When signing a lease for a rental property, initial costs such as a deposit and key money are incurred. However, there are some properties that do not require a deposit or key money.
Properties with a 0 yen deposit or key money can reduce your initial costs, but there are reasons why they are 0 yen, and there are some things you should be aware of.
So, this time we will introduce rental properties with no security deposit or key money, their advantages and disadvantages, and things to keep in mind when choosing a property.
If you are thinking of moving to a rental property that does not offer a security deposit or key money, be sure to check this article beforehand.
Why is a security deposit required?
The initial costs incurred when signing a lease for rental property include the deposit, key money, agency fee, previous month's rent, and miscellaneous expenses (fire insurance, house cleaning, key exchange fee, etc.).
In particular, the deposit and key money will cost one to two months' rent. First, we will explain why a deposit and key money are required before moving in.
What is a security deposit?
The deposit is a fee for maintaining the property. For example, if any equipment in your room breaks down, the deposit will be used to cover the repair costs.
It will also be used to repair common areas such as the lighting in the hallways and exterior walls, and to cover the cost of restoring the premises to their original condition when you move out.
Therefore, if no repairs are required when you move out, the deposit will be refunded.
The following article provides more detailed information about security deposits. Please take a look at it.
What is a rental deposit used for? Explaining the average initial cost and refund when moving out
What is key money?
Key money is a token of appreciation paid to the property owner. Unlike a deposit, it is not refunded when you move out.
In the days when rental properties were scarce, it was customary to give these to house owners as a token of appreciation.
These days, there are a lot of rental properties, and many properties do not require key money.
The following article provides more detailed information about security deposits. Please take a look at it.
What is a zero-zero property?
A property that does not require a deposit or key money is called a "zero-zero property."
In recent years, as it has become easy to compare rental properties online, price competition among property owners has intensified, leading to an increase in the number of such properties.
Also, since property owners want to fill as many vacant rooms as possible, in some cases you can negotiate the deposit and key money at the time of moving in, which can result in the deposit and key money being waived.
Why there are properties with no deposit or key money
In recent years, as the number of vacant houses has increased, there are more and more cases where properties are being made to waive security deposits and key money to make it easier for tenants to move in.
In other words, prices are adjusted according to the supply and demand at the time, and as a result, security deposits are often waived.
In addition, there are cases where the security deposit is free for other reasons, and if you are unaware of the reason why it is free, you may end up paying unnecessary costs.
Therefore, if you find a zero-zero property, it is important to first understand why the property offers no security deposit or key money.
Check to see which of the following three reasons applies to you:
- Large supply of rental housing
- There are some drawbacks in terms of the environment
- Long-established
Large supply of rental housing
As we explained earlier, as the number of vacant houses increases and the supply of rental housing increases, security deposits and key money are often waived.
In addition, as more people are becoming property owners for asset management purposes, the number of vacant rental properties is increasing.
As a result, tenants now have a wide range of options to choose from.
There are some drawbacks in terms of the environment
There are good and bad locations for rental properties.
For example, people don't want to move into properties that have environmental problems such as loud noise or poor quality tenants.
Therefore, in order to avoid having vacant rooms, property owners may waive security deposits and key money or set rents lower than the market rate.
Therefore, when viewing the property, it is important to carefully check the property and the surrounding area and see for yourself whether the deposit or key money has been waived due to environmental issues.
Long-established
The older the building, the harder it is to find tenants.
Many people have a negative impression of older properties, thinking that the living conditions are poor and the facilities are not kept clean.
Even in older properties, measures are often taken such as renovating facilities and keeping common areas clean, but a bad impression can discourage people from viewing the property, so the deposit and key money may be waived.
The pros and cons of no deposit or key money properties
We explained why properties with no deposit or key money (zero-zero properties) exist.
Next, we will explain the advantages and disadvantages of such zero-zero properties.
The benefits of no deposit or key money properties
The initial costs of renting a property are largely made up of the security deposit, so not having one makes the initial costs cheaper.
First, we will introduce you to properties with no deposit or key money and three benefits of keeping initial costs low.
- No initial costs
- Choose a better property
- You can move in smoothly
No initial costs
The biggest advantage of a property with no deposit or key money is that it requires less initial outlay.
Normally, properties require initial costs equivalent to 5 to 6 months' rent, including a deposit and key money.
