Investing in real estate in a foreign country is typically more complicated than a similar investment in the city where you live.
In locations around the world, Singaporean buyers experience similar challenges with international property transactions, and those buyers benefit from the same kinds of support as they work to accomplish their goals. Generally speaking: International real estate buyers are more successful when they put together a team of local providers to help with each step in the process of buying real estate.
In this post we will share the most common real estate services international buyers and investors use in their deals. In order to provide more clear examples of the concepts discussed in this article, we will show how two common types of international buyers work with local real estate professionals to buy property and manage their investments.
The Most Important Roles in an International Real Estate Transaction
At the heart of every real estate transaction, there is a seller and a buyer. While it is technically possible to complete the transaction by themselves, most real estate transactions require several professionals, in various roles, to enable the transaction, and to help the buyer after the sale is complete.
The most commonly requested services in international real estate include: a visa and immigration specialist, a local real estate agent, a real estate attorney, a property title specialist, possibly an architect, a property management company, and a local tax specialist.
Not every transaction will require all of those services, but it is not uncommon for a buyer to assemble a team that includes many of these roles to help with a foreign real estate purchase (and to protect and manage the investment after the sale).
Common Examples of Foreign Real Estate Buyers
To help explain the various experts that provide service to international real estate deals, in our examples below we will use the two most common examples of international real estate buyers.
Two of the most common types of buyers of foreign real estate are: the buyer that wants a vacation home in a foreign country, and the investor that wants property in a foreign country that generates rental income.
A Popular Destination for Singaporean Investors
As an example of an actual location where Singaporean investors commonly utilize the full range of real estate professionals, we will focus on the Niseko region, in Hokkaido, Japan.
The region of Hokkaido that is commonly called “Niseko” (which is an area that includes the small towns of Niseko, Kutchan, and Rankoshi) has a higher percentage of foreign buyers and owners (per capita) than almost anywhere else in Japan; many specialists in international realty are employed in this region. Perhaps 20 years ago, most of the international buyers in Niseko were from Australia, and other “western” countries in North America or Europe. In recent years, the percentage of international real estate owners from Asian countries like Hong Kong, Thailand, and Singapore has increased significantly.
We will use Niseko in the examples below to show how foreign buyers utilize the services of the most requested local real estate professionals.
A Visa Attorney
Anyone that is considering buying real estate in a foreign country should begin by identifying how much time that country allows non-residents to remain in that country before returning home.
Singaporeans can both own freehold property in Niseko (as in other cities in Japan), and can visit as often as they want, as long as they do not exceed 90 days at a time, or 180 days in a single year. While they can buy and own property, that does not qualify those buyers to live in Japan year-round. If a Singaporean wants access to their investment in Japan beyond the 180-day total allowance, they might work with a visa attorney to secure a business visa (or create a path to permanent residency).
For most vacation home owners in Niseko, the travel requirements are not a problem; even multiple visits (up to 90 days) in a year are possible. For business owners, forming a company and creating a business visa can offer more time in the country (if needed).
A Local Real Estate Agent
For most Singaporean real estate investors buying in Japan, a local real estate agent will provide the most immediate value in the transaction.
It is often true that international real estate searches begin on a website that lists available property for sale in the target country. The ease and convenience of online property listing websites make it easy to begin looking at property without having to coordinate with an agent. In Japan, property listing aggregators like AtHome and SUUMO are good examples of websites that show some of the real estate for sale in each area. Local real estate companies in locations like Niseko sometimes also have their own listings of local property for sale.
However, especially if you have not already completed a few deals in the target country, having your own real estate agent as the buyer is highly recommended. When an international buyer attempts to contact the representative of a property they find online, the agent they speak to will be the agent that represents the owner of that property. If there are better properties for you as the buyer, that agent has no incentive to show them to you, nor any reason to help you see the undesirable qualities of that online listing.
“Many of our foreign clients contact us to request additional help buying property they found online. We recommend they begin working with an agent that represents their needs before they attempt to make contact with any specific property. Local buyer’s agents can provide independent advice about property listings in Niseko or other areas of Japan.”
