Transcript
Speaker: Welcome back to the buying a house in Japan podcast, the number one Akia podcast in the world. How are you doing, Joey? Pretty good. Tired. We've had a packed ah day today, packed day yesterday.
Speaker: lot of driving. lot of driving, but I'm excited to share that today we are we have a special guest. I know we say this often, but a really special guest. He has been integral for our Japanese business, Takamori KK. We have our representative director, Ryan Kubozona. Welcome to the show.
Speaker: Thank you. Thank you. Shachosan. shaau We just came back from a coin laundry visit to which we are hopefully going to buy. But before that, actually, Ryan, give us a quick intro of yourself. Who are you? Where are you from?
Speaker: How long do you live in Japan for? Sure, yeah. So originally born in Japan, but my dad was an expat in the 90s. Went to the U.S., California, and so probably crossed paths somewhere with Take. Yeah, San Jose Bay bay Area. Yeah, and then came back to Japan for college and been here since.
Speaker: And I pretty much do financial planning for... but non-Japanese nationals primarily. RiFi.world, is that it? That was the origin. The RiFi is like cross-country finances, but then, I don't know, finances seem to be more like investing, so I didn't want to do that. So I wanted to focus more on the holistic planning.
Speaker: You know, a lot of people here interested in buying a house. And when you have stuff in other country, you know, that's local rules that to deal with. So I help a lot of people untie those knots if they've gotten into the into that kind of situation.
Speaker: We brought Ryan on board so we don't hopefully get into those knots. He untied the knot for us. consider Yeah, already you're in the knot untier. That's a good ah good good name, good title. Yeah, when when Ryan came on board on Takamori, nothing was moving ahead. It felt like, ah you know, not and not that nothing was moving ahead. you know so It was just like stuff in Japan moves slowly, so was just kind of coming to grips with that. But a lot of documents needed to get hunkoed and move around and sent from place to place. And without me and Take on the ground there, without speaking Japanese, without really understanding Japanese bureaucracy,
Speaker: um it probably was going slower than it would normally go and Ryan has been a breath of i don't know if breath of fresh is the right word but like man king catalyst things move fast with Ryan we're very happy to have you on board Yeah, glad to hear that. I mean, i I'm pretty good at eKYCs now. I know how to use those apps, tilt my head.
Speaker: You got it now. you have the front man now to to run the business. I'm glad that things are moving forward. I think you opened like three bank accounts or two credit cards. It felt like we had like a two-week streak where we're just like punching punching it out every every day Just know, like technically as a non-resident foreigner, you can open a business in Japan.
Speaker: um It's just like things will move incredibly slow and you might not get a bank account. You might not get this. You might not get that. How do you? so good Yeah, just like, you know, way better to have a Japanese national on the ground.
Speaker: How did we meet you, Ryan? Did I reach out to you on LinkedIn or something? Yeah, I think Ray Sato shouted me out on one of his posts. Oh, Ray Sato. Yeah, I reached out to me. Okay. Yeah, I did Sotoban with Ray. His mom was one of our teachers. We'd go to like LA every year and have competitions with him and his brother.
Speaker: And, uh... Okay. And it's interesting. Actually, we found out we have mutual friends. You were at Cupertino High School, right? Yes. Saratoga High School, right next to each other. so Yeah, I used to run there for a track and field. Okay. Well, hey. Voyager Coffee. I was going to Cupertino a whole bunch in June.
Speaker: Anyways, glad that we crossed paths again. It is so helpful to have be able to speak English fluently at like no like no restriction on speed to someone. And I think for those who are looking to make a company in Japan, like you um you need to have a Japanese speaker that's fluent and on the ground, right?
Speaker: Yeah. Ryan has learned that we throw caution to the wind with a few things and we kind of YOLOed into a laundromat here. Jumping into that conversation.
Speaker: ah so Ryan came down to check out the laundromat with us today. um Spoke a whole bunch of Japanese with the guy that was there. um me and Takei were taking pictures in the back. um First impressions of the of the place, Ryan?
Speaker: No, it's in a very nice area where a lot of ah commuter traffic likely flows through a convenience store. So I think the whole area, it looks like ah as long as you know the business runs as it has been, I think that it's going to be very stable.
Speaker: So Ryan helped us put in our letter of intent yesterday, right? Is that it? That's right. So basically, we pretty much committed to the deal based on the facts that we were provided.
Speaker: And if there are any discrepancies to the information that they provided, then I think we can you know take a step back. But aside from unless those things happen, I think we're pretty much committed to making that purchase.