If there is no deposit or key money, the initial costs will be limited to around three months' rent, as only advance rent, brokerage fees, and other miscellaneous expenses will be required.
Choose a better property
Since there are no upfront costs, you can choose a better property.
For example, you can rent a property with better facilities such as security, surrounding environment, floor number, etc.
Recently, there has been an increase in properties that come equipped with facilities that are popular with tenants, such as internet connections and delivery boxes, to make it easier for tenants to move in.
By reducing initial costs in this way, you can enjoy a comfortable life in a property with a better environment.
You can move in smoothly
With low upfront costs, you can allocate more of your budget towards moving expenses.
Especially for those starting a new life, you will need to purchase furniture, home appliances, and daily necessities, which will cost more than you expected.
Since you don't have to spend money on the property, you can spend more on preparing for the move and things you'll need for your new life, so you'll be less likely to suffer from unexpected expenses.
Disadvantages of properties with no deposit or key money
While properties with no deposit or key money have the advantage of no initial costs, they also have disadvantages.
We have heard reports of costs increasing especially at the time of signing the contract, and ultimately costing more than the deposit.
Furthermore, you may be charged a house cleaning fee to return the property to its original condition when you move out, which could lead to trouble.
Next, we will introduce four disadvantages of properties with no deposit or key money.
- Rents tend to be expensive
- Since there is no deposit or key money, you must join a guarantor company.
- There will be various expenses such as house cleaning fees and key exchange fees.
- The costs of moving out tend to be high
Rents tend to be expensive
Properties that do not require a deposit or key money often have higher rents because the costs of repairing the property and maintaining the facilities are covered from the rent.
Originally, the purpose of a security deposit is to cover costs related to maintaining the property, such as repairs and replacing equipment in the rooms.
Therefore, in order to maintain the property, maintenance fees will be collected from the rent. In addition to the rent, management fees also tend to be higher than for regular properties.
Since there is no deposit or key money, you must join a guarantor company.
Among properties that do not require a deposit or key money, there are some that require you to join a guarantor company.
Because the initial costs are low, you will be required to join a designated guarantor company to verify that the tenant is capable of paying the rent.
The guarantor company will conduct a screening process based on the tenant's place of employment and personal information, and if the screening is not passed, the tenant will not be able to move in.
Therefore, people who are about to start a new life and do not have anyone to act as a guarantor will be at a disadvantage.
There will be various expenses such as house cleaning fees and key exchange fees.
Since there is no deposit, you will be charged for house cleaning and key exchange when you move in and out.
These costs are normally covered by the security deposit, but if no security deposit is required, various fees may be added on.
In particular, the average cost for house cleaning and key replacement is 20,000 to 30,000 yen, which is by no means cheap.
Some people think that they don't need services such as house cleaning or key changing, but be aware that some properties may charge various fees as a condition of tenancy.
The costs of moving out tend to be high
Some properties that do not require a security deposit or key money may have restrictions regarding moving out.
For example, some properties require you to give one month's notice before moving out, and if you move out within one year of occupancy you may be charged a penalty or other moving-out costs.
In particular, house cleaning fees aimed at restoring a property to its original condition often cause trouble because there are no legal guidelines for how much of a property should be restored to its original condition.
Even if moving in is free and smooth, it is not uncommon to incur a loss when moving out, so be sure to check the terms of the contract in advance.
Points to note when signing a contract for a property with no deposit or key money
We explained that properties with no deposit or key money have both advantages and disadvantages.
Next, taking into account the advantages and disadvantages, we will introduce some points to keep in mind when signing a contract for a property with no deposit or key money.
As long as you know what to look out for, there's no need to be wary of properties that don't require a deposit or key money, so be sure to keep the following four points in mind.
- Understand the contract thoroughly
- Always inspect the property on-site
- Please use your room with care during your stay.
- Plan your move-out preparations
Understand the contract thoroughly
When signing a contract for a property, be sure to check the terms and conditions before signing.
Once you have found a property and it is time to sign a contract, you may tend to focus on costs and moving, but the most important thing about a rental contract is to understand the terms of the contract.
Be sure to check any additional terms and conditions in particular to avoid any regrets when you move out.
Always inspect the property on-site
Recently, some real estate companies have started offering online viewings.