Most real estate agents in Japan conduct business in Japanese. However, there are some real estate agents in Niseko that can do business in English (and occasionally Mandarin). There are also specialized companies in Japan like Find Hokkaido Agents that work with Singaporean clients to make personalized introductions to local real estate professionals.
For buyers of vacation homes, working with an independent buyer’s agent will help ensure unbiased advice and access to more property in each area (including all property on REINS, the multiple listing service run by the Japanese government). For an investor seeking returns from rental properties, enlisting an experienced buyer’s agent to help identify high-ROI properties is even more important.
Do You Need a Real Estate Attorney?
Unlike Singapore, it is not always necessary to have an attorney involved in a real estate transaction in Japan; a local specialist called a judicial scrivener will process the title documents at the time of the sale. For large investments, however, and as a safeguard to protect your investment, an independent real estate lawyer in Japan might make sense for your deal.
According to Japanese real estate attorneys Takafumi Konishi and Shinsaku Tada (with Yamakoshi General Law Office, in Tokyo), in the majority of cases, most of the legal issues with property are the responsibility of the real estate agent.
“It is unique to Japanese real estate transactions that lawyers are often not involved. Instead, licensed real estate agents, judicial scriveners, and consulting companies, who are experts in their fields, are frequently involved.”
— From the book, Real Estate Transactions in Japan
In their excellent book, Konishi and Tada note that “real estate agents are often more knowledgeable than lawyers when it comes to verifying the contents of an important matters explanation document.” The agents are also local experts, and often have extensive experience with building codes, zoning issues, land use requirements, and common local challenges to be avoided.
However, Konishi and Tada note that for purchases above 10 million JPY (approximately 70,000 USD), having a real estate attorney review the terms of the transaction can be an important hedge against contractual issues with the investment. A good real estate attorney can review the proposed purchase with an eye for problems that commonly jeopardize real estate investments.
For most vacation home buyers, hiring a local Japanese real estate lawyer is probably optional (particularly if they are buying an existing home or condominium in Japan). For a real estate investor in Niseko, any commercial aspects of the real estate purchase may make legal expertise more relevant. While the “explanation of important matters” is in the domain of the real estate agent, there are instances where buyers benefit from the advice of local experts in real estate law, including: existing contracts tied to the property, agreements related to commercial tenants, or any terms or conditions added by the buyers to the sales contract.
Property Title Specialists in Foreign Real Estate Transactions
The function of establishing a recognized, legal record of the change of property ownership is a crucial aspect of all real estate deals, but that process is not the same in every country.
In countries like Singapore, the exchange of title is (most commonly) recorded with Land Titles Registry. The function of the change in title begins with the seller’s lawyers, and is completed by the buyer’s lawyers after the full payment for the property is made.
For property transactions in a location like Niseko, title changes are recorded with a division of the Japanese government called the Legal Affairs Bureau. Legal administrators called judicial scriveners are used to complete the documentation (in the days after a property is sold). Just one judicial scrivener is used to complete the transaction for both the buyer and the seller. The process is typically paid for by the buyer, as the primary benefit of the documentation is for the buying party.
For both residential property buyers and commercial real estate investors in Niseko, your agent will almost always be able to provide a judicial scrivener for the transaction. You can potentially arrange for your own independent judicial scrivener, if needed.
Local Architects for Remodeling or New Construction
Some buyers will begin by buying undeveloped land for a new vacation home or to establish a business. After their agent helps them identify land that is suitable for their project, it might be time to bring in a local architect to discuss the intended structure, and to determine costs before a sales offer for the land is completed.
In Japan, many architects work in-house at construction companies; the relationship that begins with a conversation with the architect might also involve construction services from that same company.
In other cases, independent architects can be hired to create designs for a new home, or to remodel an existing home. Some of these architects will also provide construction supervision duties, working with the client to ensure the construction is up to the standards of the client, and handling last-minute changes or questions.
“At ABD Architecture LLC, we assist foreign clients with their construction projects in areas that are popular with foreign buyers, including Niseko and other parts of Japan. Our team of bilingual architects and project managers brings a unique design style, and is experienced in delivering high-end projects, whether our clients live in Japan or overseas.”
