Investing abroad: How this investor found a good asset in Japan

“We looked in America. We'd looked in Canada. We'd looked at other places and considered the ideas of a condo or other forms of investment like that where we could get a holiday out of it.

“Then, we'd done a few trips to Japan. We fell in love with the mountains and an area that wasn't very Westernised yet but still Western enough that you could get by,” he added.

After making a few inquiries and engaging with friendly acquaintances, they successfully acquired the property in the Myoko Kogen area in Niigata—a two-hour bullet train ride away from Tokyo.

They planned to turn it into a hotel to maximise its wealth-creation potential.

“There were moments of insanity but, at the end of the day, it was a workable investment. It's something that we can combine our passion and get an income, which are two things you need in life,” the investor said.

Planning

While they were able to find an asset that allowed them to combine lifestyle and wealth-creation, Mr O’Brien and his wife had to jump more hurdles to make their overseas investment work.

For one, the couple was not allowed to stay in Japan for more than three months even if they have a property and a business officially registered in the country. This proved to be a problem as they had to juggle renovation and other business works.

Eventually, after a lot of jumping back and forth in government offices, they were able to acquire Japanese visas and become residents of the country, allowing them to stay in the country for as long as they like.

Aside from visa issues, they also have to arrange the renovation process without disregarding the lifestyle and culture in the area.

Essentially, the couple tried to marry the Japanese style with Western comforts.

“Obviously, we're not Japanese. We never will be. But we're trying to bring the Western comforts in. So, that was an interesting game as well, renovating in a foreign country,” Mr O'Brien said.

Financing

Aside from getting visas and setting up building plans, financing also proved to be one of the biggest challenges that they had to get through.

For starters, they were not able to speak with any professional in Japan and get familiar with the Asian country's unique investment structure before they jumped into the property purchase.

According to Mr O'Brien: “We couldn't approach anybody and ask for finance and ask for help. We actually had to put our money where our mouth is, so to speak."

They had no choice but to sell their property in Australia and pay the property in Japan in cash.

Among the properties they had to sell are townhouses and units that they have purchased as investors in Australia, as well as their principal place of residence.

After raising the money they needed to buy the lodge in Japan, the couple went through an extensive process to comply with legal requirements pertaining to the transfer of cash and purchase of property.

Mr O’Brien explained: “We had to use a local agent and work out ways to legally move the money over traceably. The property transaction was done in a bank and the bank manager walked out with all of the money in cash and handed it to me. Then, I had to hand it to the various parties. Very different to the process of Australia.”

“It's all done with signatures and that's about it. It was quite daunting having all this cash handed to you,” he added.

How much did the couple actually have to pay for it?

While it’s a lot of money for the Japanese people, from an Australian’s perspective, the monetary worth of the lodge may not be enough to get a one-bedroom bedsitter in Sydney.

However, according to the investor, the different perspectives on value does not diminish the asset's wealth-creation potential.

He said: “It's a very different market and that comes back to what is perceived as value in property in Japan and what is not."

“There's blocks of land in the centre of town with no real potential to build because you'd be hemmed in on all sides by all the hotels. You'd have the politics of building in the middle of everybody that are worth five times as much as a building on the edge of town with an operating business,” Mr O'Brien added.

To overcome the complications of the foreign investment structure, he and his wife decided that, at the end of the day, their investment caters to a more familiar market.

“What's valuable and what's not valuable from an investment perspective is different in Japan. The business that we've set up there is not a business that would likely sell to native investors but to non-domestic Asian investors, or American, Australian investors,” the investor highlighted.

Was it worth it?

Considering all the extensive processes that they went through and other steps that they still have to take moving forward, from planning and financing to the management of their investment, was this new opportunity worth letting go of their portfolio in Australia?

According to Mr O’Brien, it’s the realisation that wealth-creation should be balanced with a healthy lifestyle that pushed them to make such a huge leap.

Three winters after the settlement of the property, the couple is keen to keep their business running and growing in Japan for years.

The investor said: “If we stayed in our corporate jobs and continued on the path we were going, yes, we had good momentum, we had good equity and asset under our belts, but there comes a point when you start to wonder, ‘How much do I really need?’”

“We want to keep moving forward, we don't want to move into retirement and eat into our assets and our investment and cash.

“This was a good opportunity to slow our earnings, so to speak, and grow a business, grow something that we were doing for ourselves while still enjoying the lifestyle that we wanted and being able to combine our passions for investing and running our own business,” he concluded.

Tune in to Warrick O’Brien’s episode on The Smart Property Investment Show to know more about his transition from being an investor in Australia to becoming a businessman in Japan.

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