Foreword
Hey there, Matt here. We are about a year into business, and it’s going pretty well. We’ve onboarded 17 clients, worked with properties across Chiba, Ehime, Gunma, Kanagawa, Kochi, Nagano, Shizuoka, and Tochigi prefectures, and have explored hundreds of akiya and their surrounding communities.
But its easy to get distracted by numbers, and success stories. So we thought we’d reel it in for a moment and reflect on where we’ve come from, and why we’re doing what we’re doing. Take a gander below at some of our history. This isn’t the whole story, but its definitely what got us started.
The Business of Spectacle
On June 26th, 2021, Insider Magazine released Japan is trying to lure people into rural areas by selling $500 homes, but it’s not enough to fix the country’s ‘ghost town’ problem to wide fanfare. The positive reception is hardly surprising. The article, and the many that have preceded it, tells a story conspicuously similar to Robinson Crusoe, albeit in a modern, Japanese setting.
That story goes something like this: A world-weary individual or family has had enough of Metro Life, throws it all away, moves to a cheap, dilapidated abandoned house in rural Japan, and fixes it up. There, they start a local business while simultaneously finding their purpose in life.
Now, this a great story that’s been told many times over the centuries and through many cultural lenses. But let’s move past the spectacle of fantasy, and consider the pragmatic issues of this ongoing and popular Akiya Saga.
The New Normal?
The Insider’s iteration features the Tokai Family, a Japanese Swiss Family Robinson of sorts. They grew tired of Osaka life, bought an akiya in Irokawa village, Wakayama prefecture, moved in, and renovated it. Now, they are happily living their best rural life. Sound familiar?
The article only implies that the property itself cost $500. It goes on to outright state that renovations added $12,500, which took about 8 months to finish, post-purchase. The article does not supply any documentation for Irokawa. However, a quick search shows that it is in the mountains just North-West of Nachi-Katsuura municipality of the Kumano region on the Kii Peninsula of Wakayama Prefecture.
The closest train station to Irokawa is Nachi Station, 30 minutes away by car. From there, it is approximately 3.5 hours by train or car to Wakayama Station, the prefectural capital and largest city. Go north along the coast for another hour, and you’ll arrive at Osaka.
In addition to its natural beauty, Nachi-Katsuura is known for it’s hot springs and tuna. It is also a 30 minute drive to the infamous Taiji Harbor.
There is much more to the Tokai’s unique circumstances, but that suffices for now. The point I’m trying to make here is simple: this works for the Tokai’s. They spent a pretty small sum of money on a house they presumably agreed was worth fixing up prior to making an offer, managed to buy it, committed to the renovation, succeeded, and are now reaping the rewards that they sought. This is a positive story, full of self-actualization and agency.
Different Strokes
However, there is something suspicious about the Akiya Saga which is predictably repeated in this most recent entry. This isn’t realistic for a large but indeterminate portion of the metro population, in Osaka or otherwise. Most people won’t or can’t remove themselves even half as extremely from the metro area as the Tokai’s did. Yet since its inception, this Akiya Saga singularly adheres to this script, leaving readers with a severely skewed perception of akiya opportunities.
To whit: the ubiquitously extreme tales of the Akiya Saga obfuscate the full breadth of real akiya market potential.
Putting the Pieces of a Business Together
I mentioned that I have a background in Japan’s independent music scene. There, I’ve set up international record labels, curated at least 60 concerts, 3 festivals, and 7 heavy metal honeymoons. Underlying all of that activity is a focus on analytical methodologies. Through trial and error, I have trained myself over the years to wrangle the many disparate, often invisible pieces of the ecosystems I work in. By pulling the pieces into a comprehensible whole, I am able to combat outdated practices that dictate less-than-optimal operations.
Just as business practice in underground music had, these akiya articles rubbed me the wrong way, too. There was a conspicuous lack of citations, lots of regurgitated numbers, and nebulous anecdotes. There was nothing in the way of actionable learnings to help readers on the path to akiya ownership. It was a hollow spectacle that you could observe and enjoy from a distance, but which wouldn’t or couldn’t empower anyone to action.
Cracks in the Business Model
So I started digging, using the aforementioned methodology to untangle the akiya ecosystem. After about 3 years of searching through the digital entrails of Japan’s akiya banks, I had developed a good understanding of the market and its accompanying fail points. Honestly, I had amassed an impressive arsenal of extremely niche knowledge, but had only tangentially thought of monetization. It was just a weekend hobby I was enjoying for the sake of it.
