€100.000 Rental Income

Perhaps I’m wrong, but most bloggers are probably more organized than I am. I don’t hold a buffer of posts that I can use when I lack inspiration. This often leads to last minute writing (with associated typo’s and spelling errors, sorry!). So, without pre-planning this week, it will hereby turn into “Real Estate Investing Week” at Cheesy Finance. What’s up with the click-bait title, I can hear you ask? Well, it might actually become a reality in the (distant) future. How do we think we can get to €100.000 Rental Income? Let’s review!

Current Situation

As you might be aware, we currently have 5 rental properties and a house of our own. The market segment we prefer includes properties around the social housing norm (defined as a €710/month limit; rents below this limit are determined by a point system here in the Netherlands). The main reason is the relatively large market available, e.g. there are many people that could afford these properties. This makes it easier to rent out these properties and keep vacancy rates low. So far, this has worded out well. The downside is that the tenant turnover is a bit higher. It’s a trade-off we are willing to accept.

€100.000 rental income
€100.000 rental income

We also have one commercial unit, which holds a artisan workshop. This is not our preferred market, but this opportunity presented itself and we took advantage of it. In the future this unit will be rebuild into a residential unit, which will allow a higher monthly rent and a better return on investment.

The Near Future

It probably is not a surprise to you that we are actively looking to expand our Real Estate holdings. We are currently investigating financing options and properties to see if we can expand our rental income. One option we are actively reviewing is a portfolio of 5 units. The yield is pretty good, but there are some other risks associated with this opportunity. This includes limited increase/stagnant rental income and requirements for urgent maintenance/upgrades of bathrooms/kitchens. But if the purchase price is right, this might not be a major concern. Only time will tell if this will become the right investment for us.

€100.000 Rental Income

Now, how do we get from where we are now (~€36.000/year RE income) to €100.000 rental income? Well, it’s something like: “go big or go home” 😉

Firstly we have to do two things with the existing Real Estate: convert the commercial unit and split of our existing house. The idea is to upgrade the workshop to a residential unit, this will probably costs us as much as €75.000 (could be €100.000, subject to work required). We also want to split our current home into two rental units. The costs for this are estimated at €50.000 (new kitchen, heating system, bathroom and partitions + municipal fees and any required works). This would add two rental units to the portfolio and increase income for one. Not unimportantly, we also will need to move 🙂

Secondly, the purchase of the portfolio of 5 units needs to be successful. We have no guarantees at this stage but will keep you updated on developments. Depending on how things go, the direct out of pocket costs for this Real Estate portfolio are about €100.000-125.000. This would mean we have to sell our Dutch dividend shares, sell our ETF portfolio and use most of our cash reserve.

Property Value and Financing

Based on our estimate of the value of all properties combined, we would be in the 7-figure territory. That is a lot of money! See below for a summary of what we believe (and know) the properties should be worth (market value):

€100.000 Rental Income - Property Market Value
€100.000 Rental Income – Property Market Value

Looking at this, we are going to need a lot of financing! This will also cause us to be quite leveraged with this Real Estate investment. Partially this scares the crap out of me! But when looking at the numbers (positive cash flow) and our experience from the last few years, it certainly is possible. A (conservative) estimate of the total financing we need (via investment mortgages and perhaps even personal loans) is shown below:

€100.000 Rental Income - Financing per Property
€100.000 Rental Income – Financing per Property

Right now, our own investment would be about €390.500. This is assuming that everything happens “tomorrow”. This is not the case, as this will take us several years to realize. Realistically, about 4-5 years at a minimum! During that time, principle payments would have increased our “investment value” at bit.

Rental Income

Using the existing rental income, and the estimated rental income of the renovated/upgrades units, we estimate the following:

€100.000 Rental Income - Rental Income
€100.000 Rental Income – Rental Income

This should be a realistic estimate, but could vary slightly depending on market conditions. If the economy does well, this should be very much doable. If we get another crisis/recession (and we will), we might temporarily get a bit less.

Operating Expenses

As noted above, assuming all this happens “tomorrow”, the expenses would look like this (rough estimate):

€100.000 Rental Income - Rental Expenses
€100.000 Rental Income – Rental Expenses

The expenses includes interest costs, property management, building management, insurance, maintenance reservations and property taxes.

Obviously we won’t be able to make this happen “tomorrow” as we simply don’t have that much money nor the ability to get all financing at once. This is therefore a conservative approximation, as over the coming years we pay down principle and the effective interest expense will go down.

Personal Taxes

Because all these investments will be considered wealth, the investments will be taxed in “Box 3“. In this case the tax burden (assuming the investment is done “tomorrow”) will be €1.704. The calculation is as follows:

  • Total assets are €1.070.000 (estimated market value)
  • Total assets corrected for being in “rented state”: €909.500*
  • Combined debts are €679.500
  • Net Wealth for taxes: €230.000
  • First €50.000 of wealth is not taxed (for a couple like us)
  • Next €150.000 is effectively taxed at 0.86%
  • The final €30.000 is effectively taxed at 1.38%
  • Leading to a total tax burden of about €1.704

*: note that we currently don’t know what the property municipal assessments (WOZ) would look like for this portfolio. This assessment is critical as it determines the value you have to add for your personal taxes. In rented state you have to use between 45% and 85% of the assessed value of the property. This percentage depends on the “yearly rental income” over “WOZ value” ratio (see here, Dutch only). We assume 85% for our scenario. This translates into the fact that the “total assets in rented state” is likely an over estimate. This as we used the market value at 85% and not the WOZ value, which generally is (much) lower.

