Transcript
Speaker: You hear that in the background? Can you hear it? What playlist are you listening to? This is, this is a cassette. I got my Nakamichi DR3 set up today. And I said, I got in Santa Fe, Emergent Songs of the Rainbow World, Native American Flute Music, George Nakai. I don't know where I got George from. It's Carlos Nakai. Who listens to cassettes, dude? That's good for you.
Speaker: I got a whole bunch, but Native American flute music, didn't someone, didn't the psychic ones tell you it's good for relaxation or? I had this like, I did this three hour psychic session with this lady during COVID over zoom. And I don't know, it was crazy. And she started like three hours, three hours, dude. I was like, what? And then somewhere in there, my big advice is you got to listen to Native American flute music because it helps you transition from.
Speaker: spiritual plane to spiritual plane or something like that. So I believe it. How much did you pay for that? Damn, I don't remember, but it is cool. I've never really had a psychic till then. Hopefully the flute music is not too distracting. I can turn it off. It's okay. Okay.
Speaker: Welcome back. This is the buying a house in Japan podcast. This is going to be our Tokyo base camp series. My name is Taki joined by my co -host Joey. Joey, how you doing? Doing good. Doing good, Taki. Where are we at with Tokyo base camp? Okay. So we have our offer accepted, which sounds like it's a sealed deal from our understanding, right?
Speaker: Yeah. So we signed a few documents recently. Honestly, I don't remember what each of the documents were. Maybe sign like a handful of them. And we also had the explanation explainer by Yoshi, which was interesting. He was, that's our real estate agent. He was, Hey guys, I've got a few important matters to discuss with you on the phone. Can we find a time for a call?
Speaker: I thought he was going to tell us someone died in the house because he can use the same language that someone else had told me. Oh, this is the language they use when they need to disclose something important. Like someone died in the house, but no, thankfully no one passed away in this house. Although it is interesting to know that he would not have a legal obligation to tell us because there was a purchase to a company first from the seller to a company that renovated it. And then they sold to us. So there's no more legal obligation. But Yoshi said he doesn't believe that someone died in it.
Speaker: little suspicious that we are buying a flip. Looking at Google Earth, we saw like Joey and I was looking at the plot of land and there's like a ton of trees and we're like, no, that can't be the right property. But I guess they did a ton of landscaping. Yoshi's suspects that our real estate agent suspects that they got it probably for a really cheap deal. But again, we're buying it for a hundred. Wait, 17 million yen, which is about 115 ,000. So I don't know how much they're really
Speaker: skimming off the top here, unless it's really fucked up on the inside. Yeah. I do think we mentioned this in the previous podcast, but they, they're selling after owning the property for less than a year. And I think they're subject to short -term capital gains tax. I don't remember what it is. Something high. Let me see if a chat GPT can give us a quick answer. We should explore maybe flipping someday. I know most people for anyone listening, flipping is generally not profitable in Japan.
Speaker: But I don't know we, this foreigner markets a new market and I think people looking for turnkey ready, especially furnished places could pop off. Still here, Joey.
Speaker: Yes. So I'm looking up capital gains tax corporate. Okay. Interesting. So it would be, so it is a company. So they'd be subject to corporate tax on this money. It's treated for capital gains are treated as corporate revenue. So to be hit with a 30 % tax on it, if they were an individual, it would be whatever your marginal tax rate is for your personal income tax, but okay. So they're getting taxed 30%.
Speaker: Interesting. So they, if we took 30 % off the price, they at least bought it for less than that. Okay. Going back to the actual contract reading or whatever. So we sat down with our real estate agent for about, felt like an hour, maybe an hour and a half, Joey, I know you popped off at the end, but.
Speaker: He literally went through every small concern with the place. He like went on each border. He explained the streets needed to be four meters. He explained some of the risks and it was honestly too thorough for what I wanted. Yeah, a little too thorough. There was some interesting stuff though. There's like an archeological discovery. I have no idea what that means. It was pretty vague, but like a hundred meters from the house. We're not in the landslide zone is what we also figured out, which is great.
Speaker: Yeah, not in a landslide zone, although there is something again, a hundred meters away that is the very tip of a landslide zone area. So that's the type of stuff that we got to that level of detail.
Speaker: Yeah. So step -wise we got our offer. I think our process was we got our offer accepted and then Yoshi jumped on a call. I think the reason, and I think this is mandatory if you're buying a place that the real estate agent has to sit down with you and explain like all this paperwork stuff. This is a liability thing. Something we're learning about Japanese real estate agents and real estate in general is that they're very concerned about
Speaker: liability and making sure that you as a buyer know what you're getting yourself into. I think he, he stated a couple of things like over and over again. I was like, Hey, you got it. We're totally cool. Can we skip to the end? But he had to go like bullet by bullet and recorded the conversation and made sure we, we had heard him. So yeah. And he showed us his license like on screen. It was real for legal. This is for legal purposes, kind of thing.
