The first time I walked into a 12-unit building in Saitama with eight studios and four family-sized 2-bedroom units, the seller’s rent roll said the average rent was 68,000 yen and the yield looked great on paper. What the rent roll didn’t show was that six of those studios had sat vacant for more than four months each, while the two 2-bedroom units had ten-year tenants locked in at rents well below market. That gap between the mix on paper and the mix that actually performs is the first thing I dig into now before I ever make an offer.
After 15 years and 9 buildings, I’ve learned that unit mix, meaning the ratio of studios to 1-bedrooms to family-sized units, matters more to your real return than the headline cap rate ever will. Here’s how I actually evaluate it.
Start With Who Actually Lives Near the Building
ud83duded2 RECOMMENDED ON AMAZON US
Real Estate Investment Books
The books that changed how I think about money, leverage, and long-term wealth.
Before I look at a single unit, I walk the neighborhood at three different times: a weekday morning, a weekday evening, and a Saturday afternoon. If I’m seeing mostly single commuters and students, a building that’s 70% 18 to 22 sqm studios is probably fine. If I’m seeing strollers, elementary school kids walking home, and family cars parked on the street, that same studio-heavy mix is a warning sign. One of my properties near a university had 10 studios and stayed at 96% occupancy for six straight years. A near-identical building I looked at but passed on, three train stops closer to a residential school district, would have needed at least 40% of its units to be 2-bedroom or larger to match local demand.
Compare Rent Per Square Meter, Not Just Rent Per Unit
ud83duded2 RECOMMENDED ON AMAZON US
Financial Calculators for Investors
Run yield and cash-flow calculations in seconds u2014 worth every yen on your first deal.
A studio renting for 62,000 yen and a 2-bedroom renting for 118,000 yen look like very different numbers until you divide by floor area. I’ve seen 45 sqm family units that pencil out to barely 2,600 yen per sqm, while an 18 sqm studio in the same building hits 3,400 yen per sqm. On a per-square-meter basis, small units are almost always the better earner, but they also turn over far more often, which brings me to the next point.
Check Turnover and Vacancy Days by Unit Type
Ask the seller for at least 3 years of leasing history, broken out by unit type, not just a total occupancy percentage. I want to know the average vacancy period for each size of unit. On my own buildings, studios average around 3 weeks of vacancy between tenants, 1-bedrooms average about 5 weeks, and 2-bedroom family units can sit empty for 2 to 3 months because there simply aren’t as many families shopping at any given moment. A building that’s 80% studios will feel like a revolving door, with constant cleaning, re-listing, and key-cutting costs, even if the headline occupancy rate looks identical to a more balanced building.
Renovation Costs Don’t Scale Evenly Across Unit Types
ud83duded2 RECOMMENDED PRODUCTS
Investment Analysis Templates
Spreadsheet analysis is the difference between a good deal and a disaster.
When I bought a 20-unit building three years ago, I budgeted 350,000 yen per studio for a basic refresh, paint, cleaning, and fixture swaps, and closer to 850,000 yen per 2-bedroom unit once you add a kitchen replacement and flooring for the extra rooms. That’s not double the cost for double the room count, it’s closer to 2.4 times, because bathrooms and entryways cost roughly the same regardless of unit size while kitchens and flooring scale with square footage. If a building is heavy on family units and every one of them needs the same deferred maintenance, your renovation budget can balloon fast. Always ask to see at least 2 or 3 units of each size type before you finalize your capex estimate.
A Skewed Mix Concentrates Your Risk
The building where I got burned early on was 90% one type of unit, all 1-bedrooms aimed at the same tenant profile, young single workers at a nearby factory. When that factory cut its shift schedule and relocated part of its workforce, I lost 5 tenants within about 4 months, and because every unit competed for the exact same renter pool, I had no cushion. A mixed building spreads that risk across different tenant profiles, students, young couples, and families, so a shock to one segment of the local job or housing market doesn’t hit every unit at once. It took me almost a year and roughly 1.2 million yen in lost rent to recover from that one factory-dependent building, and it’s the single biggest reason I now cap any tenant-profile concentration at 70% of total units before I’ll even schedule a viewing.
My Pre-Purchase Unit Mix Checklist
Whenever I’m evaluating a new building now, I run through the same short list before making an offer:
- Walk the neighborhood at 3 different times of day to gauge the real tenant profile
- Calculate rent per square meter for each unit type, not just total rent
- Request 3 years of vacancy history broken down by unit size
- Inspect at least 2 units of each size to build an accurate renovation budget
- Check what percentage of units share the same tenant profile, and treat anything above 70% as a concentration risk
- Confirm the building has at least 2 distinct unit types so a single market shift can’t empty it out
None of this shows up on a simple cap rate calculation, but it’s the difference between a building that fills itself and one that drains your evenings fielding vacancy calls. That’s the approach I use across all 9 of my properties, and it’s saved me from at least two purchases that looked great on the spreadsheet and terrible on the ground.
Property Cash Flow Calculator + Complete Guide
The exact Excel spreadsheet I use for every property purchase decision u2014 5-year projection, yield calculation, and break-even analysis included.
ud83cudfe0 More from DIY Father
15 years of landlord experience u00b7 3 apartment buildings u00b7 DIY renovations that saved millions of yen. Browse all articles at diytosan.com
