With the pandemic behind us and inbound tourism to Japan on the rise, interest in vacation rentals (minpaku) continues to grow. Minpaku refers to a lodging format in which private homes or owned properties are rented out as accommodation. While the term “minpaku” once carried connotations of free lodging, rising demand has established it as a legitimate business model, with paid accommodation now the standard practice.

That said, many people aren’t sure what procedures are involved when they decide to start a vacation rental business. Since charging for accommodation requires following official procedures, it’s important to understand these requirements in advance.

In this article, we’ll explain the preparations needed to start a vacation rental business and share key points to avoid common pitfalls in operations, drawing on real-world examples as a vacation rental management company. We hope this guide helps ease any concerns you may have about getting started, so please read through to the end for a smooth launch.

3 Laws You Should Know Before Starting a Vacation Rental

There are three main operating formats for vacation rentals in Japan, each with its own characteristics and regulations. Since the requirements and operating conditions differ between them, let’s first understand the distinctions.

1. Ryokan Business Act Minpaku (Year-Round Operation)

Vacation rentals licensed under the Ryokan Business Act operate as approved simple lodging facilities, meaning there’s no limit on the number of operating days per year. While this allows for 365-day operation and maximum revenue potential, it requires municipal approval and is restricted to certain areas. Additionally, since building code requirements must also be met, the hurdles to getting started tend to be somewhat higher.

2. Special Zone Minpaku in National Strategic Special Zones

Special zone minpaku is an operating format based on the 2014 National Strategic Special Zones Act, which relaxes certain Ryokan Business Act regulations for properties licensed in designated areas. With approval from the prefectural governor, operation is possible even in residential-only zones and without limits on operating days. However, note that a minimum stay of 2 nights, 3 days is required. Special zone minpaku is available in areas including Ota Ward in Tokyo, Chiba City, Niigata City, Osaka City, and Kitakyushu City, and requires application through the relevant local government.

3. New Minpaku Law (Private Lodging Business Act) with 180-Day Annual Limit

Under the New Minpaku Law (Private Lodging Business Act), operators can start simply by filing a notification, making this a relatively accessible and easy-to-launch format. Enacted in 2018, this law only permits operation in properties used as residential dwellings and limits operating days to fewer than 180 days per year. Since maximizing revenue is more difficult under this format, it’s well-suited to side businesses or making use of vacant rooms.

Application Methods Vary by Operating Format

Starting a vacation rental requires different application procedures depending on the operating format. Neglecting to file the proper application could be considered illegal operation and result in penalties, so it’s essential to understand the correct procedures and prepare accordingly.

Ryokan Business Act Application

To start a vacation rental under the Ryokan Business Act, you’ll need to apply to the local health center. Applications require confirming the property’s designated use with the building guidance division or development review division, along with preparing the following documents:

• Certificate of registered matters
• Sketches, floor plans, and specification drawings
• Land and building registry certificates, etc.

Approval won’t be granted unless all application requirements are met, so thorough advance confirmation and document preparation are essential.

Special Zone Minpaku Application

Special zone minpaku doesn’t require health center approval; instead, you’ll file a certification application with the relevant local government. Check the Japan Tourism Agency’s portal site to find the appropriate contact for your area, and prepare the following documents:

• Individuals: copy of residence certificate; Corporations: articles of incorporation or certificate of registered matters
• Business operation plan for the rental, etc.

New Minpaku Law Notification

For rentals under the New Minpaku Law, you can file your notification either through the online portal or at the health center. The required documents include:

• Notification form
• Floor plans, sublease consent form, written pledge, etc.

Since the portal site also provides contact information for the responsible department, we recommend preparing your documents early and submitting a complete, error-free notification.

8 Steps to Launching a Vacation Rental

Here, we’ll walk through how to start a vacation rental under the Private Lodging Business Act in 9 easy-to-follow steps.

• Choosing a property
• Confirming equipment requirements
• Renovating the property
• Purchasing and installing furniture
• Complying with fire safety regulations
• Filing notification with local government
• Registering with the Minpaku Business Management System
• Explaining to neighbors and distributing materials
• Preparing amenities
• Listing on OTA platforms

Note that for rentals operating under the Ryokan Business Act, specialized knowledge and drawing preparation are required, so it’s common to hire an administrative scrivener (gyoseishoshi). The steps for preparing amenities and listing on OTAs, however, are common across the Private Lodging Business Act, the Ryokan Business Act, and special zone minpaku formats.

