1. Overview

Inbound demand is recovering and short‑term rentals are again a viable income engine. This note shows how to balance compliance with numbers so returns are durable.

2. Laws and House Rules

Your legal base changes with the model. Residential use with occasional stays follows the Private Lodging Business Act, while continuous lodging requires the Hotel Business Act. In condominiums, building by‑laws may restrict short stays. Before signing, verify zoning, owners association minutes, fire safety, and egress with original documents.

3. Location and Specs

Target 5 to 8 minutes on foot from major stations and 25 to 35 sqm studios to 1‑bedrooms. Ensure self check‑in, a reliable building network, and adequate sound insulation. Proactive neighbor communication reduces risk.

4. Sample Pro‑Forma

Purchase ¥32,000,000, equity 20%, interest 1.5%, tenor 30 years. ADR ¥12,000, occupancy 65%, days 30. Gross revenue ¥234,000. Assume OTA fee 12%, cleaning ¥33,000, utilities ¥18,000, supplies ¥5,000, linen ¥6,000, building fees ¥12,000, insurance ¥1,000, other ¥2,000 for Opex ¥105,000. NOI ¥129,000. Debt service about ¥88,400. Pre‑tax cash flow ¥40,600. Annual NOI ¥1,548,000 implies a ~4.8% cap on price. Figures are illustrative only.

5. Sensitivities

Each 1 percentage‑point occupancy shift moves monthly revenue by about ¥3,600. Each ¥1,000 change in ADR moves it by about ¥19,500. Use these levers to tune rate strategy and marketing.

6. Operations

Standardize self check‑in, noise monitoring, smart locks, and PMS integration. Use photo‑verified cleaning and stock counts. Faster replies within 48 hours and pre‑arrival confirmations lift reviews. Share a clear quiet‑hours policy and a contact number with neighbors.

7. Exit and Plan B

Design for quick pivot to long‑term leasing. For example, at ¥120,000 monthly rent and 5% management, the model can still leave about ¥13,600 after expenses and debt service. For resale, present occupancy history and consecutive monthly P&L to support pricing.

8. Takeaway

Winning short‑term rentals in Japan rest on four pillars: location, compliance, operational playbooks, and quantitative control. Validate documents and sensitivities before acquisition, then track KPIs weekly once live.