Vacation rentals are growing in popularity not only in tourist destinations but also in urban and suburban areas, drawing increasing attention as a means of earning supplementary income. However, many people considering starting a vacation rental business often have questions like “What kind of property is suitable for vacation rental?” or “How do I find properties that allow vacation rental use?”

In this article, we’ll cover the basics of starting a vacation rental business by explaining what “vacation-rental-eligible properties” actually are. We’ll also introduce the characteristics of high-earning properties and share efficient strategies for finding the right property. This content will be valuable for anyone looking to start a vacation rental business or make use of a vacant property they own.

What Is a “Vacation-Rental-Eligible” Property?

A vacation-rental-eligible property is a residence that meets specific legal requirements and has been approved for vacation rental operation. There are three main laws related to vacation rentals in Japan: the Private Lodging Business Act, the Hotel Business Act, and the National Strategic Special Zones Act (Special Zone Vacation Rentals), each with its own distinct requirements.

For example, under the Private Lodging Business Act (commonly known as the “Minpaku Law”), operation is limited to a maximum of 180 days per year. Special Zone Vacation Rentals, on the other hand, allow for more flexible operations by taking advantage of regional exceptions established by local authorities. Under the Hotel Business Act, operators are generally allowed to run their business without any day-count restrictions. Ensuring a property complies with one of these laws is the fundamental requirement for legally operating a vacation rental.

If you’re using a rental property, it’s essential to check whether the lease agreement includes a “no subletting” clause. Since many rental contracts prohibit subletting, this restriction must be cleared before legal vacation rental operation is possible. When selecting a vacation-rental-eligible property, be sure to confirm not only that it meets legal requirements, but also that subletting is permitted.

What Makes a Vacation Rental Property Profitable?

Vacation rental properties that generate high returns tend to share certain common traits—and location is one of the most critical factors. Below, we’ll break down the key characteristics of a profitable vacation rental property.

1. Great Location

Properties near tourist attractions or business districts, or those with easy access to major public transportation, are highly appealing to travelers. Properties just a few minutes’ walk from a train station, or in areas with direct transit access to the airport, tend to rank higher on travelers’ lists of preferred accommodations.

2. Well-Equipped Facilities

Properties equipped with amenities that ensure a comfortable stay tend to receive higher ratings and enjoy stronger occupancy rates. For instance, features like reliable Wi-Fi, a clean bathroom, and a high-quality kitchen can meet a wide range of guest needs. You can also set your property apart from competitors by incorporating local specialties or cultural elements into the interior design and amenities. By enhancing your facilities and boosting your competitive edge, you’ll be well positioned to secure stable, ongoing revenue.

3. Attractive Scenery and Surroundings

Properties with beautiful views from windows or balconies, or those within walking distance of famous tourist spots, offer a significant advantage. In particular, properties that let guests enjoy local character and natural beauty can provide a truly special experience—making it easier to build a base of repeat guests. This kind of property also allows you to charge higher nightly rates.

Rent or Own? Choice #1 in Selecting a Vacation Rental Property

When starting a vacation rental business, one of the biggest decisions is whether to operate out of a “rented” property or one you “own outright.” Each option comes with its own set of pros and cons, so it’s important to choose based on your business goals and budget.

Operating a Vacation Rental in a Leased Property

Advantages

The biggest advantage of starting a vacation rental with a leased property is the relatively low initial cost. Generally, including the security deposit, key money, and the cost of furniture and equipment, you can often get started for around ¥1-2 million. This makes it a more accessible option for those without a large amount of capital to start a vacation rental business.

What’s more, if the business doesn’t go as planned or you need to change direction, exiting is as simple as ending the lease. Since there’s no burden of selling property or managing an asset, this offers a highly flexible option.

Additionally, since you’re not responsible for paying property tax or city planning tax, ongoing running costs tend to be relatively low as well.

Disadvantages

On the other hand, operating a vacation rental out of a leased property requires obtaining permission from the landlord or management company to use it for that purpose. Since standard rental contracts commonly prohibit subletting, it can take considerable time and effort to secure this approval.

Furthermore, the supply of properties available for vacation rental use is limited, and rent for such properties is often set higher than for standard rentals—reflecting the risks owners factor in when allowing this kind of use. Lease agreements also frequently place restrictions on renovation and customization, making it harder to differentiate your property through unique interior design.

Operating a Vacation Rental in a Property You Own

Advantages

The biggest advantage of owning your property is the tremendous freedom it gives you in terms of how you use and renovate the space. You can carry out renovations and interior design based entirely on your own vision, making it easier to stand out from other vacation rentals. In particular, offering a concept-driven room design or a unique guest experience can help you build strong support and loyalty among users.

Owning a property also has the potential to become more profitable over the long term. If your vacation rental operation increases the property’s value, you may even be able to sell it at a premium down the road. Additionally, since you have full decision-making authority over management as the owner, you enjoy far greater operational flexibility.

Disadvantages

That said, owning a property requires a substantial initial investment. Beyond the purchase price and renovation costs, you’ll also need to budget for furniture and equipment needed for operation. Once purchased, a property isn’t easy to sell off quickly, and depending on market conditions, there’s also a risk that its asset value could decline.