Speaker: So from, I think, mine and Taki's perspective, it has the process so far has been a little bit of a black box. We have been relying on you pretty much 100%. Has there been anything like this is your first M&A deal? I'm guessing anything that like stands out to you or anything interesting you've noticed about this process in Japan? Well, I don't know how other people would usually facilitate or initiate an M&A to begin with, but you know we're going through Tramby, and then we're speaking with the inimmeary intermediary for the seller side.
Speaker: So right now, we still haven't even contacted the seller. We don't even know who this person is. So we haven't talked to the seller yet? No, just the intermediary. He has no idea who we are. It's very interesting. i hope that things just kind of move forward as a they were explained to us today. But yeah, it's it's it's nice. It's a nice learning experience.
Speaker: I also thought it was interesting. i don't know if you know most deals on Trambi go through an intermediary or is it just you know the coin laundry industry or just this one particular deal? Well, I can tell from this deal that this particular company is very involved in the M&A space.
Speaker: So I think maybe it's a unique thing to the coin laundry industry, but it sounds like a lot more of the deals on Trambi are more ah to do with of legacy companies or you know manufacturing companies who are looking for successors. So they're legitimate.
Speaker: mom and pop type of businesses that need successors. So I think there's two different clear, distinct groups. One is the the more businessy M&A middlemen group, and then we have the regular mom and pops.
Speaker: Right. and the mom um And you're saying the mom and pops would probably be direct to seller communication. Yeah. I noticed on the business card of the guy today, like that it's like coin laundry M&A. That's what they do, just coin laundries.
Speaker: So he said that he was part of a bigger company called Japan Coin Laundry M&A Corporation or Association. looking at his card right now. Yeah, Coin Laundry M&A is his company name. That's right. So he was part of a bigger group that does this and then he spun off. So it sounds like him and the the guy from Meow GK is also one of those spinoffs.
Speaker: Mr. Hiromitsu. Okay, got his business card. Unfortunately, we did not have business cards to return back to him, but we do have some that are being ordered. So pro tip, if you are making a business in Japan, business cards are probably good.
Speaker: All right, in a nutshell, to the two-minute, could you summarize the conversation you had with the the guy from the M&A? Sure. So we're, as as you may know, we're basically the second group to put in an offer. The first group put a bid right before we decided to put our bid in.
Speaker: And so we were kind of blocked out of that one. You know, we did put a counter offer that was more than the list price and that didn't go well. one yeah
Speaker: nail And then what ended up happening was, is the the landlord, basically the coin laundry is is the business, but it's a tenant of of that building. So the landlord decided to change the terms from the existing lease.
Speaker: So the first, bidder basically backed out because those terms no longer look good for them. So basically we're coming in now with the understanding that the the landlord gave new terms in terms of the rent. They wanted to increase the rent.
Speaker: In terms of the the lease period, they wanted to do a fixed period lease. Although i think that the general premise is that they will want to renew the lease after three years. But if the seller decides, or if the landlord, excuse you decides not to go through then they could technically cancel the lease on us after year three.
Speaker: They just want to have that option available, but you're you're saying it sounds like they will likely want to continue if there's no issues. Right. And the background was, I think the first bidder was someone outside of the prefecture. So the landlord wasn't sure if this person can really, you know, come in physically and maintain the property.
Speaker: And so he had his doubts and he wanted to make sure that there was an out for him in case the the new operator wasn't so ideal. So I think that was really the background. But I think because we're based out of Tama, they have much more comfort in in dealing with us.
Speaker: Okay. We literally just got our address. Drayan's been helping us navigate the address change. We've changed our address for our business and we finally just got it to our Tama house. So good good timing for us. Tama business buying a Tama business.
Speaker: Yes. Let's go. Any red flags, yellow flags? oh Well, the the obvious thing is the facilities aren't particularly new. So the longevity opportunity baby of the the machines, you know, how long they're going to last, if they're going to require additional or more frequent maintenancing, you know, those things, you know, we will we won't know based on the current operations. I think that's going to be the biggest problem.
Speaker: black box. But I think aside from that, it looks like there's stable clientele. So I hope that, you know, we can improve things to make the laundromat more appealing.
Speaker: Little yellow flag. We were just hanging outside and it's like, dude, looks like a college-age student, just kind of bikes up, will go straight in, go straight to the bathroom, and just comes back out. we' like, hmm, okay.
