Is it a good investment ? Due Diligence For high-rise condominium buyers : What You Need to Check

High-rise condominiums sometimes meet fierce resistance from residents who believe their neighborhoods are being overwhelmed by soaring glass towers.

In Japan, a number of rich and famous are living in those high rise condominiums.
But are they really good investment ? What are the potential risks ?

The higher that buildings can stretch into the sky, the more money that developers can command for sweeping views.

Those luxury condominiums are called ‘tower mansion’ in Japan.

I know it sounds very confusing.

In Japan mansions aren’t massive houses and estates for the rich and famous.

They are conventional apartments for regular people

(manshon ~ マンション).

Japanese mansions are the equivalent of condominiums.

People buy them to live in or rent out.

Generally, mansions are small but efficient. However, there are several areas where buyers look for luxurious features.

Mansion tend to have large bathrooms relative to apartment size. In Japanese culture, bathing is a recreational activity.

Japanese people enjoy unusually large bathtubs  (large in wester term)

Bathtubs have advance control systems that keep the water at a particular temperature or automatically

pour a bath for a pre-scheduled time (they can also sing).

Bathrooms often have a separate Japanese style shower area.

It’s also common to have a dressing room adjoining the bath area.

Toilets are usually in a separate small room.

Usual Japanese manshons and houses do not have two bath rooms but only one bath room and one separate toilet.

The following are some of the risks generally associated with purchasing a tower mansion (high-rise condo)

Management cost and repair reserve funds of high rise condos are usually very expensive.

In large-scale repair work (which usually take places every 10-12 years) ,

cranes do not reach to the high rise, so the management association (owners association,

管理組合) have to do special work

using a different method from normal condominiums.

Therefore, the cost of repair for tawaman is usually more expensive than that of conventional low condominiums.

Needless to say, the cost of repair is paid by ‘the repair reserve fund’  which is funded by each owner of the unit.

Usually the owners association collects money for  the repair reserve fund monthly from each owner

The monthly amount varies but is between 10,000 yen to 30,000 yen per unit.

In tower mansions, there are often a swimming pool and a gym which are run by the management fee

collected by the owners association.

Some tawamans have swimming pools, kids room, concierge, guest rooms.

Who is paying the cost to maintain such facilities ?

You, owner of the unit.

However, a number of naive buyers believe these facilities are free !

To check the accounting book of  ‘management cost’ and ‘repair reserve funds’ is very crucial before you

buy a tawaman investment.

There are a number of owners association which are collecting bear minimum amount from each unit.

Because some associations are so sloppy, they often face the financial crisis to maintain the quality of

the building in the long run.

Further more, in tawamans there is usually an emergency elevator and it is not used under the normal circumstance and

they are very expensive to maintain.

Such amenities also increase maintenance costs.

In particular, elevators for tall buildings for tawaman would cost as much as 40 million yen to replace every

20-30 years.

Again be sure to check ‘the repair plan’ and the current management association’s financial status

before your purchase the tawaman.

Not only tawaman but ordinary manshons need the major repair once every 12 to 15 years

It is necessary to do large-scale repair such as outer wall, roof.

This repair reserve is sometimes under funded due to the non-payment of the residence.

 

In many cases, there is a large variation in the price range in the same tawaman.

Even if the property on the top floor is about 200 million yen, some lower units are sold for about

40 million yen. This price difference could be the cause of social issues.

 

The level of income is different for every household and 

when you have such disparity in income, owners association is very difficult to handle.

(Please note Japanese mansions including tawaman are all managed by the owners association)

The price difference sometimes creates the class among the residence and even kids

start the discrimination according to the price of unit they live.

 

If there is a airbnb apartment next to your room, that could undermine the safety and security of your daily life,

meaning your neighbor is someone you don’t know. They could be a Chinese traveller

who does not speak a single word of Japanese. (No offense !)

You don’t want to let your kids play with someone whom you have not met before.

You may be bothered by the noise during the night caused by such foreign tourists.

 

Even moving could be troublesome.

Sometimes furnitures and home appliances do not fit in the elevator.

It is not possible to “lift” items outside by the machine because Tawaman is too tall.

You can not carry in things that do not enter the elevator in the apartment.

 

The higher the floor of the tower apartment, the stronger the wind.

the sound of the wind coulee be very noisy.

When the window is opened and the front door is opened, the wind blows through suddenly,

and things in your rooms fall down and the door is suddenly closed or opened by wind pressure.

 

Most tawamans prohibit drying your laundry outside.

Because if the laundry is blown away, it may harm the residence and the pedestrian.

Elevators could get very busy especially in the morning rush hour and it is

very frustrated. Some articles are reporting that tawaman residents in Musashikosugi area in Kawasaki city where recently a number of

tawamans have been built need to allow about 30 mins to go down and reach the station nearby.

30 mins is a long time in the busy morning.

 

In summer, your rooms become sauna.

It is just too hot without the aircon.

That said, there are some advantages.

View is great. If you buy tawaman near the ocean, your view would be very great and you can enjoy the view every day.

There no insects. Tawaman is too tall for insects.

Sunshine view is secured.

Common facilities are very luxurious (but you have to pay for them as a part of management fee payment)

Security system is usually very good

The proximity to the station is secured. Tawamans are usually in the very convenient location.

Final Thought

Please make sure you verify the book of the owners association and the repair plan of the property before

you buy tawaman or any type of manshon.

In short term, the book can look healthy but you need check it to gain a perspective of a big picture.

If you buy a wrong one, you will suffer substantially in the long run.

Other Helpful Articles

Essentials : How is the real estate ownership registered in Japan ?

Real estate investment in Japan : Beautiful Stories, Hard Realities

Pitfall of the condo unit investment in Japan : Management company and work matter

Toshihiko Yamamoto
Real estate investing consultant and author.
Founder of Yamamoto Property Advisory in Tokyo.
International property Investment consultant and licensed
real estate broker (Japan).
He serves the foreign companies and individuals to buy and sell
the real estates in Japan as well as own homes.
He holds a Bachelor’s degree in Economics from
Osaka Prefecture University in Japan
and an MBA from Bond University in Australia

Toshihiko’s book, “The Savvy Foreign Investor’s Guide to Japanese Properties: How to Expertly Buy, Manage and Sell Real Estate in Japan”is now out on Amazon, iBooks (iTunes, Apple) and Google Play.
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