Property owners are also responsible for paying property tax and city planning tax, which tends to push up running costs. On top of that, business-use fire and liability insurance is often required, adding yet another expense to factor in. These additional costs can put a strain on cash flow for operators without sufficient working capital.

Which Should You Choose: Renting or Owning?

Both leased and owned properties come with their own advantages and disadvantages, and the right choice ultimately depends on your circumstances and the business model you’re aiming for. By thoroughly understanding the characteristics of each option and choosing the one that aligns with your goals, you’ll be well on your way to building a successful vacation rental business.

Detached House or Apartment? Choice #2 in Selecting a Vacation Rental Property

Detached house or apartment building? This is another important decision you’ll need to make. Each type comes with its own advantages and disadvantages, so it’s important to choose based on the operating style, budget, and target guests you have in mind.

Detached Houses

Advantages

Since detached houses offer spacious accommodations, they’re popular with families and groups of friends traveling together. They’re especially appealing to guests seeking a private space where a large group can stay together. With a higher guest capacity, you can keep the per-person rate low while still maximizing overall revenue.

Detached houses are also standalone buildings, which often means less need to worry about neighboring residents compared to apartment buildings. This makes it easier to avoid issues like noise complaints and privacy concerns. Additionally, if the property includes extras like a garden or parking space, you can highlight these as selling points to differentiate your listing.

Disadvantages

On the other hand, detached houses tend to come with a higher purchase price and initial investment. Beyond the purchase and renovation costs, there are also ongoing expenses for maintaining a larger property. Larger properties also require more time, effort, and money for cleaning and maintenance, adding to the overall operational burden.

Additionally, detached houses often carry higher property taxes on both the land and building, which tends to push rental rates upward as well. To ensure stable revenue, it’s essential to carefully plan your pricing strategy and thoroughly analyze your target guest demographic.

Apartment Buildings

Advantages

Apartments and condominiums typically come with relatively lower initial costs, making them an accessible entry point into the vacation rental business. In particular, units designed for solo travelers or couples require simpler furnishing and setup, helping keep initial investment costs down.

Apartment units are also generally easier to manage, and since they’re typically smaller in scale, cleaning and maintenance costs tend to be lower as well. Many are also situated in prime locations, and those near urban centers or tourist areas can expect strong demand.

For business travelers or those on short trips in particular, an affordable apartment can be a very appealing option.

Disadvantages

On the other hand, apartment-style properties face stiff competition from business hotels and other vacation rentals in the market. To attract guests, you’ll need to bring something unique to your interior, amenities, and services—for example, incorporating stylish design elements or décor that reflects local culture.

Additionally, in an apartment setting, it’s essential to take steps to avoid friction with other residents. In particular, you’ll need to establish clear rules around noise levels and garbage disposal and make sure guests are informed of them in advance. Some properties also have building bylaws that prohibit vacation rental use entirely, so be sure to verify this before signing any contract.

How to Find a Vacation-Rental-Eligible Property

Here are several effective ways to find a suitable vacation-rental-eligible property. Try using these different approaches to find the property that’s right for you.

Using General Real Estate Portal Sites

You can also search for vacation-rental-eligible properties on general real estate portal sites (such as SUUMO or LIFULL HOME’S). These platforms let you set detailed search criteria, making it easy to narrow results down by area and price range.

[External Link] SUUMO
[External Link] LIFULL HOME’S

Using Vacation Rental-Specific Portal Sites

Using portal sites specialized in vacation rentals (such as Minpaku Bukken.com or MINCOLLE) allows you to search for properties more efficiently. These sites feature a large number of listings for properties that already hold the required vacation rental permits.

[External Link] Minpaku Bukken.com
[External Link] MINCOLLE

Contacting Real Estate Agencies Directly

Another option is to reach out to local real estate agencies and ask them to introduce properties suitable for vacation rental use. By tapping into the local knowledge and networks of an area-focused agency, you may have a better chance of discovering a high-quality property.

Checking the “List of Registered Private Lodging Business Properties”

It’s also worthwhile to check the “List of Registered Private Lodging Business Properties” published by local municipalities. Reviewing already-registered properties can help you get a clearer sense of the conditions and characteristics that make a property well-suited for vacation rental use.

Consulting a Vacation Rental Operator or Management Company

Consulting with a company that specializes in vacation rental management can give you access to property recommendations and operational know-how based on their real-world experience. This is a reassuring option for anyone starting out, allowing you to begin your operation with confidence.

Leave Your Vacation Rental Management to “Stay Buddy”!

Once you’ve found the right property, entrusting the ongoing management to professionals allows for smooth, efficient operation. At Stay Buddy, we offer a wide range of services covering everything needed to run a successful vacation rental.

Full-Service Management

From renovations to negotiations with local authorities, we handle everything needed for vacation rental operation as a true one-stop solution. Since we take care of all the time-consuming paperwork and procedures, even first-timers can feel completely at ease.

Revenue Optimization Support

At Stay Buddy, we implement dynamic pricing, automatically adjusting rates based on seasonality and demand. We also maintain an in-house cleaning staff, helping keep operating costs down while boosting overall profitability.

Multilingual Support

We provide 24/7, 365-day support in multiple languages, including English, Chinese, and Korean, ensuring international guests can stay with complete peace of mind.

We also offer a wide range of other comprehensive support services related to vacation rentals. If you’re interested, please feel free to reach out to us for a consultation!