Process of Selling Income Properties (Entire Apartment Buildings and Mansions)｜5 Steps from Appraisal to Settlement and Related Costs and Taxes
When selling an entire apartment building or an entire mansion, major differences from selling a personal residence are that the property is sold with tenants in place (owner-change) and that the price is almost entirely determined by rental income. Proceeding without understanding the process can result in lowering rent to fill vacancies and thus lowering the sale price, or not having the necessary documents ready just before settlement.
This article divides the sale of income properties into five steps from appraisal to settlement and handover, explaining what owners need to do at each stage, the costs and taxes involved, and how to proceed if the owner cannot attend in person.
Overall Flow of Selling Income Properties
From appraisal to handover typically takes several months, depending on the condition of the property and the buyer’s financing. Understanding the overall process first allows you to prepare based on your target sale deadline.
| Step | Main Content | What Owners Do |
|---|---|---|
| 1. Appraisal | Determine price from rent, yield, and evaluation of land and building | Prepare rent roll, lease contracts, and property tax notification |
| 2. Brokerage Contract (or Direct Purchase) | Sign contract with real estate company and decide listing price | Choose from general, exclusive, or exclusive exclusive, or direct purchase |
| 3. Preparation before Sale | Organize documents; check vacancies, boundaries, and repair history | Collect materials from management company; confirm need for surveying |
| 4. Sale Contract | Negotiate conditions and sign contract; receive earnest money | Fill out property condition report and fixtures list honestly |
| 5. Settlement and Handover | Receive remaining funds, registration, and hand over tenancy | Pay off loan and cancel mortgage; notify tenants and management company |
Step 1 Appraisal: Price is Mostly Determined By "Rent ÷ Yield"
Appraisal of income properties mainly combines the following three methods.
- Income Capitalization Approach (収益還元法): Calculates price by dividing annual rental income (or net income after expenses) by the expected yield for the area and building age. This method is central for income properties bought by investors.
- Cost Approach (積算法,原価法): Adds land price and current rebuilding cost for the building minus depreciation. Because banks emphasize this when deciding loan amounts, properties with low cost valuation tend to have difficulty getting loans, which can become a negotiation point.
- Comparative Market Analysis (取引事例比較法): Compares sale prices of similar nearby properties.
As a reference, Urbalytics has compiled median gross yields (annual rent ÷ listing price) by station for entire building listings in Tokyo.
| Nearest Station | Number of Cases | Gross Yield (Median) |
|---|---|---|
| Ikebukuro | 167 cases | 4.7% |
| Nakano | 122 cases | 4.6% |
| Nezumi (Note: original is 練馬 = Nerima) | 72 cases | 4.8% |
| Kamata | 131 cases | 5.1% |
| Kita-Senju | 177 cases | 5.5% |
Source: Urbalytics (Aggregated September 2026). These values are based on listing prices and differ from final sale prices. There is a wide range of yields even among properties at the same station depending on age, structure, and distance to the station.
From this "Rent ÷ Yield" relationship, it is clear that lowering rent reduces the sale price. For example, a fully occupied property with annual rent of 12 million yen evaluated at 5.0% yield is worth 240 million yen. If to fill vacancies you reduce rent by 5,000 yen per month on 10 units, annual rent decreases by 600,000 yen, reducing the price by about 12 million yen at the same yield. When considering sale, it is often better to continue recruiting tenants at an appropriate rent instead of lowering rent significantly to fill vacancies.
Step 2 Brokerage Contract: General, Exclusive, Exclusive Exclusive, and "Direct Purchase"
Once the listing price is decided, sign a brokerage contract with a real estate company. There are three types of contracts, each with a maximum validity of three months.
| General Brokerage | Exclusive Brokerage | Exclusive Exclusive Brokerage | |
|---|---|---|---|
| Number of companies you can contract with | Multiple | One only | One only |
| Transactions with buyers you find yourself | Allowed | Allowed | Not allowed |
| Registration in REINS (Japan Real Estate Information Network System) | Not mandatory | Within 7 business days of contract | Within 5 business days of contract |
| Activity reports to seller | No obligation | At least once every two weeks | At least once a week |
General brokerage allows contracting with multiple companies and also listing without REINS registration, making it suitable if you want to keep the listing confidential from neighbors or tenants. However, there is no obligation for reports and companies may be less motivated to advertise actively. If you want to be involved in sales activities and negotiate terms, general brokerage is good; if you want to unify the contact point and sell sooner, exclusive or exclusive exclusive contracts are better.