Interesting note, if all mortgages and loans are paid in full. The total tax burden on €909.500 would be €11.082 per year (for the 2017 tax year). This is an effective tax rate of 1.22%

Net Income

So what are we left with at the end of the day? Based on the above we have the following:

  • Income €100.320
  • Expenses €67.448
  • Net income before personal taxes €32.872
  • Personal taxes €1704
  • Net income after personal taxes €31.168

Now that is more then enough to become FI for us! It would even give us about €6K more in travel allowances per year, yay 🙂

Note that taxes in this case are only just 5.2% per year! This will obviously rapidly climb as the properties are being paid off and your wealth is increasing. For example, as noted above, the taxes are €11.082 if you have no mortgages/loans. In this case the expenses would drop about €17.000 (2.5% interest on €679.500). Your net income before personal taxes would increase from €32.872 to about €50.000. In this case the tax burden would become about 22%. In that case you are left with about €38.900, that is more than enough for FI in the Netherlands!


How about you, are you interested in real estate investing? What do you like about it? What are you afraid of?


  1. hey! I don’t know why I didn’t discover your blog earlyer.
    We’re in a very similar situation! We’re doing the same sort of thing in Germany but we stopped at 5+1 units. II think your calculations are too pessimistic and you’ll be FI lots sooner than planned.
    Off to browse through your blog now!

    1. Hey Mr. W, thanks for the chat on Friday night, was great fun talking to you. As discussed the Dutch system is quite different from the German, and our rental income compares to something in between the kaltemiete and the warmemiete. So do de really need at least 2-3 more units to make it FI, the rest would be a bonus to allow for more travels.

  2. Sounds likes a plan that you gave some thinking. Keep us posted on the progress…

    When you write about it, i go like: why did we sell our rental#1? it was nice cashflow… Weel, that is looking bad, the future is ahead…

    Last night, we had people over for a BBQ. Rentals were discussed as well. An idea they have (and I like it ) is to have a rental as soon as the main house is paid off. Rental is not my passion investment asset, maybe that changes in a few years…

    1. Ha, the plan is somewhat bust already. Could not broker a deal on the 5 units, price was too high considering the risks. Now need to find another opportunity, but there are not that many around…..Still we would like to increase the RE holding a bit more, as well as the dividend stocks.

  3. I just wonder where you get units of 60K in the Netherlands and what kind of units those are. Which area are you living?

    1. Hey Tneo, have a look in the SE of the country. You’d be surprised . That being said, we are also starting to look at Germany.

  4. Have you ever thought about expanding out into other real estate areas CF? For example, you could buy a large office building or warehouse instead of managing so many small units.

    While this kind of real estate isn’t as accessible for small investors, I think you’re no longer quite so small. 🙂

    1. Actually no, this is a choice we have made on purpose due to the stability of this portion of the rental market. It provides a higher change of a stable cash-flow, which is critical to us. We are not too fond of commercial real estate, primarily due to the risk of longer periods of vacancy. The good thing is the 5 year contracts that are normal on this type of commercial RE investments.
      I like your optimism, but we are still quite small actually 🙂 Perhaps talk to us again in 10 years.

  5. For now it’s still a dream, the coming weeks/months/years will have to show if we are going to make it happen. Exciting times!
    We are not aiming high on the expenses front, €25K per year is quite comfortable, everything extra is a bonus for travel and fun.

    1. Hey Jose,
      No, I did not. This would actually mean, assuming we have not other work, that initially we would not pay any taxes at all :-).
      But there is a good change we have some form of part-time employment that would eat up that tax credit, so therefore did not include it into the calc.
      Well spotted!

  6. This also scares the crap out of me 🙂 But it does make sense. I’m just more used to only spending the money you have, so financing not one, but like 10 properties is way out of my comfort zone. However, I do feel that I have to get into investing in these types of things more, otherwise my money is just dripping away and FIRE will remain a dream.

    1. We had the same realization a few years back, just did not know in what assets we wanted to invest. We therefore try as many as possible to see where our preferences are. Real Estate is one, but it is far from perfect!

  7. I admire your guts, I would not dare to bet all my stakes on real estate. And I would like my money to be liquid so I would to be able to use the money I have before I die as I have no kids to inherit to.

    1. Look at it this way, it’s 10 companies, spread over the entire country 🙂 They pay every month, so no need to sell! Miss CF will ultimate inherit some of these, it’s her nest egg too, ultimately. And if she does not want it, it’s going to charity!

