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From "getting rich with other people's money" to "cash flow deficits" - the final chapter of the high-leverage era
The investment logic that once rapidly accumulated assets through "small change capital + high leverage + rent-driven debt" has now completely failed under the multiple blows of rising interest rates, tightening regulations, soaring costs, and downward revisions of capital gain expectations. The Bank of Japan has officially initiated an interest rate hiking cycle, with loan rates generally raised to 2%~3.5%, while the investment yield in central urban areas remains only 2%~3%. Meanwhile, significantly increased maintenance costs, seismic standards, and building repair expenses have rendered the former strategy of scale economies through low holding costs nonviable.
Super Landlord Model
The "Super Landlord" (Super Oya-san) model refers to a widely popular leveraged investment model during the Japanese real estate investment boom from the 2000s to the mid-2010s, primarily targeting office workers and the middle class individuals.
- The typical approach is: investors use a very low down payment, or even a "small down payment," and leverage high-ratio bank loans (Full Loan or Over Loan) to purchase an entire apartment building (usually low-rise collective housing made of wood or light steel), covering repayments with rental income and achieving asset appreciation.
- Due to Japan's then ultra-low interest rate environment, coupled with the "three-in-one" collaborative operation of real estate agents, financial institutions, and guarantee companies, many investors, even those lacking experience and capital, were able to quickly "board" and become so-called "landlords" (Oya-san).
This model was once seen as the FIRE representative of "achieving financial freedom with other people's money," and it became a kind of "urban legend." Due to its low entry threshold (you can start with an annual income of basically 3 million yen), favorable bank policies (major banks could offer over-loans, and the screening process was lenient), and the impressive rise in property values, it attracted a large number of people to enter the field all at once.
Key Figures and Success Stories
- Shigeki Kanamori
- Book: "Make a Billion in a Year! The Disruptive Success Method of Real Estate Investment"
- Features: Achieving whole-building investment arbitrage through the yield restoration method, initiating the "Tuuhan Ooyasan" project, and extensively cultivating "mail-order type" landlords.
- Model: Intermediary matchmaking → High-leverage loan → Investment in entire properties → Entrusted management → Cash flow turnaround.
- Yūji Fujiyama
- Book: "You Can Become a Landlord Even with an Annual Income of 3 Million Yen"
- Known as the figure who enlightened people to become real estate investors even with low income.
- Advocate starting with high-return small apartments in local areas and quickly accumulating to roll a snowball.
- Takayuki Kimura
- Book: "Earn 200,000 Yen Monthly with Partitioned Apartment Investments!"
- Although the focus is on distinguishing apartments, it also advocates using loans to create "asset-based income streams."
Amazon上的搜索结果
Searching for Super Oya / Salaryman Oya on Amazon yields many related book results. Most of these "celebrities" have already established asset management (AM) or investment consulting companies, and now, with the market downturn, they are finding new ways to earn money from novices eager to try their hand.
Recent financial default events
In recent years, the "Super Landlord (Super Oya-san)" model in Japan has faced severe backlash, with its underlying systemic vulnerabilities gradually being exposed, leading to a series of financial and social issues.
The most representative case is the "Suruga Bank Share House Incident" in 2018, where a large number of investors, under the collusion of intermediaries and banks, obtained full loans using false income data and rent forecasts to purchase shared rental houses under the "Pumpkin Carriage" brand. Although it appeared stable in collecting rent, in reality, the vacancy rate was extremely high, and rent recovery and operations collapsed, ultimately leading to collective default by investors, personal bankruptcies, and even incidents of suicide, drawing national attention.
This incident prompted an investigation by the Financial Services Agency and compelled banks across the country to tighten the approval process for personal investment property loans, marking the end of the golden era of high-leverage whole-building investments. Additionally, the media exposed that many "individual landlords" were forced to sell their properties due to loan pressure and rising vacancies after the pandemic, proving that the myth of "zero down payment, guaranteed profit" had long since collapsed. These events have gradually transformed "super landlords" from financial idols into cautionary examples of "financial accidents."
スルガ事件关系图
Major Events in Recent Years
- The "Pumpkin Carriage" shared housing collapse (2018): The "Pumpkin Carriage" shared housing project for women, operated by Smart Days, attracted numerous working investors who purchased entire properties with high-leverage loans provided by Suruga Bank. However, due to poor project management, rental income was insufficient to cover the loans, leading investors into financial distress. Following the exposure of the incident, the Financial Services Agency intervened to investigate, and Suruga Bank was found to have engaged in irregular lending practices. Regulatory authorities subsequently tightened policies on personal real estate investment loans.
- The "TATERU" false loan application scandal (2018): The real estate technology company TATERU was exposed for altering clients' bank deposit information without their knowledge to secure higher loan amounts. The incident led to a plunge in the company's stock price, a loss of investor confidence, and regulatory bodies increasing scrutiny of the real estate loan application process.
- "Leopalace21" Building Violation Issue (2019): The major apartment developer Leopalace21 was exposed for having multiple apartment buildings that violated building standards such as fire safety and soundproofing. The incident forced many tenants to move out, and investors faced asset depreciation and rental losses, highlighting the importance of investors conducting building quality checks when purchasing properties.
