Due diligence is key in property investment
Knowing how to calibrate trust and transparency when dealing with property managers is a challenge for investors in Japan; and there are many reasons why. For both first-time and experienced investors, the language barrier is often a stumbling block. This also applies to long-term residents who can, in fact, speak Japanese.
But the challenges don’t end with communication. Common problems include traditional approaches to property management that prioritize short-term revenue over long-term return on investment (ROI) and an entrenched lack of transparency.
The upshot? Due diligence, the most important step when seeking property investment opportunities, is often an afterthought or ignored altogether, Tsuyoshi Hikichi, managing director of Tokyo-based Axios Management K.K., told The ACCJ Journal.
“Property and asset management is at the core of what we do. That touches on a number of things: increasing rent, minimizing costs, and dealing with issues like a death on the property. But due diligence—including property valuation, market research, and assessment of the property—is key.”
Prospective and experienced investors seek Axios Management’s services for many reasons: two are Hikichi’s 15 years of experience in the industry and his bilingual skills.
But perhaps the main reason they seek his services—often after first reaching out to him for a second opinion—is the lack of trust and transparency that often exists in Japan between investors and traditional property managers.
“I get a lot of questions from investors who are suspicious of their property management company. Recently, I got an email asking: ‘Does this invoice make sense?’ This person had received a quote for repairs to his property that did not match expectations. He thought he was being overcharged.”
Hikichi said such complaints are not uncommon in Japan. In fact, it is common practice for traditional property managers to engage in cost-plus practices, where an additional 10 percent is added to invoices for work such as repairs.
On another occasion, a US investor and personal friend of Hikichi came asking for advice. The investor’s property in Hokkaido had six units that sat empty for months. Despite several phone calls to the management company—and promises by them to put a plan in place to find renters—nothing happened.
“My friend went up to Hokkaido to find out what was going on. When he got there, he found out the property manager was working with a local partner. But as the local partner and the manager had not prioritized his apartment, nothing was done for months,” Hikichi said. When Axios eventually took over management of the property, the empty units were filled within two months.
“There are two takeaways here,” Hikichi said. “The first is that we provide 100 percent transparency when it comes to revenues and expenses. And the second: we go the extra mile to do due diligence, with a focus on long-term ROI. That is our promise to clients.”
From initial consultation to tenant exit procedures, Axios Management offers its clients a full range of customized property management services, focusing on both maximizing owners’ ROI and protecting their interests.