Speaker: And I think this is an interesting difference between Japanese real estate agents and US real estate agents. I feel like we, honestly, this level of effort is really high on the real estate agents. Again, their commission's lower for the property prices, but I actually asked Yoshi at the end, I was like, Yoshi, how do you make these contracts? Are these like templates? No, I make each one individually.
Speaker: Based off the seller. And I was like, Hey, how long does this take you? It's like three to six hours. Like, what Yoshi are you using chat GPTs? No. I was like, Oh man. Yeah. It does sound like something where chat GPT could excel at or at least some sort of form standard format. And you just fill in the blanks for each different property at least. Or dude, I did tell him, I think there's, it is ripe for disruption. Hopefully we can figure out how to like start making templated formats. Cause I, it doesn't make sense how much time he's spending.
Speaker: It's awesome the amount of effort, but also at the same time, man, you got to be doing, you can't be spending six hours on this contract that we are not reading, but I guess it is a liability or conservative kind of, I don't know what the right word is, but put the liability off them.
Speaker: Yeah. I also wonder if, so we did it over zoom. So we just got on a zoom call. I wonder if that's only since COVID that they've been doing that like previous to COVID. I wonder if you had to go to Japan for this part of the process or maybe it can't even be power of attorney because we gave Yoshi the power of attorney. So this is the contract between him and us. So I wonder if you had to go to Japan.
Speaker: Yeah, our first transaction, we didn't need to do this. Our intermediary handled this, which was awesome. I do see a benefit of doing this though. I think we're really going through a little bit of a different process this time. Also, when we signed the contract, it was interesting. We had like DocuSign type contract, but it had a hanko, which is like the Japanese seal.
Speaker: like spot for it. Eh hanko. Eh hanko. And in our situation, our company or our KK is what it's called, is purchasing this property. So Yoshi had to go get our seal from our representative in Japan. It was like this whole chase, but we eventually got it. And yeah, offers officially accepted. And it sounds like this place is ours, assuming we can transfer the money on time. Ooh, hilt that celebration button.
Speaker: Oh, is that the right one? Or do you want the applause? I'll say the applause for another time. Joey, what's next? I'm excited. Okay. I'm not. What's next? Amazon. Amazoning things is going to be a big part of what's next. What's next in the purchase process. So we've signed the, I guess our contract's been accepted. We paid a 10 % deposit. Yeah. What's the next steps?
Speaker: I'm not 100 % sure. I think it's going to be transferring the money around the 14th. I think we need to get the money to Yoshi. He needs to have it in under his control by the 14th. That's the day we chose for settlement. Yeah, I think it could be wrong. It sounds like, so the next step for us was actually to work with Yoshi and our real estate agent to figure out a date to quote unquote close.
Speaker: It sounds like from a closing perspective, everything needs to happen in a certain order. Like we need a sign, the money needs to be transferred and then the titles.
Speaker: Hand it over. If you remember, if you guys remember our podcast episode with Rob Arimoto from She -Max Legal, it sounds like we need to have a judicial scrivener in the room ready to verify who we are. Oh, that's right. And then verify that the money was sent and then he like signs it off. I think that's the next meeting we have, right? Yeah, you're right. We got to figure out, I don't even know if you picked a date. I don't think we picked a date and time, but June 14th, it's all on that date.
Speaker: That's what's happening on June 14th. So everything goes down on the 14th. Okay. So the money needs to be in Yoshi's hands. Okay. So this is the settlement date.
Speaker: And on that same date, the judicial scrivener will be in the room. We have to show him some PDF versions of our identification and then seller's going to be there and then he's going to make the transfer or do whatever the judicial scrivener needs to do to transfer the title. Okay. That wasn't clear in my mind. I see now. Yeah. So our closing date, it also sounds like because we're buying this with our KK and we're not on the ground.
Speaker: Yoshi is having to coordinate and figure out like how to get these documents stamped and sent back to him. Our case again is more unique because we're buying it under our entity. I think this is pretty, a lot more straightforward if you're just buying it by yourself or like under a non -entity.
Speaker: Yeah, it does seem like a few, the extra steps too is that there's a lot of documents and stamps that are required by a Japanese corporation for signing documents and that kind of stuff. And we don't have control over them right now. They are physically in Japan and our accountants are managing them. So it's a little bit of coordination between Yoshi our real estate agent and then the accountants to actually
Speaker: Sign documents or hand over the stamp, that type of thing. So that is the added complication here. Probably Yoshi does seem willing to handle certain things via like a doc, a Japanese version of docuSign. So either FedExing, Yoshi, some wet signatures or handling stuff via docuSign. And it probably would have been a faster process had we not.