Cases Choosing Direct Purchase Instead of Brokerage
Another method is to have the real estate company buy the property directly. Because no buyer search period is needed, this allows quicker conversion to cash, and often contracts exempt the seller from liability for defects in contract (契約不適合責任). The price tends to be lower than selling via brokerage to general investors, so the choice depends on prioritizing speed and convenience versus price. For older properties, properties with many vacancies, or properties that cannot be rebuilt—where financing is difficult and general buyers are scarce—direct purchase may be more practical.
Step 3 Preparation Before Sale: Organize Documents and the Property
Buyers of income properties require many documents for purchase decisions and loan applications. Having these ready early shortens the contract period once a buyer is interested.
- Rent roll (list of rent, common fees, deposits, and lease start dates per unit)
- Lease contracts for each unit and guarantee company contract details
- Fixed asset tax and city planning tax notices
- Registration identification info (title deed), building plans, and survey maps
- Certificate of Approval and Completion Inspection Certificate
- Repair history (exterior wall painting, rooftop waterproofing, timing of water heater and equipment replacement, etc.)
- Management outsourcing contract and building maintenance (cleaning/inspection) contracts
Also confirm the following.
- Boundary: For land-attached entire buildings, the buyer may request a confirmed survey. This requires meeting with neighbors and road officials and can take several months, so confirm early if necessary.
- Vacancy: As in Step 1, continue recruiting at proper rents without large cuts.
- Appearance: Cleaning common areas and minor repairs can improve impression at showings. Major repairs are not always recouped in price, so consult with the real estate company before proceeding.
Step 4 & 5 From Sale Contract to Settlement and Handover
Sale Contract
When a buyer is found, you will receive a purchase offer (purchase application) stating the desired price, payment method, and handover date. When terms are agreed, sign the contract and receive the earnest money, usually about 5–10% of the sale price.
At contract, fill out the "Property Condition Report (Disclosure Statement)" and the "Fixtures List." Be honest about known defects such as leaks, termites, equipment failures, rent arrears, or tenant disputes. Since the April 2020 amendment of the Civil Code, the seller bears liability for contractual non-conformity (契約不適合責任) if delivery differs from contract. Individual sellers can limit or exempt this liability by special agreement, so confirm the extent before contracting.
Settlement and Handover
On settlement day, receive the remaining balance from the buyer, and the judicial scrivener will file the ownership transfer registration. If a loan remains, it is repaid in full and the mortgage is cancelled on the same day. The following settlements and procedures are specific to owner-change sales.
- Security Deposit: The deposit held from tenants is transferred to the buyer (generally offset against the sale price).
- Rent for the Current Month: Pro-rated as of handover date.
- Fixed Asset Tax & City Planning Tax: Pro-rated for the year as of handover date.
- Notification to Tenants and Management Company: Inform them of change of owner and new rent payment destination.
- Key and Document Handover: Deliver keys for each unit and common areas, originals of lease contracts, and equipment manuals, etc.