Speaker: That's going to happen often. I think we shut down the bathroom. We just lock it and put out of service or something. Paywall it? don't know. Well, there's a 7-Eleven, know, two stores across. It's not like that there's a lack of toilets around there. So I think it's just maybe a one-off thing. It's just convenient. There's no no one looking.
Speaker: We just happened to be there. Anything else interesting the the man said? ah and think the what I wanted to know was about the the reason why the current owner was selling it.
Speaker: you know I just wanted to make sure that there's no red flags there. It just sounds like the owner is old, so he just wanted to downsize his portfolio. so Okay. I heard him say mention something about the the ah side yards there. And it's like, oh, it's up to the landlord.
Speaker: Oh, right, right. So I think that's the part where you guys wanted to decide whether you can put like coffee shop, car, whatever there to be confirmed. I think the two sides, the left side has no stairs. So it's not connected to the residential side.
Speaker: But I think the right side has stairs. So it's connected to the residential road or it's connected to the apartments upstairs. So potentially that side we we can't touch. But the left side to be confirmed. And there's like this office that we we got access to and and it looks like it it goes out externally. So that is our office.
Speaker: So to the listener, like we imagine you're looking at our coin laundry spot. There's five parking spots up front. There's like one big spot on the left where you could fit like a ah school bus, I feel like.
Speaker: And on the right, there's also a kind of miscellaneous parking spot, but stairs that go up. And then above the building is um like an apartment complex. Yep. I walked around. There's a lot of, it seems like a lot of students, actually.
Speaker: Gakuari. Yeah. But other than that, i do you guys see the ah questionable magazines in the office that I saw? You show them to me. And Ryan didn't see them. I told him about them. I went on. I was videoing the tour. I got video proof.
Speaker: ah where So this is a back office. It's like the security office where you see the machines. There's a guy there's ah ah monitor, a little desk, and a chair. And I was just kind of you know't do it looking around, and you see a lot of these toilet paper rolls.
Speaker: And then oh no toilet below the desk, I see a couple ah unsavory ah Japanese porno magazines. um i I saw what I saw. and We're cleaning this place up. We're going to be above board act. nothing Nothing sketchy going on in our coin laundry. so that you know I don't know. Maybe allergy season or just lost and found magazines. give Going to give him benefit of doubt here.
Speaker: Lost and found magazines. I think easy to put a little bit of love into this place and bring it up to a ah much higher standard. Especially that' the kids space, like you mentioned before. It's like thumbtacks in there. Okay. We're thinking about putting like, you know, in California, did you ever go to like a dentist where they would have like an N64 monitor and Dr. Yoshida.
Speaker: Okay. Maybe we have the same dentist. Dr. Yoshida. We are going to think, we're thinking about like, okay, let's definitely bring that back. Do you think N64 is too retro? like i what do your kids play you ryan has twins yes do they they don't really game or we don't let them game so damn it would you bring them to a coin laundry and let them play there it was just the coin laundry you know it's one of those special benefits that you could have outside of the house okay that'd be nice special benefits uh we're thinking about maybe what do what do you think about like a nail salon in there would your wife want to get her nails done while she does laundry
Speaker: That's interesting. That reminds you of the hot pot place. What hot pot place? Heidi Lau. Oh, Heidi Lau. Oh, do they have a quick nail place outside. So while you're waiting for your the line, you can. Exactly.
Speaker: so Okay. So we were thinking that, um well, we don't know who the main ah customer segment is yet. It could be students, could be single men, like they said in the email to us, or housewives. But if it is housewives, you know, a nail salon.
Speaker: could be you know ah like a pop-up nail salon i'll find someone who's doing that kind of stuff and and offer it could be interesting i think we put super smash bros for the millennial men too single like i'm not sure what what's the one video game you think we should play joey doesn't play video golden eye no dude it's too old yeah smash 64 is pretty cool i think smash 64 melee the golden eye was nintendo 64 too Okay, age demographic, I'd say single men, probably 30 to 50 there would be, I think, the... like Super Smash Brothers is pretty safe. Yeah.
Speaker: But then you need to have other people to play with. I'm not sure. I think i think we we want to bring kids there. yeah Foster community. I mean, it's it's all going to come down to who's frequenting this place, I guess. You should run a Dagashia, one of those old school Japanese snack shops where you can sell like really cheap snacks.
Speaker: Yeah, yeah, yeah. How do we, like, should we run, like, a survey on Keto? Or, like, how do we get people, how do we get this information? How do we get the data of who's coming there? Old school, just have some flyers at at the store and and ask people if they want to see changes and what kind of changes.