Speaker: had the corporation own this property. I think the only thing we're waiting before transferring the money again, we've been, OFX has been an absolute champion. One of our main structure funnels. Same thing the other day. Yeah, just like everything goes through OFX and it's gotten faster with the business account.
Speaker: So the only thing we're waiting for before transferring the sum of money is I believe he's pulling up closing costs. He had alluded that the closing costs are going to be lower than we expected. We've quoted on the show 10 to 15%. I'm not sure, I think, we'll come back with the exact percentage again. Kendall Broth, in one of our previous interviews, he outlined why it was really hard to predict closing costs.
Speaker: I do know overall we're adding, we're having Yoshi do a couple more extra things, but he's guaranteed the 3 .3 % commission. And also in Japan, agents can charge up to six, is it six months or 60 months? Yeah, it's like a flat, yeah. Flat fee of Rokuman that either capped at Rokuman flat fee and then capped at 3 .3 as a percentage fee.
Speaker: And Nokuman translates to like 400 US dollars. Joey and I have been discussing recently a lot about these closing costs and how do we motivate agents for cheaper properties. So if you're listening to us for the first time, if you're buying a $10 ,000 property, the agents can only legally charge you.
Speaker: 3 .3 % of the commission plus six man, which is like $400. So on a hundred, let's say a $10 ,000 spot, that would be like it's 730. I was actually doing this math today cause I'm drafting up the fee agreement. So on a $10 ,000 house, yeah, that's $730 commission to the agent.
Speaker: Given that they're hustling, maybe Yoshi said like minimum 10 hours per that he works on these things and doesn't include travel and travel time. Yeah. Dude's up at like 3 AM messaging us too. I feel quite bad that on our deal, he's getting a little bit more, but still compared to the US, I worked as an agent myself. I worked like a fraction in the hours and got a way higher returns just because the property price was higher. Yeah.
Speaker: But yeah, second would mention we're brainstorming a way to the issue is that we have to tell buyers when they're interested in a very low prop house with a very low price tag that we're like, we don't really know anyone we can pass you to.
Speaker: that can help you get this job done. Recently, we have met someone that can handle a little bit of volume in the much lower price range, but as like a consistent place to pass people, that's a real issue. Real estate agents, they just, they don't see it worth their time to handle transactions for these lower price properties. Yeah.
Speaker: So hopefully we come up with a solution. I think there needs to be one because yeah, there's just so many Akias and so many houses and so little motivation by agents, but let's talk about commission, Joey. I know we've had a couple of conversations with clients again, hot topic again, just to reiterate agents get 3 .3 % and six month or $400. This is.
Speaker: should be set. We recently had a client and this might've been a miscommunication on our part or Yoshi's part, but there was a little bit, there was a thought of that was flexible, right? Yeah.
Speaker: Yeah. So 3 .3 % plus six man, $400 is the legal cap that real estate agents can charge commission directly to their clients in Japan. That being said, it is technically negotiable since that's just the max they can charge.
Speaker: But in practice it is pretty much non -negotiable. I spoke with Kendall, we've had him on the podcast, just chatting with him on WhatsApp. I asked, I actually asked him some specifics around this and he was super helpful. He gave some pointers that's as to the reason why it's so non -negotiable.
Speaker: And I'll just read a couple of them out. One first one is that obviously it's their bottom line. So people are going to want to charge the real estate agents would like to make more money than less money. So that's just obvious economics. The second one is that there's a fear among real estate agents that if they show a little bit of weakness and
Speaker: accept a discount that the client will just come back and continue to negotiate down. And he was like, there's this perception that there, where's the floor? Are people just going to continue to take advantage of us? The third one is a rumor that same sort of thing. Maybe message gets out that, Oh, this specific brokerage, they work for cheap. And then people continue to come to them demanding steeper discounts.
Speaker: Fourth one is interesting and I didn't know this is that commissions are posted publicly. So the commission that a Japanese real estate agent makes, I'm not sure where, but apparently it's public information. So if other brokerages see a specific brokerage taking fat.
Speaker: discounts, they might see them as sleazy or trying to steal customers from other brokerages. For example, if someone finds a house through one broker, they do a bunch of work with that one brokerage and then they go to the second sleazy brokerage to finalize the deal because they know they're going to get a cheaper deal. It has that type of image in Japan and brokerages don't want to.
Speaker: be seen as sleazy. And the last reason that he specified it was that cultural, there's this cultural, they want to stick to a specific standard in the real estate industry in Japan. So it's just the inertia of 3 .3 % plus Pokemon.