But then Corona hit. About a month in, I noticed a distinct change in the conversations I was having, professionally and personally, that gave me pause. People in Tokyo at all levels of all industries were cautiously admitting to being tired, scared, and angry with the situation they found themselves in. Most also added that they hated their job and thought leadership was incapable of correcting course. In either case, though, they didn’t know what to do.
Corona started sounding like it could be the straw that broke the camel’s back, and was revealing some of the true colors of modern business. My armchair psychological analysis was that Corona was eliciting a flight response, but no one had resources to facilitate it. In a nutshell, they felt cornered and desperate.
Lightbulb Moment
It then occurred to me that what I had learned about akiya and inaka through my research activities might provide a solution. Not to Living in Tokyo in and of itself, as if the city itself were some sort of monster. Rather, to the severely limited resources and lack of options being alluded to in addressing this so-called “new normal” that the people nevertheless felt threatened by.
So, without wasting much time, I went to my good friend and frequent collaborator, Parker Allen, to explain my findings and suggest we dust off our business boxing gloves and get back in the ring for another tantalizing match up: Tokyo vs. Not-Tokyo Real Estate.
Thus, we began our business with Japan’s akiya and fabled inaka. And here we are now, almost exactly one year later. We are experiencing success greater than initially estimated, are contacted almost weekly by domestic and international publications interested in the business, and are invited to speak at events and organizations of all types… Which begs the question, what the hell are we doing?
The Problem
Our main beef with the accepted real estate business model is the industry standard 3% commission upon sale. We don’t think it’s intrinsically bad, just that it doesn’t work for the type of assets we attend to: cheap, rural real estate.
Think about it. If you’re working with multimillion dollar properties, in 4 respected development regions, and with a reliable project management team, 3% upon sale ain’t bad because it’s commensurate with the amount of time, effort, and resources that went into the project execution and completion.
But a $50,000 mystery house somewhere completely off the radar with missing documents and local representatives unfamiliar with international clients? Come on, any agent in their right mind doesn’t want to work on that. But not necessarily because the property is no good (though that can easily be the case); it is because standard business practice guarantees that they won’t see commensurate returns on their effort.
With this in mind, it becomes a bit easier to see that akiya quality might not be the problem, but rather akiya management. Which isn’t to lay blame on those managers – they’re doing the best with what they’ve been given. Just as using a hand axe on a clogged toilet won’t yield optimal results, so, too, the 3% commission model doesn’t help akiya move.
The Problem, Cont.
But that’s not all. The Akiya Saga does some very specific damage. By rigidly defining akiya as dilapidated, abandoned houses in the middle of nowhere for $500, no one thinks of anything but that.
This is demonstrably not the entire story. Are there abandoned, dilapidated forest shacks for $500? Yes, but I recommend that you avoid making eye contact with them. There are also vacant palatial estates with award winning gardens; charming countryside getaways with owners too advanced in age to use; and ex-residences of head priests that are mid-level fixer-uppers. But guess what? They’re all more than $500. They’re still cheap, but if $500 is your threshold for purchasing a house, maybe you should consider shelving that impulse.
And that’s just domiciles. There are bars, hotels, pensions, offices, and more on the market as well. Hell, you want a bowling alley? There’s one up in Tochigi I’ve had my eye on for a while.
Point being, akiya are many things, not just death traps. The price can literally range from $0 to just shy of $1,000,000, but generally speaking you should probably start around $50,000. Square footage of structure and land is equally variable. As is quality and use case. The entire market is outstandingly dynamic, you just need to know how to parse the information. Currently, there is no way to do that, and so akiya far and wide languish.
Thus, the crux of Akiya & Inaka is two-fold: on one hand, our business activities recognize and rectify this dearth of diversity in property management and deliver our clients actionable intel. On the other, we must work to wrangle the akiya narrative away from the clutches of the magical Akiya Saga which suggests that you must become a hermit upon purchasing an akiya. We steer the narrative towards the multifaceted reality of these multitudinous properties that is hidden in plain sight.
Our Business Approach
Coming back to my previous statement, the multimillion dollar metro or resort property business model works for precisely those properties. That model does not necessarily work for properties that lie outside of its purview. With akiya, at least, we can see that this is the case through the simple fact that historically they do not move.
If it were the case that akiya were universally garbage, then we’d have no reason to question the popular narrative. But there is documentation that proves at least some of these properties are worth pursuing for the right buyer.
So we flipped the standard business model. Our fees are front ended for related services to provide our clients with actionable intel and vetted resources. To that end, we also formed a strategic partnership with a respected Tokyo real estate agency, STK Properties, subsidiary of legal services firm, STK Group.