Working with their agent, vacation home buyers from Singapore might find a suitable property in Niseko, and work with a company like ABD Architecture on new construction, or a remodel, to suit their purposes. Due to existing contracts with local tenants, new owners of occupied rental apartment buildings in Japan typically cannot engage in significant changes to the buildings; those owners often have a more immediate need for the services of a handyman or local carpenter to make smaller repairs for tenants or in unoccupied units.
Property Management for Overseas Real Estate Investors
Once the sale is complete, foreign buyers can begin to enjoy their new property (or their return on investment), but there are also new responsibilities.
Property you buy in a foreign country includes many of the same duties that you might experience in your home country; there are often monthly bills that need to be paid, scheduled and unexpected maintenance, taxes, and more. If your property generates rental income, tenant management is another consideration. Having a local contact to manage the property is often necessary.
Both residential and commercial property owners in Japan must pay their property taxes. In addition, local services, such as electricity and internet connections, often require a local address to receive statements. These kinds of payments typically need to be paid locally as well (international money transfers for local services are often not possible). For foreign real estate investors, a local property management company can be a high-value addition to your real estate team.
Vacation home owners in Niseko can hire a local property management company for basic services for approximately 100,000 – 150,000 JPY per year. That company will then receive local bills and remit payment for taxes, utilities, and more. For a foreign investor with rental property in Niseko, his property management company is more important. For a fee per unit, a local Niseko property management company will pay local bills, collect rent, communicate with tenants, and manage repairs. If a unit becomes unoccupied, (for an additional fee) the property management company can perform the duties of a leasing agent as well, to keep the property occupied and revenue flowing.
Full-Service Property Developments
Some real estate companies provide nearly all of the real estate services needed by foreign owners. Planned managed developments can deliver a full-service experience for a client across the full life cycle of their ownership. These companies often already own several plots of land in desirable locations, and can provide additional services for their foreign clients.
“It is not easy to do business in a foreign culture. Our clients count on us to take care of each stage of their investment. MnK Real Estate is a dynamic agency with licensed agents, architects, project managers and interior designers. Combined with our property management services and hospitality expertise we can offer comprehensive support to Singaporeans who want to own and enjoy their investment in Niseko.”
These planned development opportunities in Japan can be ideal for foreign buyers, as they provide in-house staff for many of the roles Singaporean owners might require to develop or care for their property. As owners want to help offset costs with some seasonal rental income, companies like MnK Real Estate manage the accommodation side as well.
Tax and Payments
It is a fact that it can be easier to buy property in Japan than to pay the local taxes each year. A local real estate agent will help you purchase property, but the ongoing needs of the property will usually be handled by a different professional.
After you buy real estate in a foreign location, you will have to pay local property taxes annually. In a location like Niseko, you must also pay a real estate acquisition tax (which arrives sometime after the sale). If you do not reside in the country, receiving your bills and paying them on time can be a challenge.
For most foreign buyers, having a local financial representative who will manage your taxes (and other local payments) can be an important part of that investor’s team. If you earn any income from your property in Japan, you are very likely to be responsible for annual tax reporting, and payment of income tax (and other local taxes).
For vacation home owners, a property manager that serves as a “tax administrator” can receive and pay local bills, including taxes. For owners of rental property, income-producing investments in Niseko will create the need for regular tax accounting. These investors will likely need a tax preparer in Japan that will process the taxes, that will work with a separate tax administrator to make payments, and then submit reports back to the owner to be shared with the owner’s tax accountants in their home country.
Learning from Each Provider
For investors that want to learn more before they commit to a property deal in a foreign country, the process of hiring your team will teach you a lot.
Real estate investors from Singapore can start by working with one of the primary roles (a local real estate agent is often a good initial contact). From that initial relationship, they can begin to ask questions about the other roles.
At each introductory meeting, an international buyer can learn more about how the local real estate experts contribute to a successful deal. They can also ask questions about the other roles, to gain a better understanding of how all the various functions work together in the process of buying and selling real estate in that country. Each of those conversations will increase their education about the entire process.
Featured image credit: image via pexels