Speaker: Yeah, so we learned a lesson here and I think moving forward, we're going to really explicitly communicate that this agent fee of 3 .3 % and the dokuman is standard. We weren't, we had thought it was, and obviously in the past couple of days, we've had those conversations and there's been misunderstanding. So I think this is a learning moment for us. We, you know, just to be very transparent, we get a referral fee sometimes from referring folks and we sacrificed our referral fee too.
Speaker: make the deal go through. I think Joey, it'll pay dividends in the future. I hope though. Yeah. I think being clear with clients going forward that, Hey, and I feel like this client did obviously burn to bridge with us. We had to give up our commission, but also burnt a bridge with the real estate agent that they're dealing with. The real estate agent contacted us about this client and they were, they're very upset.
Speaker: So it's just like this, this specific client just burnt bridges all around. I mean, maybe it is like, I want to, we'll let the dust settle. I want to give benefit of the doubt here. And again, I think it had, we communicated very clearly in the beginning, this wouldn't be an issue. So it was a little bit of a costly, but a lesson for us, but it is, I think overall going to be good long -term and has honestly strengthened our bridge with our agent partners, right. And that they know we're flexible and we want to just get the deals done.
Speaker: Yeah, and hopefully they see us as trustworthy. We want to get the deals done. Totally. So you're listening to this. Commissions are set. This is just the Japanese rules. We really saw these agents get pushed a little bit further than I thought. The flexibility in some of these things is not there. There is in America. The negotiation is less aggressive overall and more like people will walk away if they feel offended. Yeah. So.
Speaker: Hopefully the deal gets done, but overall, Joey, I think it was a, it was a, this just happened yesterday. It was crazy. It got a little crazy weekend. I know a lot of roller coaster, right? Yeah. Lesson learned on our part that it should have been our responsibility to as the English, as the first point of contact and the real English speaking.
Speaker: side of this whole setup that we're putting together, we should have been there to communicate fees much more clearly and transparently. And we'll do that going forward. Boom. And I also think, man, these agents hustle. Like we have been partnering with a couple agents that like absolutely are killer. And I know in previous podcasts, we've talked about like a
Speaker: And it's true overall in Japan, the real estate agents don't have that fire or hunger. So what we're trying to do is identify the strongest hungry folks that want to help foreigners that are bilingual. So if you rebook a console with us, we'd love to match you up to the right person. We have folks all over Japan, I think. And we're trying to grow that network to help our folks or help people buy Akia. Joey, what was our mission statement? You wrote something good. Yeah.
Speaker: I've been working on a few documents recently. Our mission is to help you purchase a home regardless of your budget. Sorry, it changed a little bit and it got shortened and shoved in another paragraph. But basically, we were hoping to help people buy these homes in Japan and the more affordable properties. That's what got me excited in the first place too, looking at these $5 ,000 homes. That's what got me really excited about real estate in Japan.
Speaker: And just due to the commission on these cheaper homes, these real estate agents, they don't want to take on these jobs. So our company mission, the way what we're putting together is to be a figure out some system to make it worthwhile for all parties to be fairly compensated and encourage these real estate agents to take on these jobs. So we're in brainstorming a little bit of a fee structure there to make it happen. Absolutely.
Speaker: from whatever the year we've been deep in Japanese real estate, this is the clear problem that no one has solved. How do we help foreigners buy these cheap, undesirable, buy Japanese and Japanese agents, these properties that people don't want to touch? So I think we found a problem statement, Joey. I do think we are uniquely empowered to help here. I remember our business insider interview. He was like, why are you guys? And I was like, I don't know.
Speaker: Yeah, it's becoming a little bit clear why us, I do agree with that too. I do think that having the double entities, like the subsidiary in Tokyo, like having this cross border corporate structure, it's going to help us. There's going to be a way to figure this out. I think with that corporate structure, we're excited about the problem and I think we have a good idea. Yeah.
Speaker: Cool. Joey. I think that was pretty good. We talked a little bit about commissions. We talked about where we're at with our Tokyo base camp. Hopefully things pan out. I am actually, we should buy some clubs. I want to go to the driving range. We're right in the center of a U S military. Like zone, right? Yeah. We're going to need to get invited onto the base. It would be awesome if I don't know, maybe the rules are different, but it would be awesome if we can get on that driving range. Yeah. Well, we're presenting, I think we're presenting, right? We're presenting to the.
Speaker: Air Force Base or something. Pretty soon. Yeah. Like a real estate investment group on a Yoda base in Tokyo. Yeah. All right. Well, Joey, I'm going to hit this outro with your favorite song here. What's that? We got to start loading up different songs or different sound effects. Because everybody that has the RODECaster is going to know. Dude, nobody has RODECaster. All right, Joey. Good episode. We'll talk to you next week. All right, man. See ya.