What does all of this look like? Truthfully, it is relatively simple, and breaks down to three core phases.
Phase 1
We begin with research. With the Japanese government reporting 8.46 million akiya in 2018, it is no understatement that there is a lot to work with. So much so that just saying, get me an akiya, doesn’t really cut it. The problem at this initial phase is, above all, documentation. The nature of akiya banks and other databases is perfectly isolated, idiosyncratic, and analogue such that it is often exceedingly difficult to locate candidate properties. This is due to unworkable datasets, and deluges of conflicting information. Even if you are able to vet a property to your satisfaction, you’ll then need to integrate with managing parties. As stated previously, they aren’t exactly incentivized to care.
We help clients develop property profiles that suit their unique needs. Once we have that in hand, we then scour a number of resources available to us – some public, some private, some invisible to all but locals – to determine feasibility and scope. Finally, we boil it all down into a curated candidate property portfolio.
From there, we conduct top-level due diligence, speak with representatives or agents to gather any additional information, gauge the sales environment, and generally put to rest any initial concerns we may have about a given property.
Phase 2
Once a client has reviewed reports and determined which properties to pursue, we move onto Phase 2, buyer representation.
With candidate properties in hand, the first thing to do is to coordinate viewings. There’s the client’s schedule to consider, as well as the representative’s, but there’s a wild card in there, too: owners. To reiterate, it isn’t always the case that an akiya has no owner. If there is an owner, often enough, they don’t live nearby, but may want to attend the viewing as well. There are a lot of moving parts.
In Phase 1, we also work with our clients to pinpoint specific areas of interest, in part to maximize viewing potential in Phase 2. If we were scattered across multiple prefectures, we couldn’t do much in one day, and associated costs would rise. But if, for example, they like Hakuba and nearby locales, we can really cram it in. 6 in a day is our current max.
We also provide extensive visual documentation of each property. If you’ve ever explored the market, you’ll be well aware of how miraculously poor akiya photography can be. We’re no pros, but have a decent eye and high end equipment to capture troves of on-the-ground and aerial photography and video for reference in the post-viewing consideration process.
This is also the point at which we establish an official relationship with the property representative. Having an official business entity mediating negotiations is the best way to keep the high ground.
Speaking of ground, Phase 2 is where we also recommend conducting land and building inspections. The one-two punch of hazard maps and in-person viewings is pretty good, but nothing provides peace of mind more than having a licensed architect or surveyor give their stamp of approval. We have resources for this, but require a client make their own decision and engage whichever service they please for liability purposes.
Phase 3
If we do our job well, we soon introduce our partner, STK Properties. Once a client determines a property they would like to seriously pursue, we do three things simultaneously:
- Deploy STK to the municipal offices to run deep investigations, verify records, compile all available official documents, and confirm missing information
- Get a soft number from the client and put in an offer to secure the listing in the short term
- Review information gathered in phases 1 and 2 to formulate the best plan of attack that ensures optimal results for the client.
Once these 3 pieces are in place and provided everything still looks good, we move to official closing proceedings. These are exceedingly analogue across the board. For example, there are mounds of paper to sign, address, and stamp – to that end, we actually recommend our clients fork out an additional ¥1,000 to get an address stamp so they don’t have to write it by hand over and over again.
Unsurprisingly, these are incredibly dense and long documents written in very formal Japanese which anyone, regardless of nationality, mother language, or reading level, will have a hard time navigating. We make sure our clients understand the implications of these documents before signing or even agreeing to anything. If there are points of contention also act to correct them in the client’s favor. You’d be surprised at how many people buy without a decent grasp of the property.
Perhaps most surprisingly, there is no escrow, only bank transfers and confirmation phone calls. To the extent we are able to, we put measures into place to ensure no funny business, but the fact is that this is an imperfect process highly reliant on trust. This is something we aim to address in the future and are actively exploring smart contracts ala US blockchain implementations.
A Business of Value
We openly say that working with us will cost you more than it would otherwise. But if you’re so interested in akiya, why haven’t you already purchased one?
Let me answer that question for you: it’s a massive pain in the ass fraught with risk. Akiya & Inaka mitigates that risk to all but assure our clients make it through the purchase process successfully and with confidence. Is it worth the money? Current and previous clients think so.
For a DIY hobbyist with considerable experience in Japanese real estate, our services may be unnecessary. But if you’re a busy professional, an inexperienced craftsperson, or someone who just wants the job done right, you literally can’t find anyone better than us. I dare you to prove me wrong.
Akiya & Inaka
Akiya & Inaka