What to do with $300K? (Part 2 – Fukuoka, pref. Japan)

Ok, been away for a few weeks to Fukuoka, Oosaka, Shizuoka and Fukui. As promised, a summary of proposals for an approximate budget of $300K cash purchase in the land of the rising sun – I'll start with a general impressions, and try to drill down to actual purchase potential as conclusion –

1) The area to invest in remains Kyushu, not for lack of potential and deals in other areas, but for unclarity regarding radioactive fallout dispersions – better safe than sorry, and there still isn't conclusive evidence to suggest the hot areas map has stopped migrating at what seems to be the eastern border of Nagano (mid-Japanish). Fukui, while clean and cheap to purchase in, suffers from slightly higher vacancy rates and feels a bit like a deserted seaside resort – empty shops, bored and cashless shop owners, eye down-cast local population. While good deals are to be had, it felt a bit too slow to consider for constant cashflow, and I couldnt find the numbers yet to support investment there. This may (and hopefully will, it's a beautiful place) change in the future – will keep you posted. Particularly for the cold, snow lovers out there, it's a dream country.

2) Kyushus hottest; prefecture, realty-wise, still seems to be Fukuoka, where Fukuoka city (capital, 1.5 million app. pop) is still showing nice expansion trends, parciularly Chuo-ku and Kurume wards feeling vibrant to walk down, with new monster office complexes, hotels and condo blocks popping up left right and centre. A walk down the main business district street of Hakata shows no signs of economic slowdown and/or shops for lease, particularly compared to walks taken six months ago, where there was still what felt like a bit of uncertainty (nuclear and economical) in the air – no sign of that now, business seems, to the passing eye, to be booming.

3) After meeting with several agents in Fukuoka city and Tokyo, confirmed the up trend in sales, with good deals being snatched a bit quicker than previously. While there are certainly several 9-12 blocks to be grabbed at the $300K range, all at 90% occupancy or more (including some nice ground floor long term commercial renters), returns seemed to be on par, or in most cases less than what we're used to see with the same number of separate, well-dispersed units across the city. While we'll be struggling to gain the 11-15% norm that we're used to with separate rental units, and there's still more funds that need to be set aside for future repairs/maintenance (things that are covered in monthly body corp fees when buying separate units), we were trying hard to understand why anyone would want to purchase such assets, rather than a geographically and economically dispersed range of units across town, mitigating risk far nicer in our perspective.

4) The answer, according to the agents, lies in the rebuild/redevelop value, which block buyers normally aim for – something that requires firm, 24×7 firm feet onsite (be your own body corp, so to speak), familiarity with local laws and by-laws and public area design constraints and other issues that I personally wouldn't delve into, as I aim for immediate and maximal cashflow, and like to keep exit strategies flexible and modular, which would be difficult with a block. If I ever will, I'll be happy to share my experiences, but at the moment seems like a complete headache. So looks like it's going to be same as it's been so far – single, small-micro units in older, strategically placed condo blocks with immaculate maintenance fund collection records and tenancy. Hope to experiment with some holiday/student rentals at least one one or two of those, so will hopefully have more to share.

5) While negotiation options are generally more limited by the nature of the purchase (9-12 units will not normally come from a single source, unless they're in the one block) – still, there are retiring investors, family inheritances and such deals that come in 2s or 3s, and can be at least slightly negotiated if purchased as a package deal (as opposed to foreclosures, money raisers and small upgrades to existing properties – these causes of sale will usually generate only one or two units per deal, and are the majority of deals out there). Alternatively, one watchs a particular interesting listing that doesn't quite cut it, and slips in a quick, substantially reduced offer as soon as the price goes down (which would happen if it's not applied for in 4-6 weeks normally, but then will be quickly snatched). Case in point see the deal breakdown thread.

6) So the way ahead seems to aim for something like 3-4 deals, 2-3 units a deal of $20-35K each, negotiated down to as close as one can get to 15% pre-tax return, while maintaining maximum occupancy period potentials. Internal and external maintenance and renos/rebuild usually not required, and good tenancy seems to be the main cash factor – this is our goal, and not difficult to achieve with a good, Japanese speaking team on the ground.

Hope this helps and answers some of the questions previously asked. Still looking forward to hearing what similar budgets will get me in the US? Anyone?