An example of a rental mortgage
You would like to buy a rental property of € 200,000. After an appraisal, the value in rented condition is determined at € 150,000. Banks do not finance the full purchase amount and offer on average between 70% and 90% financing. At 70%, the bank will therefore offer a mortgage of € 105,000. As a result, you have to finance the remaining € 95,000 yourself. Most likely, this is where you can use the surplus value from your own house. Finally, you also have to finance the buyer’s costs yourself (transfer tax and notary costs). The tax authorities charge the highest transfer tax rate for a purchase of a rental home (8% in 2021).
Alternative for your savings
Owning a second home is seen as capital in The Netherlands. The property value will therefore be included as assets in box 3 of your income tax return. The mortgage for the house is deducted from this capital. The rental income you receive is no longer taxed.
Purchasing a second home for rental can therefore be an attractive alternative to your savings, which are currently barely profitable due to the low-interest rates at banks. Under all circumstances, keep in mind that you have a financial buffer for unforeseen expenses. With an investment like this, your money transforms into your second house and can only be retrieved again when the second property is sold. Based on the actual market values, you will gain a profit or will suffer a loss on your investment.
Costs at the property for rental
Major repairs and major maintenance are at the expense of the lessor, such as exterior painting or replacing pipes. It is therefore wise to set aside part of the rental income for this.
As the owner of a rental home, you will also be assessed for the municipal property tax (property tax) and sewerage levy.
Last but not least: the point system for rental
In the Netherlands, there are two types of rental. Social rental, which has to follow government regulations in terms of a maximum amount of rent, and private rental, market based amount of rent. The government has set up basic rules that determine whether a house and its rent applies for social or private rental.
The so-called Point System determines which rent applies for which house. Learn more on huurcommissie.nl (mainly in Dutch), perform a check for an specific address (in English) or ask our advisors.