! I see how it's financially better to take out a loan, with low interest rates, compared to the return on our investments.
Like you, we're not spring chickens. LOL, but I suppose if things did go "tits up", "pear-shaped" or "FUBAR", we could like you, cash in, and pay the whole thing off. and just chill.

I suppose, psychologically, as an immigrant, where we see the idea of asset preservation as very important,house prices rising, it's hard to get my head around buying the biggest thing I'll ever own and lose money.

[Deep Blue]

Are you sure you’ll lose money on your purchase? Houses do depreciate in value here, but typically land doesn’t. I’d suspect the value of your 32 year old house is already zero yen or close to it?

We also purchased an old house, in 2014 it was 31 years old and it was clear the house was “worthless” and the price of buying the land with no house on it would be the same.

Ten years on the house is still “worthless” but the land value has in fact risen 60-80%. Now this is quite location specific (central Tokyo prices have probably risen a lot more than rural Inaka land prices) but even so I’d be surprised if land prices has fallen much anywhere?

[northSaver]

Ten years on the house is still “worthless” but the land value has in fact risen 60-80%. Now this is quite location specific (central Tokyo prices have probably risen a lot more than rural Inaka land prices) but even so I’d be surprised if land prices has fallen much anywhere?

I get the feeling that rural areas are experiencing depreciation due to depopulation. However, this website seems to indicate that land prices are rising in most prefectures and in Japan as a whole. Interesting!

https://tochidai.info/

Personally speaking, the value of the land we own in small-town Hokkaido has barely changed in 15 years, but the land we own in Sapporo has appreciated quite a lot.

[Deep Blue]

Yep, I am sure there is a large discrepancy between prime, urban, suburban and rural. But even rural land might at least hold most of its value, unless you’re buying in a place with no future (seems unlikely but .. ?)