Gross vs Net Rental Yield in Japan

1. The two formulas

Gross yield = Annual gross rent ÷ Purchase price
Net yield   = (Annual gross rent − OpEx) ÷ (Purchase price + acquisition costs)

“OpEx” in Japan means the same buckets as anywhere else — property tax, management, common-area costs, insurance, small repairs, vacancy — but the tax and PM conventions are Japan-specific.

2. What the listing hides

• Property tax (固定資産税・都市計画税): ~1.4% + 0.3% of assessed value. Assessed value is typically 60–70% of market for buildings, 70% for land.
• Building management fee (管理費): monthly for condominiums; already netted or not, depending on the listing.
• Reserve fund (修繕積立金): monthly for condos; a real cash outflow, not optional.
• PM fee: 3–5% of rent for a Japanese property manager; higher for non-resident owners because filings and remittance are handled for you.
• Vacancy: plan for 5–10% depending on city, higher outside the top 5 metros.
• Acquisition costs (仲介手数料, 登記費用, 不動産取得税): ~7–10% of purchase price on top. Absent from “gross yield” entirely.

3. Worked example — Tokyo studio

Price:                    ¥25,000,000
Annual gross rent:         ¥1,320,000   (¥110,000 × 12)
Gross yield:               5.28%

OpEx (Japan-specific):
  Property tax:            ¥120,000
  Management + reserve:    ¥180,000
  PM fee (5%):             ¥66,000
  Vacancy (5%):            ¥66,000
  Insurance & repairs:     ¥30,000
                          ─────────
  Total OpEx:              ¥462,000

NOI:                       ¥858,000
Acquisition costs (~8%):   ¥2,000,000
Adjusted basis:            ¥27,000,000

Net yield / cap rate:      3.18%

A 5.28% headline became a 3.18% real number — before financing, before tax. This gap is why Japanese lenders underwrite on NOI, not on the listing yield.

4. What lenders use

Japanese banks feed NOI into their DSCR calculation. If DSCR < 1.2 at the appraised NOI, the deal is capped by the lender, not by your yield goal.

5. For overseas buyers

Add one more deduction to net yield: the 20.42% withholding on gross rent for non-resident landlords. Even if you claim it back via tax return, it's a cash-flow drag every month. See Japan withholding tax for non-resident landlords.