Speaker: Do you think the landlord, so this is the one X factor. We don't know who the landlord is. Like, do you think he will not be down for us to, like, make changes to this place? He probably is not desiring for us to make changes to this place, right?
Speaker: I'm not sure. So i asked about you know changing the store name, for example, and and it doesn't seem like the landlord will be against that. So I'm not quite sure to what extent we need the landlord's permission to do these additional things.
Speaker: So maybe if we don't need to run it by the landlord, then I think we're free to do whatever. But if there's you know structures that we're going to put on the empty lot, for example, I think those are things that we probably need permission to from the landlord due to place.
Speaker: I think we like a boil of frog, just like slow, like nothing too drastic, like just like incremental changes, nothing, not, not a whole bunch of stuff at once. Yeah. On the way here, Joey was ah contemplating not coming in from a worrying two gaijin, but I think it was good, right?
Speaker: I don't think that the, at least the Mr. Hiromitsu didn't care. Yeah. I think he's not the landlords. I think he couldn't care less. I think it's more the landlord that we we should be concerned about.
Speaker: Okay. Yeah, I mean, it's coming from like, you know, you hear all these horror stories that foreigners have difficulty renting apartments in Japan because landlords don't want to have gaijin tenants. And so I was just thinking ahead and like, okay, maybe same thing with ah this space.
Speaker: yeah I think at least for for this guy that we met today, you know, his purpose and his goal is to make sure the deal is successfully closed. So I think he's definitely more on our side than maybe the landlord.
Speaker: Okay. Do you have an understanding of how tram... There's something like... Tramby takes fees, but not if we like say the deal was successful on Tramby or like the you know the seller side probably. I think the seller is supposed to report the deal success to Tramby and then that will waive the fees. I'm not quite sure what the the purpose of it is, if they just want data or how they monetize that. But it seems like there's a way to waive. There's like two middlemen here. There's the coin laundry M&A company that is representing the seller. And then there's also Tramby that is representing the coin laundry M&A basically.
Speaker: That's right. So I think our relationship and any kind of fees will be primarily with Tramby. Okay. And then the seller probably has their fees to pay to the agent.
Speaker: Okay. Let's talk fees here. I know we had kind of ballpark stuff and maybe we don't have the numbers exactly, but the list price of the property, what is... Or of the other business? 5.5 million yen. Which translates to yen. I heard the yen is, yen took a little slip the other day. So we're at 150? Just about. Okay. So at 150, that's about 40, 35.
Speaker: forty thirty thirty five little under 40K US? Under 40K. Okay. What other fees are associated Shikikine, Reikine. What does that mean, Jerry? Brokerage fees.
Speaker: What does Shikikine make? So um lots of fees when renting. but We're renting this space from the landlord. Lots of fees associated with it. Key money, guarantor money. I don't know which ones we get back. One of them is like the security deposit, and then one is literally just a gift to the landlord. Right.
Speaker: That's right. So the key money is the one that you you have to give up. It's usually like one month of rent, maybe two months. yeah And then the deposit is the deposit. So they use that to offset any ah expenses on the way out.
Speaker: And then the guarantor, that one probably won't come back because basically if if we decide not to pay rent, then the guarantor company you know pays on our behalf. So we're basically paying for that insurance essentially. Yeah, so those are those are the four, and then the brokerage fees for the real estate agent to help us rent the place. So those are the four fees that my understanding, ah key money, security deposit, guarantor fee, and then um brokerage commission.
Speaker: That's right. After everything, we expect this to be 7.5 million yen, sound about right? That's, I mean, just rounding it 50K US for our side. Does that sound pretty appropriate? Yes, I think that sounds about right.
Speaker: Okay. So we have these numbers written up on the whiteboard. Joey and I did our our best do M&A due diligence here and try to just distill what we saw. So just kind of going over 2023, the operating expense of this business was close is 89.96%.
Speaker: Pretty dang high. ah The owners probably took away around 8% and we expected about 1.5% for tax, which doesn't make sense. You know, we're we're off there going off their Excel. So That's a percentage of revenue. Of revenue, yeah. And 2024 is almost the same. There was a little bit bump in, so I guess 89.19% for operating expense, another 10% for owner's compensation, and 1.6% for tax.
Speaker: This was related to something about the lease of the machines, right? like There's like an annual versus monthly fee. Yeah, it sounds, i mean, it sounds too good to be true, but it sounds like for some of the machines he's converting to an annual lease and there's like a one-time annual lease fee that's only two months, equivalent to two months of the the previous, he was paying monthly previously, and the new annual fee is just two months of that previous monthly fee, which seems too good to be true.
