1. what is the advertising fee (AD) you hear about in rental agency?

If you own a rental propertyin Japan, you have probably heard of advertising fees (AD).

So what is an advertising fee (AD) and when is it paid?

(1) Difference between advertising fees (AD) and agency fees

An advertising fee (AD) is positioned as a cost for more prominent or special advertising.

In practice, it is meant as an incentive paid by the owner to the agency in order to give priority to prospective tenants.

A brokerage fee, on the other hand, is a commission received from owners and tenants as a result of the agency work carried out by the real estate company.

The maximum amount of agency commission for rental is set at one month's rent under the Building Lots and Buildings Transaction Business Law, but there is no maximum amount set for advertising fees (AD).

2.What are the advantages and disadvantages of an advertising fee (AD)?

(1) Advantages of advertising fees (AD)

If the property to which an advertising fee (AD) is attached is introduced and a contract is concluded, the profit of a real estate company will be larger than if the property to which no advertising fee (AD) is attached is introduced.

Therefore, the property with an advertising fee (AD) that can increase its own profit will be actively introduced to the customers who visit the real estate company.

If the frequency of referrals increases, the closing rate of properties will increase.

The advantage of an advertising fee (AD) is that it makes it easier to attract tenants.

(2) Disadvantages of advertising fees (AD)

Although there was an advantage in that the possibility of acquiring tenants increases when an advertising fee (AD) is attached, there is also a disadvantage.

That is, the more you pay for advertising fees (AD), the more you have to spend.

The cash flow will deteriorate as a result of the expenditure on advertising fees (AD), so if a property is easy to find tenants without paying advertising fees (AD), there is no need to add advertising fees (AD).

3. Cases to consider advertising fee (AD)

Although an advertising fee (AD) increases the owner's expenditure, the cases in which it is considered better to pay an advertising fee (AD) even if the expenditure increases are as follows.

(1) When the property has been vacant for a long period of time.

If a property has been vacant for a long period of time and there have been few viewings, even though the rent is set close to the market rate, it may be advisable to consider an advertising fee (AD).

By adding an advertising fee (AD), the property is more likely to be actively presented by the real estate agency, leading to more viewings and a higher likelihood of a contract being signed.

(2) When vacancies occur after the moving season

After the moving season, when there is a large influx of people moving in and out of rental accommodation, the movement of people slows down.

Therefore, if a vacancy occurs immediately after the moving season, there is a risk that the vacancy period may be prolonged.

With the absolute number of people looking for housing decreasing, it is necessary to give priority to the introduction of properties in order to attract prospective tenants.

You may also want to consider advertising fees (AD) if a vacancy occurs after the moving season.

(3) If the property is in a competitive area

If a property is located in an area where many rival properties are being built, it is possible that many properties with similar conditions are looking for tenants.

In such cases, property agencies will eagerly introduce properties with an advertising fee (AD) and try to close the deal.

In particular, as there is a move to actively attach an advertising fee (AD) to rental properties managed by large real estate companies, properties without an advertising fee (AD) may lose out in the competition.

It may also be better to add an advertising fee (AD) in areas with many rival properties.

4. Market rates for advertising fees (AD) and points to note when paying advertising fees (AD)

Advertising fees (AD) are an effective means of getting property actively introduced to real estate agencies in order to fill vacancies.

So, how much is the market price of advertising fees (AD)?

(1) Advertising fee (AD) rates

The market rate for an advertising fee (AD) is approximately one to two months of the rent.

If the advertising fee (AD) is too low, you may lose out to rival properties with higher advertising fees (AD); conversely, if the advertising fee (AD) is too high, your cash flow may deteriorate.

In order to achieve stable rental management, it is important to understand the market rate of advertising fees (AD).

(2) Points to note when paying advertising fees (AD)

As the maximum amount of advertising fees (AD) is not set by law, some real estate companies demand high fees.

You need to be careful of companies that ask for advertising fees (AD) above the market price.

An advertising fee (AD) is a fee paid for special advertising and consulting services beyond the scope of normal agency work.