Renting out the house is in the current market something that can be appealing. Is it appealing or appalling?
Renting out the house
The moment you have the luxury to either invest in another property. Or you move houses and you can keep on the ‘old’ house. You inherit a Dutch house. Renting it out can be appealing, or is it appalling?
Certain actions you need to take before you start.
UK TV serious about nightmare or horror tenants
We recommend you to find the UK TV series that is also broadcasted in the Netherlands about horror tenants. Tenants that no longer are able to pay the rent, but they are able to maintain 17 cats in your property. Or sublet your property and not pay the rent to you.
My clients will know I love cars. My own car I will not park under a tree full with bird. Birds tend to shit while sitting in a tree. If it is a rental vehicle I drive, I might care less about where I park the car. That is how tenants see your property.
This is to bring perspective to the story.
Do you still have a mortgage on the property you would like to rent out?
The moment the property you would like to rent out still has a mortgage on it, you need to contact the mortgage bank if you can rent out the property. We can already inform you that nearly all regular mortgage agreements explicitly state you cannot.
The moment you want to pursue your activities you need to ask the mortgage bank to change the contract. The mortgage bank can cooperate, but at a higher interest rate. Most mortgage banks do not cooperate as ‘to let’ products is not among their services. You need to find another bank.
Not asking permission to the bank, as you already know the answer is a problem beyond your control. The moment the bank finds out, and we learned they are good at finding out, you have a problem. The problem is that you breached the conditions of the contract, and the mortgage is terminated instantly. You will be asked to pay back the loan in a very short period of time. If you cannot, the bank is forced to sell the house.
In this housing market you might care less. However, the mortgage bank sells the house at an auction. The auction prices are very much different from the Funda prices.
Contact the city if you can rent out the property
Before you start doing anything, ask the city if you can rent out the property. Right now there are rules in place that forbid investors (which you are) to purchase certain properties for renting out.
Then check with the city, if you are able to purchase the property, what are the renting conditions in that city. For instance, renting out less than six months is short stay. Short stay is in the same category as AirBnB. Cities might have rules against that. Or the apartment building in which you purchased an apartment might have rules against short stay.
The moment you set no maximum period in the rental agreement or the period exceeds 24 months, the tenant has the right to stay in the house. That implies, you cannot easily or not at all terminate the rental agreement. Please check with a lawyer specialist in rental agreements to assist you.
Renting and taxation
The rental income we do not tax. The costs you have are not deductible. Taxed is the so called WOZ value. The WOZ value is a value set by the city. This WOZ value you can reduce with the debt value of the debt you took out to purchase the property.
The property is in Box 3 of your income tax return. The taxation is roughly (2022) 1,7%. Depends on the WOZ value and your other assets.
A capital gain you make with selling the rented property is not taxed (2022). That is only different when you make a habit of buying and selling properties. Such a habit that it is seen as a form of labor, then the gain is tax at the progressive tax rate of Box 1.
Tax is exciting
We think tax is exciting. Renting out a property is in this market a good investment. This article is to make you aware of aspects that come along. Or to kick you from the pink cloud only showing the rental income amount.