However, the reason why the deposit or key money is free may be because there are problems with the environment or there are some circumstances regarding the living space, so be sure to go and see the property in person.
We recommend taking photos during the viewing, especially if there are scratches, mold, dirt, etc. in the room.
Please use your room with care during your stay.
For properties that do not require a deposit or key money, you may be charged a fee to restore the room to its original state when you move out, so please take good care of the room while you are living there.
It is especially important to keep your room clean and ventilated, and to use the facilities with care.
For example, if you intentionally damage an air conditioner or gas water heater, you may be charged for repairs.
In addition, if you do not ventilate the room and mold grows in it, you will have to pay for renovations.
If this is discovered when you move out, you may be asked to pay compensation, so be sure to use it carefully.
Plan your move-out preparations
When you move out, you must give notice one month before you move out.
In particular, properties that do not require a deposit or key money may include terms in the contract that require you to continue living there for a number of years, so we recommend that you make preparations to move out in a well-planned manner.
In addition, tenants are obligated to return the room to its original condition before they moved in (excluding any deterioration due to aging).
The owner or management company will inspect the property just before you move out, and if any repairs are found to need to be made, you will likely be charged for the repairs, so be sure to prepare financially in advance.
How to choose a property with no deposit or key money
Considering the disadvantages and points to be aware of, some people may think it is better not to choose a property with no deposit or key money.
However, if you are familiar with the property's characteristics and the contract terms, there is no need to be afraid of living in a property with no deposit or key money.
Finally, based on the explanation so far, we will briefly explain how to choose a property with no deposit or key money.
When choosing a property, be sure to pay attention to the following five points.
- Viewing will be done on-site
- Find out why there is no deposit or key money
- Check for defects during the pre-occupancy inspection
- Check the points to note when moving out
- Rent may be negotiable
Viewing will be done on-site
Due to COVID-19 and legal changes, an increasing number of real estate companies are offering online viewings, but as you cannot check the surrounding environment during an online viewing, it is best to view the property in person.
In particular, properties with no deposit or key money may have problems with their location or condition.
If any problems arise after you move in, there won't be anything you can do about it, so be sure to inspect the property in person.
Find out why there is no deposit or key money
Be sure to check with the owner or real estate agent in advance to find out why the property in question does not require a deposit or key money.
Not only are there properties with good locations and ages, but there are also new buildings that do not require a deposit or key money.
In this case, the property owner may choose not to charge in order to actively seek tenants.
There are various reasons for this, so it is very important to find out why there is no deposit or key money to avoid any regrets.
Check for defects during the pre-occupancy inspection
When you move in, be sure to check that there are no problems with the facilities or the room.
Any damage to wallpaper or malfunctions in the facilities before you move in must be shared with the management company. Or you must request repairs.
If you do not disclose any defects or damage that occurred before you moved in when you move out, it may be considered damage that occurred after you moved in, and you may be charged for repairs.
When viewing the property, be sure to check for any malfunctions or other issues.
Check the points to note when moving out
If you are renting a property that does not require a deposit or key money, it is important to know in advance the costs that will be incurred when you move out.
Depending on the property, you may be charged cleaning fees to restore the property to its original condition, or a penalty for moving out before the contract period has expired.
House cleaning fees average around 20,000 to 30,000 yen, and penalty fees are roughly two months' rent if you move out within a year, and one month's rent if you move out within two years.
Check the terms of the contract, and if the property requires a fee when you move out, consider whether you plan to live there long-term.
Rent may be negotiable
Some properties that do not require a deposit or key money have higher rents.
If you feel that the rent is even a little high, try negotiating the rent.
Whether or not you can reduce your rent depends on the real estate company, but it doesn't hurt to ask if you can lower it even a little.
You should also consider negotiating the rent.
[Finally] When signing a contract for a zero-zero property, be sure to take note of the following points
This time, we explained the advantages and disadvantages of properties with no deposit or key money, as well as things to be careful about and how to choose one.
Zero-zero properties offer no deposit or key money for a variety of reasons.
Don't make a rushed decision just because you think the initial costs will be cheaper, but make sure to find out why the security deposit is free before signing the contract.
If you carefully check the reasons why security deposits and key money are not charged and the terms of the contract, you will not have any regrets after signing the contract.
It may seem a bit troublesome, but be sure to check the points introduced in this article when signing the contract to ensure a comfortable new life.