1. Choosing a Property and Confirming Equipment Requirements

First, you’ll need to choose a property that meets residential dwelling requirements. Specifically, confirm that it falls into one of the following categories:

• A dwelling currently used as someone’s primary residence
• A dwelling for which tenants are being recruited
• A dwelling occasionally used as a residence by the owner or lessee

It’s important that the property is in “habitable” condition and that its registered use is “dwelling.” Additionally, the following four facilities are mandatory—without them, the property won’t be recognized as a residence (a shower alone is acceptable for the bathing facility):

• Kitchen
• Bathing facility
• Toilet
• Washbasin

2. Renovating the Property

Renovate your rental property as needed. Since cleanliness in water-related areas (kitchen, bathroom, toilet) is especially important, improving these spaces is recommended to boost guest satisfaction. Consider whether to DIY the work or hire a contractor, taking safety and construction timelines into account. Subsidies may also be available. Keep in mind that renovations can sometimes increase your property tax depending on the municipality, so it’s worth confirming this during the planning stage.

3. Complying with Fire Safety Regulations

Filing your minpaku notification requires a “Fire Safety Compliance Certificate.” After equipping your property in accordance with fire safety regulations, you’ll need approval from the local fire department covering your property’s area, which will then issue the compliance certificate. The inspection typically covers fire safety equipment such as:

• Fire alarms
• Fire extinguishers
• Fire prevention equipment
• Guide lights

Since required equipment can vary depending on your operating style and property size, it’s best to confirm directly with your local fire department. Following these steps carefully is key to successfully preparing your vacation rental.

4. Filing Notification with Local Government

Submit your notification documents to the prefecture where your property is located. The responsible department varies by municipality, but it’s most often the Public Health Division or the Health and Welfare Division. Since procedures have been updated following the introduction of the New Minpaku Law, consulting directly with the department as you proceed will help things go smoothly. Details on required attachments can be found on the Ministry of Land, Infrastructure, Transport and Tourism’s Minpaku Portal Site, so even first-time applicants can prepare with confidence.

5. Explaining to Neighbors and Distributing Materials

Before starting operations, it’s important to explain your plans to neighbors and distribute materials to help gain their understanding. Clearly communicate how the lodging operation may affect the surrounding area and the rules in place, to prevent issues like noise complaints or garbage disposal problems before they arise. Holding an explanatory meeting for nearby residents or distributing informational materials in advance helps build a foundation of local understanding and cooperation.

6. Registering with the Minpaku Business Management System

Once your notification is accepted, register with the “Minpaku Business Management System” operated by the Japan Tourism Agency. Through this system, you can complete your required business reports—due every two months—entirely online. While reporting by mail is also an option, using the system makes it easier to manage reminders and track your operating days, improving overall efficiency. We recommend registering to keep your periodic reporting smooth and on schedule.

7. Listing on OTA Platforms

OTAs (Online Travel Agencies) are online platforms where travelers book accommodations. Publishing your listing allows you to manage bookings and payments, as well as handle identity verification and payment settings, giving both you and your guests peace of mind. Well-known OTAs include Airbnb and Booking.com, with Airbnb being especially popular among users. Some platforms, like Vacation STAY, can even syndicate your listing to other travel sites automatically.

Listing on multiple OTAs increases your booking opportunities, but you may need to pay an additional fee for a “channel manager” (site controller) to avoid double bookings. Regardless of which OTA you use, attractive photos have a major impact on your booking numbers. On review-driven platforms like Airbnb, where hosts and guests rate each other, guests tend to be more mindful of proper etiquette. Since you can check a guest’s past reviews before their stay, hosts also have the discretion to decline a reservation if they have concerns.

8. Preparing Amenities

While there’s no legal requirement to provide amenities, stocking towels and basic toiletries will boost guest satisfaction. Decide whether to provide hotel-style luxury amenities or keep things minimal like a guesthouse, based on your property’s concept.

Under the “Plastic Resource Circulation Promotion Act,” which took effect in 2022, reducing the following single-use amenities is recommended:

• Hairbrushes
• Combs
• Razors
• Shower caps
• Toothbrushes

If you need to change sheets and pillowcases between stays, consider using a linen supply service, which can handle both delivery and pickup for you, saving you the hassle.

Key Points for Succeeding in the Vacation Rental Business

While launching a vacation rental business already involves significant hurdles, the real challenge lies in sustaining operations and generating steady revenue over time. Receiving your operating license is just the starting line. From there, boosting profitability requires marketing efforts and preparations to ensure guests enjoy a comfortable stay. As with any business, effective risk management is essential to running things smoothly. Let’s look at common challenges in vacation rental management and key tips for success.

1. Renovate Thoughtfully for Guest Comfort

Renovating your property is essential to providing guests with a comfortable stay. Cleanliness and usability in water-related areas, in particular, have a major impact on guest satisfaction. For example, guests generally prefer Western-style toilets, and a squat-style toilet can leave a negative impression. Separating the bathtub from the toilet for added convenience, or upgrading to a Western-style toilet for comfort, can increase the likelihood of repeat bookings. Rather than a simple place to sleep, aim to create a space guests will genuinely enjoy staying in.

