Knowing Japan’s Tax Laws Helps Sell Property Here

Local property owners who want to sell real estate to Japanese investors would be wise to brush up on the latest Japanese tax laws.

“Just as we wouldn’t buy or sell a piece of property without considering possible tax consequences, neither do Japanese investors,” says Roger Moliere, executive vice president of FLIC (USA), a real estate investment firm with offices in Los Angeles, New York and Tokyo.

“For example, without an awareness of Japanese tax laws, you wouldn’t expect that a Japanese corporation would be interested in buying a 25-year-old wooden-frame apartment building. But because Japanese tax laws give accelerated tax deductions on older properties, your building might be attractive to a Japanese investor.”

Because Japanese are concerned about possible effects of inflation, Moliere says, they want the ability to raise rents when necessary. This makes property located in rent-controlled areas like Santa Monica and West Hollywood less desirable, he says.

Japanese investors will frequently pay a premium if the seller guarantees the rate of return on investment for the first three years.

In the final negotiations with a Japanese buyer, Moliere suggests not using the traditional American selling technique of pressing for an immediate yes or no.

“This turns Japanese off,” he says, “The best approach is to make a reasonable offer and let the time factor speak for itself.”