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Buying a house to rent out

Inflation is sky-high, while interest rates are lower. Personal assets are worth less and less, so people are looking for alternatives. That’s why buying a house to rent out has been a trend for years. It’s a smart move, as the rent you receive is not taxed, and you profit from the increasing value of the house.

Is owning rental houses to rent out always a smart investment? It is not that simple, as there is a lot to it. This is what you need to know.

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Are you allowed to rent out your house?

You might be wondering: can I rent out my house in the Netherlands? Yes, you can. Buying and renting out a house is no problem if you comply with specific terms and conditions. If you already own a home and are looking for a profitable investment, you will come across specific rules. The terms and conditions for buying a second house differ from buying your first. If you buy a house to rent out, you are not allowed the same type of mortgage: in that case, you need a rental property mortgage.

Rental property mortgage

The rental property mortgage is intended for people who want to buy property to rent out. You can’t permanently rent out your own house, but in the case of a rental property mortgage, you can. The rental property mortgage makes it possible to buy a second house as an investment, but it does come with a price tag. Mortgage providers run more risk in the case of a rental property mortgage. That is why most providers charge you an interest rate surcharge.

What is the maximum amount banks will lend?

You will need a second mortgage if for buying rental property. It is wise to learn more about the financial terms and conditions if you want to do so. With a rental property mortgage, you can typically finance 70 to 90% of your rental property purchase. In comparison, a ‘regular’ mortgage would account for 100% of the costs. This has one advantage: the percentage is calculated based on the market value when renting the house out. This value is lower than when you inhabit the house yourself. Calculating this value happens through a valuation of the property.

If you buy a house, can you rent it out?

Besides financial, there are also construction and judicial terms and conditions. A rental property mortgage is typically only approved once you comply with certain construction conditions. Additionally, the property usually has to be located in the Netherlands. There are rules for use as well. Short stay is ruled out in every case, and renting out as student housing or holiday home is rarely allowed. Local government adds rules as well. To make sure there is enough affordable housing, an increasing number of municipalities impose a self-housing obligation. In that case, owning rental houses to rent out is not an option.

Buying rental property: taxation

The tax authorities see buying your first house as a box 1 property, which means you are entitled to a mortgage interest deduction. A rental property purchase is seen as a box 3 asset. This means you can’t make use of mortgage interest deductions.

The homeownership benefit does not apply either. Interestingly, you don’t pay any taxes for your profits out of rent. If you buy a house to rent out, you pay a transfer tax once.

Lastly, you will receive yearly billing like the property tax (OZB) and municipal taxes. You obviously need to consider all financial consequences when making a return calculation, to conclude whether a rental property investment is a good idea.

Buying a house to rent out: maintenance

Buying a house to rent out is not a passive investment. As the owner, you are responsible for the house’s condition by conducting small and extensive maintenance. We advise you to act immediately when problems arise, which helps prevent high costs in the future. You are also the person for tenants to contact, which requires attention. Be aware of your role and invest in the relationship with your tenants. This is a solid basis for a rental property investment in a second house.

Buying rental property: is it profitable?

Many people have been searching for ‘Buying a house to sell 2022’. But is a second house actually a smart move? Unfortunately, there is no straightforward answer. The housing market faces a shortage, which will not be resolved quickly. A rental property investment can be profitable, but all the numbers need to add up. In other words: the right house in the right place, with a fitting renting property mortgage. It is also important to be aware of fiscal and local rules and your responsibilities as a landlord. Do you tick all those boxes? Then a rental property purchase is definitely a good idea!

Buying a house to rent out: what’s next?

Did you decide to buy a second house? Do you want to know more about the rental property mortgage and other factors that weigh in? Buying a house to rent out is complex, so make sure you reach out to a specialist to give you advice. At Stoit Group we are happy to help. Please contact us for an introductory meeting.

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