Buying a house for rental

When you have a significant amount of surplus value on your home, you can think about ways to get a return from this amount of equity. One expenditure could be the purchase of a second house for rental.

By taking out a second mortgage on your own home, it is possible to spend the surplus value on a large expense. For example, investing in a second home that you rent out.

Advantages of a rental home

A second home for rent is a long-term investment. The rental income of the rented house is tax-free. Moreover, most homes on the current housing market are increasing in value. There is a good chance that you will sell the house with profit after years (though be aware the value can decrease as well).

Rental to child or parents

This construction can also be a way to provide your children with living space. The other way around also happens, children who buy the house from their parents who rent it back. Our advisors can tell you more about all options and conditions.

Rental mortgage besides a second mortgage

In addition to advantages, there are also points of attention about which you should seek good advice. Starting with the mortgage itself. If the surplus value of your own house is not sufficient, you can apply for a rental mortgage. This is a special mortgage which allows you to rent out the property. The fact that the house is going to be rented out means for the bank that there is more risk on the loan. That is why rental mortgages often have higher interest rates, which are caused by an interest surcharge.

Our advisors know all banks and lenders where you can go for a rental mortgage and will explain to you the possibilities and impossibilities. The bank will make an offer based on your own income, current mortgage, but also the expected rental income.

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.