Have you ever felt that the initial costs you pay when signing a lease for a rental property are too high?
The initial costs include various fees such as the deposit and key money.
Among these, I think many people are wondering what purpose "key money" is being charged for.
In this article, we will explain what key money is, why you have to pay it in the first place, and how to reduce initial costs.
Why do I have to pay initial costs such as "key money" and "deposit"?
Initial costs are a major consideration for people who are considering moving or who want to sign a cheap rental agreement.
Here we will explain what initial costs are involved.
What is key money anyway?
Key money is money given to the landlord as a token of appreciation for renting a room to you.
It is said that the custom of key money originated in a time when there was a housing shortage, and now that we are in a time when there is a surplus of housing, only the custom from that time remains.
In addition, due to the increase in vacant houses and the decline in population, the supply of properties has increased, and the number of properties with no key money is also increasing.
Difference from security deposit
A security deposit is money that a landlord holds from a tenant during the contract.
Therefore, unlike key money, it is generally refunded when you move out.
However, the deposit may not be refunded as it is used to cover unpaid rent or to restore the property to its original condition when you move out for any damage that occurs after you rent the property.
If you would like to know more about deposits, please refer to the following article:
What is a rental deposit used for? Explaining the average initial cost and refund when moving outWhat other initial costs are involved?
Other initial costs besides the deposit and key money include the following:
- "Advance rent" is the payment of rent for the month you move in in advance
- "Brokerage fee" paid to the real estate company that showed you the property and handled the contract procedures
- "Fire insurance premiums" paid to non-life insurance companies to cover fires, water leaks, etc.
In addition to this, you will need to purchase new furniture and appliances if you don't already have them.
If you want to keep costs down, you can also purchase items cheaply using flea market apps or at second-hand shops.
Is it possible to negotiate a lower key money for a rental property?
Among those who want to keep initial costs as low as possible, there are probably many who don't want to pay key money, which is merely a tradition.
In fact, this "key money" can be negotiated.
One thing about key money is that once it is paid it cannot be refunded, so if you want to keep initial costs down, be sure to negotiate before signing a contract.
Who should I negotiate the fee with?
The key money will be negotiated with the real estate company.
The key here is the timing of when to convey your desire for a discount. The best time to do so is when the real estate company presents you with a quote.
You can also negotiate discounts on other items such as rent, but if you are specifically hoping for a discount on the key money, it is best to mention this at the outset.
However, simply asking for a discount is not likely to convince the other party.
One trick to getting a discount is to negotiate by saying that you have a temporary overlapping expense that is putting a strain on you, and therefore would like the key money to be reduced.
Which properties are easy to negotiate key money on?
The more favorable the tenant's position is, the easier it will be to negotiate the key money. It is also important to show that you like the property itself.
The properties where it is easy to negotiate the key money are listed below. Please use this as a reference.
- Properties with higher key money than market price
- Unpopular property
- A property that has had no tenants for some time
Properties with higher key money than market price
Generally speaking, the average key money amount is around one month. If the key money amount is higher than this, there is some room for negotiation.
Research properties in the same area with similar conditions (size, layout, age, etc.) and know the market price, which will give you more persuasive power when negotiating.
Unpopular property
Properties that are "far from the station," "facing north," "on the first floor," "old," or "in an unpopular area" are often avoided and may not be considered for occupancy.
If you can confirm that the property meets the above criteria, try negotiating.
A property that has had no tenants for some time
If a property has been without a tenant for a long time, the landlord will want to find a tenant as soon as possible.
It's a good idea to ask the real estate agent how long the property has been listed.
The posting period is the period during which the property is vacant, so the longer it is, the easier it will be to negotiate.
The pros and cons of no deposit or key money
So far, we have been explaining ways to reduce initial costs such as key money, but there are also some properties that do not require key money from the start.
However, some people may think that this means there is a high possibility that the property has some issues.
Next, we will introduce the advantages and disadvantages of no deposit or key money.
What is a zero-zero property?
Properties that do not require a deposit or key money are called "zero-zero properties."
The reasons why these types of properties have come into existence include the spread of the Internet, which makes it easy to compare properties, the fact that the number of tenants is decreasing year by year and competition for rental properties is fierce, and the fact that the number of rent guarantee companies has increased, meaning that even if a tenant falls behind on their rent payments, the rent guarantee companies will be responsible for collecting the debt.
In other words, landlords and real estate companies are now looking to "fill vacant rooms" by offering the most favorable conditions possible.
We will introduce the advantages and disadvantages of such "zero-zero properties."
Benefits of no deposit or key money
There are three advantages to renting a property with no security deposit or key money:
- Initial costs are lower than for regular properties
- There are surprisingly many properties with excellent facilities
- You can live in a property with a slightly higher rent
Initial costs are lower than for regular properties
The biggest advantage is the low initial cost.
If the rent is 100,000 yen and you pay one month's deposit and one month's key money, it will come to an expense of 200,000 yen.
When moving, you may end up spending more than 100,000 yen on moving expenses and buying new furniture.
So even if it's just at the beginning, it's not a small burden. If you want to reduce your expenses even a little, a zero-zero property will be a great help.
There are surprisingly many properties with excellent facilities
When it comes to zero-zero properties, some people may imagine them to be old and lacking in facilities.
However, even among zero-zero properties, there are many that are recently built and have a full range of facilities.
You can live in a property with a slightly higher rent
By waiving the deposit and key money, you can reduce your initial costs slightly.
By using the money you save on rent, you can choose to live in a higher-class property than you had originally planned to rent.
Even a difference in rent of 10,000 to 20,000 yen can make a big difference in the property's facilities.
Disadvantages of no deposit or key money
There are three disadvantages to properties that offer no security deposit or key money:
- Rents can be set high
- In some cases, joining a guarantor company may be a condition for moving in.
- If you move out on short notice, you will be charged a penalty.
Rents can be set high
Since the security deposit and key money, which account for a large portion of the initial costs, are free, the rent itself may be set higher than the average market price.
It would be a good idea to consider which option is more cost-effective, taking into account factors such as the length of time you plan to stay.
In some cases, joining a guarantor company may be a condition for moving in.
As mentioned above, the deposit and key money are used to cover the costs of unpaid rent and for restoring the property to its original state when you move out.
If the security deposit and key money were to be waived, tenants would have no choice but to cover these costs out of their own pocket, so as a countermeasure, some properties may require tenants to join a legal association as a condition of moving in.
If you move out on short notice, you will be charged a penalty.
Because it is difficult to find tenants for zero-zero properties, there are many cases where the deposit and key money are waived.
In that case, if the tenant moves out soon, you will have to find another tenant.
Owners who want to reduce vacancy rates often set the moving-out fees high and, in the hope of encouraging tenants to stay in the property for a long time, impose a penalty for short-term move-outs.
If you would like to know more about penalty fees, please refer to the following article:
Penalty fee when moving out of a rental property? Here are some tips to avoid losing money!summary
This time, we explained what a deposit and key money are, how to negotiate them, and the advantages and disadvantages of "zero-zero properties."
The deposit and key money are determined based on a combination of factors, including the characteristics of the property and the market price in the area.
When negotiating or choosing a zero-zero property, be sure to make a comprehensive judgment about why the price is what it is, what benefits you will gain from cutting costs, etc.
