Investing in real estate

Investing in real estate can be interesting. Especially now that the savings rate is so low. After all, the right real estate investment yields a stable return and in principle house prices will always rise in the long term.

In recent years we have assisted and advised various private investors on their proposed real estate investment. And we have protected some of them from a potentially bad investment. Because not every property is a good investment!

What should you pay attention to when you buy real estate to rent out?

Location-location-location
the most famous real estate agent jargon. But certainly true. Now that the selling prices of houses are increasing ever higher, it can be tempting to buy a property in an area where prices are still relatively low. But will there be tenants for the property in that area? And will the selling prices in such areas rise in the long term? Also in a big cities there are neighbourhoods where tenants prefer not to live, while you might think it is such a nice neighbourhood. Or people want to live there, but only at a lower rent than in the neighbourhood next to it. And there are neighbourhoods where everyone wants to live. But where house prices are now so high that the rents may no longer be in proportion to your investment. Always ask a local rental agent, before you buy, which rental price you can expect. It is also possible that a zoning plan changes, as a result of which the nice little shop under your apartment suddenly turns into a noisy pub. Or the free view is suddenly hampered by the construction of a large apartment complex. So always do research.

Buy at the right price
In the current housing market, with ever-increasing purchase prices, you may feel that the prices of real estate can only increase. That will certainly be so in the long term. However, no one can predict whether a new housing bubble or a crisis will occur again. Do not let yourself be led by emotion, but pay a fair price. And only buy a good rentable home.

Know the laws and regulations
You buy a property to rent it out. But tenancy law in the Netherlands is complicated and often the tenant enjoys extensive protection. So make sure you are aware or let yourself be advised by a rental agent about the (local) laws and regulations. Let’s say you can buy a property at a nice price with a relatively bad energy label. The cadastral value (WOZ) is then probably also low. But there is a big pitfall if you already consider yourself rich! In the Netherlands, the Housing Assessment System (WWS) applies. It may just be that the law stipulates that your property belongs in the social sector (2019: max. € 720.42 basic rent) while you may have already counted on € 1400 rent per month. It does not matter whether you rent furnished or unfurnished or to an expat or a Dutch tenant. The laws and regulations apply to everyone. It also happens regularly that prospective landlords approach us while they are not aware that there are regulations in some municipalities about sharing houses. For example, they want to buy a house in Amsterdam with 4 bedrooms. Because they have heard that such a house generates a lot of money when you rent it out to 4 house sharers. But in cities like Amsterdam you can only rent out to a maximum of 2 home sharers. Which means the rental price will be considerably lower than expected. So always be informed so that you do not end up with unpleasant surprises. Or suddenly get a fine.

Be realistic about the rent and thus prevent vacancy
Media reports about absurdly high rents regularly appear, particularly about the big cities. Rents in the cities are indeed high, but not as high as often suggested. So make sure you know what a realistic rent is for your investment. On the most important website for rental properties, www.pararius.nl, you can find the asking price of comparable'competing' homes on the basis of various characteristics. You can also check how long the house has been advertised. A good rental agent will rent out a house with the right price-quality ratio within a maximum of 1 month. Has a home been available for a longer period of time? There is a big chance that the requested rent is perceived as too high by prospective tenants. Or the price-quality ratio is not correct.

When you ask for a realistic rent, you will therefore rarely have vacancies. And vacancy costs money, because you have no rental income. Some landlords want to get the bottom out of the barrel in terms of rent and are willing to risk a few months of vacancy for that. But 4 months of vacancy you cannot easily make up for, certainly not if the tenant leaves again after 1 year. So, always ask for a realistic rent. The earlier your home is rented out and the longer a tenant will stay with you.

Incidentally, rental properties in the higher segment may occur some vacancy. After all, the target group for those rental prices is much smaller.

Consider additional costs
Many prospective landlords mainly focus on the initial investment amount and then on the income from rent. But also consider extra costs. Unless otherwise agreed, a tenant is responsible for the payment of local taxes as sewerage and waste tax. But as a homeowner you pay the municipal real estate tax (OZB) annually. And your property occasionally needs major maintenance, such as a paint job, to keep your house in optimal condition. And you may have to deal with incidental costs such as a leak or a broken dishwasher. Are you renting out furnished? Then furniture can break that has to be replaced. You also pay a rental agent for his work and possibly for managing your home. So always consider additional costs.

Select the right tenant
Maybe an slam dunk, but it was ultimately the intention to get a return on investment from letting. Then it is very important that you rent out to the right tenant. A tenant who pays neatly on time and takes good care of your home. Of course you can try to arrange this yourself. But a rental agent will always be able to negotiate a higher rental price for you. And will in addition arrange everything for you, including a screening of the candidate and a legally correct rental agreement, and thereby guard you against wrong tenants or for hassle.

Would you like to know more about investing in real estate? Or do you have a property in mind that you want to purchase for letting? Or have you already purchased an investment property and do you want us to find a tenant for you?

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