Costs and Taxes Incurred by the Sale
| Cost | Approximate Calculation |
|---|---|
| Brokerage Fee | Sale price × 3% + 60,000 yen + consumption tax (maximum amount if sale price is over 4 million yen). Not required for direct purchase. |
| Stamp Duty (Sale Contract) | 30,000 yen for 50 million yen to 100 million yen, 60,000 yen for 100 million to 500 million yen (reduced rate applicable to contracts created by March 31, 2027) |
| Mortgage Cancellation Fee | Registration tax (1,000 yen per property) + judicial scrivener fee |
| Loan Prepayment Fee | Varies by financial institution and contract |
| Survey Fee | If conducting confirmed survey. Depends on number of neighboring plots and boundary confirmation, check estimate. |
If an individual owner sells a property making a gain (capital gains), income tax and resident tax apply. Capital gain is calculated as "sale price − (acquisition cost + selling expenses)," and tax rate varies by ownership period.
| Category | Ownership Period (As of January 1 of sale year) | Tax Rate (Income Tax, Special Reconstruction Income Tax, Resident Tax Total) |
|---|---|---|
| Long-Term Capital Gains | Over 5 years | 20.315% |
| Short-Term Capital Gains | 5 years or less | 39.63% |
Ownership period is judged as of January 1 of the sale year, so even if it has been exactly 5 years since acquisition, it might be considered short-term. Also, the 30 million yen special deduction available for selling a primary residence does not apply to rental income properties. If owned by a corporation, corporate tax calculations apply. Tax amounts vary by individual conditions, so consultation with a tax accountant is recommended (rates as of 2026).
When the Owner Cannot Attend: Sale by Proxy and Overseas Owner Cases
If the seller cannot attend contract or settlement in person due to hospitalization, age, or living overseas, sales can be entrusted to a proxy. However, transactions by proxy are vulnerable to fraud (so-called jimen-shi or land swindlers), so buyers and judicial scriveners carefully verify. To proceed smoothly, prepare the following first.
- Power of Attorney: Clearly state the proxy’s name and address, property details, scope of authorization (whether signing contracts only or also receiving payment), validity period, and date of delegation, with the personal seal (jitsuin) of the owner. Avoid vague wording like "delegate all authority."
- Owner’s Documents: Seal registration certificate, identification documents, registration identification info (title deed). If the registered address in the registry differs from the current address, a resident certificate etc., is also required.
- Proxy’s Documents: Identification documents, seal registration certificate (if a corporation, certificate of registered matters).
- Confirmation of Owner’s Intent: The judicial scrivener will confirm the owner’s intention to sell even with a proxy involved. Schedule interviews or calls beforehand.
For Japanese nationals living overseas, instead of a seal registration certificate, a "Signature Certification" issued by a Japanese embassy or consulate and a "Certificate of Residence" instead of a resident certificate are generally used. Foreign nationals use notarized affidavits from their home countries. Because these take time to obtain, prepare as soon as the sale is decided.
Summary
- The price of an income property is mostly determined by "rent ÷ yield." Large rent cuts before sale lower the price.
- Choose from general, exclusive, and exclusive exclusive brokerage contracts depending on your desired involvement and sale speed. Consider direct purchase for quicker or simpler sales.
- Gather rent rolls, repair histories, boundary info, and other materials early to shorten contract timing.
- Tax rate depends on whether ownership period exceeded 5 years as of January 1 of the sale year.
- If the owner cannot attend, prepare power of attorney and identification documents promptly.
About this article
- Author
- Eiichi Suto（Real Estate Brokerage / Renovation）Qualifications: Real Estate Transaction Specialist, General Insurance Solicitor Qualification, Assistant Commercial Facilities Planner, Level 2 Assistant Landscape Construction Management Engineer, Level 1 Assistant Civil Engineering Construction Management Engineer
Brings over 20 years of experience in the real estate industry, working across central Tokyo and the broader Greater Tokyo area on acquisitions and sales of income-producing and commercial properties. Leverages an inter-broker network to uncover off-market opportunities, assess asset quality, and evaluate project profitability, while developing diverse sourcing channels ranging from whole-building investment assets to value-add opportunities. Has consistently led the process from acquisition decisions through resale strategy and renovation planning, building high-conviction deals with strong execution potential.
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- TLL合同会社宅地建物取引業 東京都知事(1)第108202号住宅宿泊管理業 国土交通大臣(01)第F03424号
Data in this article cite their source and as-of date. Market conditions and regulations change, so check the latest information and consult a professional before deciding. Translated from the Japanese original.
