RetireJapan

Would love some feedback, brainstorming on the following:

The manshon unit next door to ours is on the market. We took a look at it this morning. It is basically the same as ours but mirrored. Has been lightly renovated but we'd want to do a bit of work to get it up to our standards (extra windows, extra door at the entrance, rip out the carpet, put in wooden floors).

Reason to buy:

more space
make sure we don't get unpleasant neighbours
very rare for next door unit to become available
possible exchange rate play (sell world stock funds at current weak yen, profit if yen strengthens)

Reason not to buy:

we don't need it
it's likely overpriced
opportunity cost of buying with cash vs leaving the money in the stock market

Asking price is just under 17m but I don't think it is worth that much (prices have risen a lot in our area but are starting to soften). There is construction next door on a 4F parking garage (unit is on the 3rd floor). I think this will put many potential buyers off. Market rates for rent seem to be around 80,000 yen a month. Manshon fees are 22,000, so yield on 17m is only around 4% before taxes, agent fees, etc.

Thinking of offering 13m (cash, immediate sale) and telling the estate agent the offer is open if the seller gets desperate.

Any thoughts?

> possible exchange rate play (sell world stock funds at current weak yen, profit if yen strengthens)

How does this part work?

You’d potentially sell the unit again later if the yen strengthens, is that what you mean?

So a paper profit would come by effectively shorting global stocks and going long the yen?

On purely financial terms the answer is obvious. Hard pass.

For non-financial stuff like neighbour risk, more space you don’t need etc then that’s very personal and basically up to you and your wife to decide?

I’d never buy a manshon due to previous bad experiences in other countries with leasehold properties, so the thought of doubling down on monthly expenses and potential renovation costs gives me the heeby-jeebies.

Just going through your reasons to buy:

1) More space. Do you need more space? Would you (could you) knock a joining wall down to make it one big apartment? How would this affect its price and desirability in the future?

2) Make sure we don't get unpleasant neighbours. OK. An expensive way to do it but that makes sense.

3) Very rare for next door unit to become available. Kind of irrelevant unless you want to join it with yours to make one big apartment, or have family move in.

4) Possible exchange rate play (sell world stock funds at current weak yen, profit if yen strengthens). Where would the profit come from? Do you expect the value to rise substantially over time? What about buying and selling fees, property tax, maintenance fees, etc. If you're worried about the weak yen then it's probably better (and definitely easier) to sell some funds and keep it as cash until the yen strengthens, then buy them again. I thought you were against trying to time the market though.

One additional reason to buy is to turn it into an Airbnb if that's allowed and you don't mind the hassle. I don't know about Sendai but tourist accommodation is in short supply up here in Hokkaido and prices have gone through the roof.

Your reasons not to buy all make sense.

What would you say if a friend asked you for advice on this?

"Well...That sounds like a bad financial decision." "How well do you understand the local real estate rental market?" "Can I see your spreadsheets?" "Do you need more space? I thought you were into minimalism?" Etc Etc...

sutebayashi wrote: ↑Mon Sep 11, 2023 5:30 am > possible exchange rate play (sell world stock funds at current weak yen, profit if yen strengthens)

How does this part work?

You’d potentially sell the unit again later if the yen strengthens, is that what you mean?

So a paper profit would come by effectively shorting global stocks and going long the yen?

Yeah, we'll be selling the manshon(s) at some point if/when we move into my wife's parents' place. I imagine they will largely hold their value (especially if the owner agrees to sell for 13m) and will provide us a bit of diversification of assets.

Not that this in any way makes it a good idea

Deep Blue wrote: ↑Mon Sep 11, 2023 5:34 am On purely financial terms the answer is obvious. Hard pass.

Completely agree. I may be being tricked by scarcity, etc.

northSaver wrote: ↑Mon Sep 11, 2023 5:34 am One additional reason to buy is to turn it into an Airbnb if that's allowed and you don't mind the hassle.

Not allowed in our building unfortunately, although we would use it to house visiting family and friends.

TokyoBoglehead wrote: ↑Mon Sep 11, 2023 6:11 am What would you say if a friend asked you for advice on this?

"Well...That sounds like a bad financial decision." "How well do you understand the local real estate rental market?" "Can I see your spreadsheets?" "Do you need more space? I thought you were into minimalism?" Etc Etc...

I would probably tie them to a chair and get the baseball bat of gentle correction out of the closet

We'd almost definitely be better off just putting some money into renovating our place.

On the other hand we have been trying to change our mindset on spending recently, and I think the unit would likely hold its value quite well, especially if bought for 13m.

A lot of people quite like real estate (buying and selling) and although you may only be thinking of 1 property purchase, I would keep my 13 million in the market. The wife and I rent and have done so for 20+ years. Initially told myself that what I would be buying is just not enough space for the money it cost me. I wonder about that decision often. Should I have bought or continue to rent?
For me, I'd still rather look at the stock balance vs the mansion certificate. But to each his own. Do you really need more space or an extra place for friends/relatives to visit? You could put some relatives up in a nice Japanese inn for a lot cheaper.

And btw, there are other ways to get rid of / deal with neighbors you don't get on with.