Can You Operate an STR in a Japanese Condominium?

1. Conclusion: Operating an STR in a Japanese Condominium is "Generally Not Possible"

In the Japanese real estate market, operating a Short-Term Rental (STR / Minpaku or Hotel Business) in a condominium (strata-titled building) is in principle extremely difficult.

We frequently receive inquiries from investors asking, "I want to purchase a unit in a downtown condominium and operate an STR." However, to state our conclusion upfront, our company does not recommend STR investments through the strata-title ownership of condominiums. The primary reasons for this lie in Japanese legal regulations and the condominium management system.

2. Why Operating an STR in a Condominium is Difficult

The most significant barrier to operating an STR (under the Private Lodging Business Act or the Hotel Business Act) in a condominium is the existence of management bylaws (Kanri Kiyaku).

Restrictions by Management Bylaws

In Japanese condominiums, the management association of each building establishes "management bylaws" based on the Act on Building Unit Ownership, etc. When operating an STR in a condominium unit, notifications or permissions based on the Private Lodging Business Act (Minpaku New Law) or the Hotel Business Act are required. At that time, it is mandatory to submit documents proving that "STR (Private Lodging Business, etc.) is not prohibited in the management bylaws."

The Reality: Most Condominiums Prohibit STRs

Currently, the vast majority of condominiums in Japan explicitly prohibit STRs in their management bylaws due to concerns over decreased security, noise troubles, and violations of garbage disposal rules. As a result of the Ministry of Land, Infrastructure, Transport and Tourism revising the standard management bylaws and urging management associations to clarify the permissibility of minpaku in their bylaws, many associations revised their bylaws in the direction of "prohibition."

Therefore, no matter how attractive the location or yield may be, as long as it is prohibited by the management bylaws, it is impossible to legally operate an STR in that condominium.

3. Exceptional Properties Where STR is Possible and Their Characteristics

While STRs in condominiums are fundamentally difficult, there are exceptional cases where operation is possible.

Conditions for Condominiums Where STR is Possible

How to Find STR-Permitted Properties and Practical Approaches

Finding a strata-title condominium where STR is exceptionally possible is highly difficult, but the most efficient approach is as follows:

1. Check Public Information from Local Governments: Check the "List of Notified Housing for Private Lodging Business" or "List of Permitted Hotel Business Facilities" published on the websites of respective local governments.

2. Identify Target Condominiums: From the public information, pick out condominiums where STRs are currently being operated.

3. Confirm Management Bylaws and Monitor Continuously: Obtain the management bylaws of that condominium and confirm that STR is still permissible under the bylaws. Then, continuously monitor the target condominium for rental or sale listings, and move to contract (purchase) the moment information becomes available.

4. Our View: Asset Value and Investment Judgment

While it is theoretically possible to find STR-permitted condominiums using the methods described above, our company generally does not provide support for STR investments in strata-title condominiums (especially for rental operations).

Concerns from an Asset Value Perspective

Many condominiums where STR is possible tend to have significantly low competitiveness as standard residential condominiums due to reasons such as being "very old" or having "poor management conditions." Because demand for residential use cannot be expected, there are many cases where STR is tolerated as a last resort.

Such properties have low intrinsic asset value as real estate, which entails significant risks in future exit strategies (sales). Furthermore, it is necessary to consider the risks of increased repair costs due to building aging and troubles caused by inadequate management.

Recommended Strategy for Investors

To achieve both stable returns and asset value preservation in the Japanese STR market, we strongly recommend acquiring an entire apartment/condominium building or acquiring/developing a detached house (including Machiya and Kominka), rather than purchasing strata-title condominiums.

As experts fully compliant with Japanese laws, providing end-to-end support from property selection to license acquisition, development, and daily operations, we accompany our investors toward long-term success. Please consult with us regarding highly certain STR investment strategies that go beyond the framework of strata-title condominiums.