2. Prevent Trouble with a House Manual

A “house manual” that guides guests through using your rental is a valuable tool for preventing issues. It’s especially helpful for international guests unfamiliar with staying in Japan, helping avoid misunderstandings or problems that can arise from cultural differences. Include clear, detailed instructions on how to use the facility, house rules during the stay, and guidance on the surrounding area. Adding a welcome guide with details on nearby attractions and transportation access can also help ensure guests have a more comfortable and enjoyable stay.

3. Invest in Quality Interior and Amenities

The quality of your interior and amenities also plays a major role in guest satisfaction. Since interior design directly affects the photos that showcase your property’s appeal, creating a memorable design with a clear concept can be highly effective. When it comes to amenities, provide the essentials guests need, along with a few thoughtful extras—this can boost repeat bookings and improve reviews. That said, be mindful of costs when adding luxury touches, and aim for a balance that delivers good value for the investment.

4. Promote Effectively on OTA Sites

Effective promotion on OTAs (Online Travel Agencies) is essential for boosting your occupancy rate. On vacation rental listing sites, your title and photos matter most. Summarize your property’s key features and nearby attractions concisely, and craft an eye-catching title. Something like “5-Minute Walk from ○○ Station! Cozy Stay with a ○○” is ideal, as it immediately communicates an appealing benefit to prospective guests. For photos, choose images that highlight the quality of your interior and a sense of cleanliness, showcasing your property’s appeal to its fullest.

Things to Keep in Mind When Starting a Vacation Rental

Before starting your vacation rental, let’s go over six important points to check in advance. Understanding these will help you run your operation smoothly.

• Handling complaints
• Accommodating international guests
• Guest registry and periodic reporting
• The 180-day rule
• Checking management regulations for condominiums
• Restrictions on income-generating activities beyond lodging

1. The Need for Complaint Handling

If you’re operating a home-share type rental without using a licensed housing accommodation management business, you’re responsible for handling any complaints from neighbors regarding noise, garbage, or similar issues yourself. Maintaining good day-to-day communication with the local community goes a long way toward preventing problems. Even for host-absent rentals, reaching out to neighbors and observing proper etiquette remains important. Given the past controversy surrounding illegal minpaku operations, building positive relationships with your neighbors is especially crucial.

2. Accommodating International Guests

Vacation rentals attract not just domestic guests but also many international travelers. To help guests feel at ease, provide instructions in foreign languages covering how to use facilities, emergency contact procedures, fire prevention tips, and transportation options. Listing your property information in foreign languages on OTA sites also makes it more visible to international travelers. Giving your property a foreign-language name is another way to catch the attention of international guests.

3. Guest Registry and Periodic Reporting

Your guest registry must record each guest’s name, address, occupation, dates of stay, and nationality. For international guests without a Japanese address, you’ll also need to record their passport number. This registry must be kept on file for three years. In addition, minpaku operators are required to submit periodic usage reports to the prefecture every two months, so it’s worth understanding upfront that this administrative task will be part of your operations.

4. The 180-Day Rule

Under the Private Lodging Business Act, annual operating days are capped at 180. You have flexibility in managing your operating days and can set your open dates as needed. To make the most of this 180-day limit, it’s important to plan your business scale carefully, factoring in the number of properties, rooms, maximum occupancy, and pricing. Using the Minpaku Business Management System makes tracking your operating days much easier.

5. Check Management Regulations for Condominiums

If you’re operating a vacation rental in a condominium unit, the building’s management regulations may not permit this type of business. Your notification will require a “copy of the regulations,” and in some cases you’ll also need to attach meeting minutes dated after the New Minpaku Law took effect (2017 or later). Be sure to check the regulations and the management association’s policy in advance, and prepare the necessary documentation accordingly.

6. Restrictions on Income-Generating Activities Beyond Lodging

Generally, using a minpaku property for income-generating activities other than lodging is prohibited. For example, at an old traditional-house minpaku the author previously operated, we considered offering the property as a filming location for movies or dramas, but paid usage of this kind isn’t permitted. That said, renting the property out for a month or longer as a monthly rental for corporate business travelers is recognized as acceptable by the Ministry of Land, Infrastructure, Transport and Tourism.

Thinking of Starting a Vacation Rental? Talk to Stay Buddy

At Stay Buddy, we offer complete, end-to-end support—from launching your vacation rental to full operational management—for anyone looking to get started. If you’re interested, feel free to reach out for a consultation!