- April 24, 2024
- Posted by: legaleseblogger
- Category: Related News
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Exploring Options for Renting Out a Property to a Company in Japan
Hello Japan financiers!
Looking for some insight into this:
I am currently in the process of considering purchasing a new or used house in Tokyo this year. I am interested in potentially renting it out to my own company, despite not holding the position of president but being a shareholder. I will also have a personal loan on the house. While it is generally not recommended to rent out a property with a personal loan, it appears to be a common practice among many individuals, with a “don’t ask, don’t tell” approach as long as mortgage payments are consistently made. Are there any alternative setups that could optimize the financial and legal aspects of this situation?
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Thanks for any insight or advice.
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If you are renting out your residence, in general you no longer have a mortgage (which requires you to live in the home), you have a property loan. The interest rate will sky-rocket and/or the bank could force you to pay back the loan straight away, which means you’d need to sell. And trust me, they will find out. Not sure why you think it is ‘common’ and that you will be ‘totally fine’. Don’t do it. It’s illegal, and you will be in a world of hurt. You’ll be lucky if you only see a massive jump in interest payments.
There are occasions when you can rent out your home: If you get transferred to a different city / overseas, you can go to your bank; most banks have provisions for this. Requires your company to provide documentation and such, but it is possible; of course you’d need to check with your bank.
This if course isn’t remotely what you’re trying to do. So – I’ll repeat, don’t do it.
Aside from restrictions on renting out on a residential mortgage, part of the problem with your plan is that it is not an “arm’s length” transaction and thus could be seen as self dealing. Self dealing isn’t illegal (at least in this context), but could have some negative tax implications — e.g. possibly paying misc income tax on the value of the benefit. Not to mention possible ethics issues within your company (not judging, but many companies have policies to eliminate these types of self-dealing benefits).
I’ll give you an example — own a house in Japan and my company pays my rent (on a separate house). But if they paid my “rent” on the house I own, it would be treated as taxable income. And any efforts on my part to obfuscate my ownership in that property (to avoid it being seen as an income benefit) would be unethical.
Unless you and the company plan on committing significant fraud, this will end badly for you. Actually committing fraud will also end badly for you.
Maybe it’s just me but i found your use of terms confusing, specifically:
“personal loan”
and
“mortgage”
are generally two different categories.
mortgage = a loan against a residence with the residence securing the loan
personal loan = unsecured loan against your person
So reworded you’re asking, can you have a mortgage and then rent that property to a company you’re connected to?
I think if you get caught, your lender could require you to switch to an investment loan (higher interest) or even ask for immediate payment in full.
Do you mean that your company normally pays your rent? So instead you want to buy a place and pay the monthly mortgage with the rent money from your company?
Not sure if I understood the question correctly but if it’s like above, I asked this once and I was told no. Rent money is for rent and not for mortgage. However this might have been a restriction of the company, so that is something you should check there…