Understanding Key Money and Reikin Customs as a Landlord

The first time a prospective tenant asked me why she had to hand over an extra 150,000 yen that she would never see again, I realized how strange reikin (key money) must look to anyone new to renting in Japan. I have been self-managing 9 rental units for more than 15 years now, and reikin is still one of the most misunderstood line items on a lease. Get the policy wrong and you either scare off good tenants or leave money on the table every single turnover.

This post breaks down what key money actually is, how much is normal to charge in 2026, and how I personally decide when to ask for it and when to waive it entirely.

What Reikin Actually Is (and Isn’t)

Reikin is a non-refundable gratuity paid to the landlord at move-in, historically 1 to 2 months of rent. It is not a deposit. Unlike shikikin (the security deposit), reikin is never returned at move-out, no matter how clean the unit is left. The custom dates back to the postwar housing shortage, when tenants literally paid landlords a thank-you fee just for the privilege of being offered a place to live. On a unit renting for 68,000 yen a month, a 1-month reikin adds 68,000 yen of pure profit on day one, on top of the deposit and the agent’s commission.

How Much Key Money Is Normal Today

Across my own 9 properties, I currently charge reikin on 4 of them, ranging from 0.5 to 1 month of rent. The other 5, mostly older units built before 2005, charge zero key money because that is what the local market now expects. In Tokyo’s 23 wards, roughly 40 percent of listings I track through my property manager still include some reikin, usually 1 month, while regional cities have largely dropped it to stay competitive. I have not seen a 2-month reikin request in my area in at least 8 years; that used to be standard in the bubble era but it prices out too many renters now.

Reikin vs Shikikin vs Guarantee Company Fees

New landlords often lump every move-in fee together, but each one serves a different purpose and behaves differently at move-out:

• Shikikin (security deposit) u2014 typically 1 to 2 months, refundable minus repair costs, legally capped in what can be withheld under the 2020 Civil Code revisions.
• Reikin (key money) u2014 0 to 1 month, never refunded, pure landlord revenue.
• Guarantee company fee u2014 usually 50 percent of one month’s rent paid once, or a smaller annual renewal fee, and it goes to the guarantee company, not the landlord.
• Agent commission u2014 capped by law at 1 month of rent plus tax, split between landlord and tenant depending on the local custom.

I keep these clearly itemized on every lease I write, because a tenant who does not understand why they are paying four separate fees at move-in is a tenant who calls me confused three days after signing.

The Shift Away From Reikin

Over my 15 years as a landlord, I have watched reikin quietly disappear from a large share of listings. Vacancy risk is the main driver. When one of my properties sat empty for 4 months back in 2019, I dropped the reikin from 1 month to zero and had an application within 12 days. That single change effectively cost me 62,000 yen up front but saved roughly 4 months of lost rent, which was worth far more. Younger renters in particular, especially those under 30, tend to filter listings by zero-reikin options first, so if your target tenant is a first-time single renter, charging key money can knock you out of consideration before they even read the floor plan.

How I Decide When to Waive It

I do not apply a blanket policy across all 9 units. Instead I look at three things before every relisting: how long the unit has been vacant in past cycles, how many comparable zero-reikin units are active within a 500-meter radius, and whether the unit has a feature worth paying a premium for, like a renovated kitchen or a south-facing balcony. My two properties near the train station, both under a 6-minute walk, still command 1-month reikin because demand is high and turnover is fast. My two properties further out, an 18-minute walk to the nearest station, have zero reikin because without it they simply would not fill within a reasonable window.

Practical Steps If You Are Setting Reikin Policy for the First Time

If you are new to owning rental property in Japan, do not guess. Pull actual listing data for your neighborhood before deciding anything.

• Check at least 10 comparable listings within a 1-kilometer radius for their current reikin terms.
• Ask your property management company for the average vacancy period on units with and without reikin over the past 2 years.
• Calculate the break-even: if reikin buys you 1 extra month of rent but costs you 2 extra months of vacancy, it is a net loss.
• Reassess every time you relist, not just once when you buy the building. Market norms shift faster than most owners expect.
• Keep your shikikin and reikin clearly separated in the lease so tenants understand exactly what is refundable.

Reikin is not a tradition you have to follow blindly, and it is not free money you should ignore either. Treat it like any other pricing lever, run the numbers on your specific unit and neighborhood, and adjust. That is the approach I use across all 9 of my properties, and it is the only reason I have kept vacancy periods short even as the custom fades in most of the country.

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