It is not difficult to see that many companies experiencing explosive failures are developers themselves. These companies collaborate with banks to offer relatively favorable conditions to investors with good attributes.
Instigator of the explosion: One property one company scheme
In the field of real estate investment in Japan, there was once a popular method known as the "one property one company scheme," which was particularly favored during the time when the "Super Landlord" model was prevalent.
The core of this model lies in establishing an independent legal entity (usually a joint-stock company) to own each investment property purchased. This is primarily achieved by concealing the true overall financial situation, continuously leveraging high LTV financing loans to enable snowballing investments.
The operational process is typically as follows:
- Establish a corporate entity: Investors set up a new corporate entity for each property to apply for loans and purchase the property in the name of the company.
- Loan Application: Apply for a loan from the bank through a newly established corporate entity. The bank usually evaluates based on the company's financial position.
- Purchase of Property: After successfully obtaining a loan, purchase the target property under the name of a corporate entity.
- Rental operation: The rental income from the property belongs to the corporate entity and is used to repay loans and cover operating expenses.
- Tax planning: Optimize taxes through the financial operations of a corporate entity, such as arranging depreciation and expenses reasonably.
The advantages and appeal of this model
- Loan flexibility: Each corporate entity acts as an independent borrowing entity, allowing them to apply for loans separately and avoid the limitations of personal credit limits.
- Risk isolation: Confine the operational and financial risks of each property within its own corporate entity to reduce the overall risk of the portfolio.
- Tax optimization: Corporations can achieve tax optimization through reasonable financial arrangements.
However, recently financial institutions are scrutinizing real estate loans more strictly, and banks are more cautious in approving loans for newly established corporations. At the same time, companies like CIC have intensified their efforts to obtain and share credit data, making it increasingly difficult to deceive financial institutions with schemes involving one property per company.
2025 - The End of the Super Landlord Model
As of 2025, Japan's real estate investment environment has undergone significant changes, making the "Super Landlord" model almost unsustainable. Here is an overview of the main changes and their impacts:
#1 The Bank of Japan (BOJ) has officially entered a rate-hiking cycle, and interest rates are expected to continue rising.
Since the end of 2024, after Japan's central bank ended its more than decade-long ultra-loose monetary policy, it officially raised the benchmark interest rate to 0.25%, and then raised it again to 0.5% in the first quarter of 2025. Although this remains a low interest rate level globally, it has already made a significant impact on the real estate market, which has long relied on low-interest leverage operations. Banks have simultaneously raised mortgage and real estate investment loan rates, particularly local banks, which have increased investment property loan rates to between 2.0% and 3.5%, significantly eroding investment cash flow. The previously common model of "super landlords" who relied on full loans and used rent to "break even on monthly payments" will find themselves in a negative cash flow (deficit landlord) situation in a rising interest rate environment.
More importantly, the market widely expects 1 to 2 interest rate hikes still possible from the second half of 2025 to 2026. BOJ officials also clearly stated that they will gradually return to the path of "policy normalization." This means that investors will face an interest rate environment that is higher than the past decade's for a long time, and expectations for future returns will be correspondingly compressed. Under such financial conditions, the "landlord model reliant on loan profits" is practically declared bankrupt, with funds more likely to flow into asset types with high liquidity and low operating costs, making the "super landlord" truly a label of a bygone era.
各大银行10年后变动利率预测
According to the latest calculations, there are significant differences in the 10-year adjustable mortgage rates among major banks.
- The lowest interest rate is: 1.493% at SBI Sumishin Net Bank.
- The highest interest rate is: 2.892% at Sumitomo Mitsui Banking Corporation.
- The average interest rate of 12 banks is 2.142%.
Compared to the average of six months ago, 1.618%, there has been an overall increase of about 0.543%, and all banks have raised their forecasted rates. Although the policy rate was only raised by 0.25%, banks have increased their interest rate expectations for ten years later by a larger margin, reflecting a consensus judgment in the industry: "Interest rates will continue to rise in the future."
#2 Tightening of Monetary Policy and Loan Restrictions:
Since the "Suruga Bank incident" in 2018, financial regulators have strengthened the scrutiny of real estate loans. By 2025, banks have implemented stricter loan policies for individual investors, requiring higher down payments and more stringent income proof, which limits the feasibility of high-leverage investments. Currently, the down payment for investment loans is generally required to be over 30%, and for typical salaried workers, an annual income must be at least 7 million yen. If the conditions are favorable, major companies even require an income of over 10 million yen, effectively preventing the average person from entering or quickly replicating these investments.
#3 Deteriorating yields make it almost impossible to sustain debts with rentals.
The population of Japan continues to decline, especially in local cities where vacancy rates are rising, leading to a decrease in rental income. Meanwhile, high property prices in urban centers have reduced investment returns, increasing investment risk.
From the operating income map on Urbalytics, it can be seen that the yield in the core area in recent years has been around 2-3%, which is lower than the mainstream investment interest rate (3%+). Coupled with the skyrocketing maintenance costs, unless there is a substantial appreciation in assets, it is difficult to achieve a balance of income and expenditure, let alone expand the scale exponentially.