Speaker: So what I heard is that once the lease term is up, that's when the one year renewal contract starts. I think the lower fee only kicks in once you fully completed that first, whatever, 10 years of lease term.
Speaker: Those machines are so old. Oh, so now we're kind of like, grant we we're we're i inheriting this grandfathered in. machines that have been leased for so long that nobody wants these machines. Nobody wants them. So charging us low prices. Basically, I think for the company that's leasing it, i think it just makes sense for someone to keep using it with a lower fee than to have to you know collect it and release something else.
Speaker: Okay. ah I guess some good news for us there. When is this all due? I know we talked a little bit about like process. what what what's What's the next steps? So right now, the biggest hurdle is going to be the landlord and whether the landlord is okay with Takamori KK being the tenant.
Speaker: So that's the the biggest X factor. We don't know how the landlord is going to react, but assuming that all goes well, then the target date for the sale is December 1st.
Speaker: So we're going for... just want to invest some money. Two months. So the idea would be, you know about payment timeline? Is that like December 1st payment needs to land or? Before the four December 1st is the handover. So we're we have to pay before that. and we're We're all cash. So no issues with loan or any kind of other financing.
Speaker: Okay. And they know that? yeah we We told them this is cash. Excellent. Very easy. Excellent. Oh, shit, guys. This is happening. I think they'll be happy with that, the cash.
Speaker: don't know. It's interesting. yeah that we We really did not expect this to come through. And then like the day before we flew i flew out to Japan, you're like, it's back on the table. where we're We're here.
Speaker: so We might be crazy. We might be making, i mean, so I do agree. Like we're, we're all in agreement here. Like from an ROI perspective, I don't think this makes sense. Like the three, like, let's just say worst case scenario after three years, they're like, nope, sorry. Like we're going to, we don't want to continue. The landlord says he doesn't want to continue the lease.
Speaker: Our business goes from, you know, we bought this for $50,000 and basically just flush that money down the toilet. We can't resell the business at that point. Cause there is no business. We don't have the space. We have maybe some assets we could sell, but really it's flushing the money down um the toilet if that happens.
Speaker: I think that um you know we can try our best to improve profitability here and try to recruit some of our money that way. Taga and I had some ideas. I think that a lot of this is going to be – Part of our adventure.
Speaker: I think that part of um the strength of our brand is just, um you know, doing these crazy things and kind of ah being that pioneer in the space and potentially there's an avenue to help other people do it in the future. So that's kind of the headspace that we're in.
Speaker: We're doing this for you listeners, just for your entertainment. Just know that me and Joey are putting our personal money on here just to just entertain you guys. That being said, we did have some fun ideas. like Maybe we have like a wall or something in the back of the coin laundry where you know people can donate and like we can you know host ah some sort of image or like get their name put up on the wall or you know something fun like that that people are doing on Kickstarter or Patreon. Yeah.
Speaker: the billboard we have uh which is really interesting um we could kind of like you know auction off hey put put your design here you know there's some interesting things that we could do with this okay ryan million dollar question are we you really stupid for doing this No, I think if you guys really want to, then you should. i think no you heard to here right you're going to look back at it and you're go to always wonder, should it should we have done it? Should we have done it And if that's just going to haunt you forever, then might as well just check that off your list.
Speaker: Do it. If it works out, works out great. If it doesn't, then you know that that's it. Everyone has content. Okay, Ryan. Well, thank you so much for coming out. It was a far drive for you today. It wasn't easy to get here, but you saw the the future of our laundry business in Tama.
Speaker: You're here, our ground floor. Thank you for ah brokering this deal and helping us get through this all. Yeah, thanks for having me.
Speaker: Thanks for listening to this week's episode of Buying a House in Japan. If you find the show helpful or at least entertaining, give us a five-star rating. Takes five seconds and really goes a long way. If you or someone you know is looking for a Japanese home, check out Akiyamart.com, our English-friendly site that lets you browse over half a million listings.
Speaker: That's A-K-I-Y-A-M-A-R-T.com to find your dream home in Japan. If you've got questions or feedback, drop us a line, email contact at akiamart.com.
Speaker: You can also find us on Instagram as well as TikTok, where we post properties, tips on the home buying process, and updates on our own purchases and renovations. Thanks again for listening, and we'll see you next week. If you haven't liked our podcast yet on Spotify, please like this podcast. We are trying to match the likes to the number episode. and So thank you for listening.