Urbalytics经营收益地图
#4 Rising Building Standards and Maintenance Costs:
In the past, investors often purchased old wooden apartment buildings at low prices and rented them out after simple renovations to generate cash flow. However, with the continuous strengthening of building regulations, especially in terms of seismic resistance and fire safety, many "old seismic standard" properties built before 1981 are now difficult to pass loan reviews or resale transactions without structural updates.
For instance, the seismic assessment required by the Ministry of Land, Infrastructure, Transport and Tourism can cost between 300,000 to 500,000 yen per building, and structural reinforcement can easily exceed 5,000,000 to 10,000,000 yen. At the same time, the average cost of restoration and large-scale repairs has increased by 30% to 40% over the past five years. For example, waterproofing costs for roofs surged from an average of 6,000 yen per square meter in 2018 to 8,500 yen by 2024; exterior wall renovations even surpassed 12,000 yen per square meter. The rise in labor costs is particularly notable, with daily labor rates in the Tokyo area increasing from 18,000 yen/day to over 25,000 yen/day.
This series of changes means that the investment model that originally relied on "low maintenance, high cash flow" has now comprehensively deteriorated in terms of cost, risk, and liquidity.
#5 Significant Decline in Expected Capital Gains
Over the past decade, the prices of investment properties in Tokyo and major designated cities have risen significantly, especially in popular areas such as the southern part of the city, the bayside, Fukuoka, and Osaka's Shinsaibashi. The prices of wooden single-unit properties have generally increased by 30% to 60% compared to 2015. For example, the price per tsubo of some 1K fully-occupied wooden apartments in Tokyo has soared from 700,000 yen to over 1,500,000 yen, while rental yields have not increased correspondingly. As a result, even newly constructed buildings are showing a net yield of only 4% or even lower. More and more investors believe that prices have disconnected from rental fundamentals, lacking support for further increases.
This kind of high-level consolidation price structure makes investors generally believe: "Buying now is basically catching a falling knife at the peak." Against the backdrop of economic slowdown, rising interest rates, and reduced foreign investment, the market generally expects limited room for future house price increases, with the possibility of a reversal and correction. Since capital gains are unlikely and cash flow is squeezed by repairs and taxes, the super landlord model naturally becomes unsustainable.
Due to the combination of the aforementioned factors, investors' confidence in the real estate market has declined. The once-popular "super landlord" model is now considered too risky, and investors are turning to more stable investment methods.
Advice for new investors in 2025
1: Abandon blindly chasing high returns, shift to selecting "stable rental-type assets".
In the era of high interest rates, investment logic must shift from "capital gain driven" to "cash flow security prioritized." Currently, prices in the core areas of Tokyo and other first-tier cities are already at historical highs, with limited room for further increases. It is recommended that investors focus on:
- Rental income is stable (closely tied to local employment/transportation structure).
- Mid-sized property with low maintenance cost
- The surrounding area has large-scale development plans, and properties can maintain a low vacancy rate.
Urbalytics的大规模开发地图功能，可以查看关心区域近年的竣工计划
For example, Urbalytics' development plan mapping feature allows you to view recent development plans and filter areas and properties with population growth potential.
2: Use data to identify "overheated areas" and "technical risk objects" in reverse.
Currently in the market, there are still many investment properties with exquisite decoration but over-packaged returns. Investors:
- Not only should we look at the "superficial rate of return," but we should also consider dimensions such as "estimated restoration costs" and "analysis of maintenance timelines."
- Be cautious of sellers using "technical means" to unsustainably raise rents.
- Be mindful of older seismic-design buildings or areas with high vacancy rates and unsustainable rents that may not be able to refinance through banks after 2025.
For example, Urbalytics' rental comparison feature can determine whether the current rent is too high/low, helping users avoid investment traps that appear attractive but are actually highly risky.
Urbalytics的租金对比功能
3: Reconstruct the holding model and exit strategy in conjunction with interest rate simulation.
The BOJ has entered a long-term interest rate hike cycle, and it is recommended that investors no longer assume "persistently low future financing costs," but instead incorporate an assumption of long-term interest rates of 1.0%~1.5% into asset calculations.
- Use Urbalytics' cash flow simulation tool to predict changes in NOI/ROE under different financing conditions.
- Design a 3-5 year exit cycle strategy, prioritizing assets with strong liquidity and the potential for redevelopment or higher use conversion in the future.
- Implement an "advance refinancing plan" and "expense provision strategy" for existing high-leverage assets.
Urbalytics的现金流模拟工具
References
- What is the "Pumpkin Carriage" incident?
- https://www.murc.jp/wp-content/uploads/2022/10/medium_1603.pdf
Medium-Term Outlook for the Japanese Economy (Fiscal 2015-2030) - The variable interest rate for housing loans 10 years later is expected to rise from 1.493% to 2.892%! Estimates for 12 banks [Latest forecast for 2025] (Mechanism of housing loan interest rates - Part 2)