  8. Nice article! Very interesting to see your calculations. We just started saving and investing, so we don’t dare to dream about investments this big yet. I hope in the future we can look at possibilities regarding investing in real estate too 🙂

    1. It’s a dream for us too, no guarantees it will work out! There is a good change we will never got to 12 units, but there is a very real change that 7 will materialize. Will have to wait and see how things progress. Never believed I would actually think about this, when we started actively investing 3 years ago. Life can be full of surprises!

  9. When I started reading your post I had alarm bells going off in my head. The reason: leverage. But you addressed that! If your numbers are correct you would be less than 2x leveraged which is acceptable in my book. No more raisins for you!

    Doing this means you will go all in on real estate. Forget having diversified investments. Especially with going FI once this is done you will never be able to offset this 1.000.000 euro real estate investment with other investments. And real estate investing, due to its illiquidity opens you up to some new risks: geography and government. Geography as in: everything is in the Netherlands. Better hope those dykes hold and no Greece style crisis hits your country. Government: during the last housing crisis the value of property dropped in the Netherlands but the government didn’t lower any taxes apparently … Governments loves taxing wealth that cannot run away ….

    Doesn’t mean you shouldn’t do it. It certainly can work and it clearly is the investment you guys like the most and as said Saturday: that is the investment on should do!

    1. Glad to hear my raisins got an upgrade 😉
      Just for the record, we will not go full in on Real Estate, the Canadian dividend portfolio will remain untouched, if this happens. Considering Mrs CF will continue to work for a while longer, we probably will diversify again into ETF’s and stocks along the way. But we would be heavy on the RE for a while, that’s true! It’s a risk too, no debate there either. But it is a calculated risk to a degree.

  10. Hi,

    Keep it up the good work! It’s really nice to read this blog and i love the tips/tricks and all the information.
    I have right now a porto with crowdfunding and (dividend) stocks.

    For spreading our risk i was thinking to start buying some garages to rent. We don’t want to put all our money into the garages do you know if it’s easy to get a financing for this? Will this a box 1 or box 3 investment for the dutch taxes? What is opinion about this or will it better to save more cash for buying houses for rent?


    1. Hey Ron,
      I’m not sure about the garage boxes, as far as I know they are considered Real Estate. Which if actively managed would be Box 1, but I will have to take a look at this in more details to be honest. Not sure about the financing either, they are not our preferred form or Real Estate, but they can be lucrative for sure. The good thing about garage boxes and parking spots is that you have a good chance of saving up to purchase one in cash. But you could also consider a personal load for this too (which go up to €75K, subject to your income). If you go bigger, the banks/mortgage provides may start to become interested (minimum amounts are often €70K for financing).
      Personally, I would aim to get a house that has good rental potential, live in it yourself and move on a few years down the road. Probably the easiest way to get started in RE in the Netherlands (we did the same, albeit via a foreign country).
      Best of luck!

  11. ‘Go big or go home’ that’s the spirit 🙂

    I wonder how much time you would spent on administration and maintenance of your properties, with a portfolio of that size. Wouldn”t it be like a full-time job?

    Anyway, I admire your entrepreneurship!

    1. Heck no, the idea is passive income here! 🙂 I might do some maintenance because I like it, but that should not consume too much time (couple weeks per year, tops). The administration would take about 1-2 hours per month on average, phone calls/contractor contact/tenant selection with management firms and such about 2-3 hour average per month also. That should be about it (going for the 4 hour work week at most). Other than that is it just collecting money/paying bills, with a positive result at the end (that’s the plan anyways).
      You have to have a dream, right?

  12. I have been following your blog for a while now, and really enjoy reading it! I particularly enjoy the posts on real estate. We currently own 2 rental properties in The Netherlands which make up ~35% of our total portfolio. To be quite frank, I am rather disappointed with the yield on these properties, which hovers between 3-4% (unlevered – they have been fully paid off). To see your projected rental yield being between ~ 8% (levered) and 4.5% (unlevered) is amazing, and sets a clear bar, well done. It inspired me to look around on beleggingspanden_dot_nl which confirmed that your projected yields are feasible, so it means I must do my homework better!

    Could I inquire what your assumed vacancy rates are? And one other question: I know that Dutch banks are very conservative in terms of providing morgages for investment properties. Will they support financing about 2/3 of the property value?

    Good luck, looks like you guys are on the right path to FIRE!

    1. Thank you! It took us a while too to realize that leverage is really key in real estate to assure your yield improves (while still managing the associated risks obviously). I’m not surprised that your properties does 3-4% unleveraged. Our first two properties do about the same! In hindsight, these properties were not the best investments either, but they do now provide the ability to leverage and expand (and the cash-flow is reasonable too).
      The expansion is also good because it provides both better yield on our investments, spreads risks and further improves cash-flow. All three are very important to us.
      To answer your questions, we assume vacancy rates are one month per year (which in our experience is a bit on the conservative side, but it really depends on the location of your properties!) Your best bet right now for financing, up to 65-70% of the value in rented state (and perhaps even 80% of market value!) are NIBC, RNHB and ING (last one is a bit of a surprise to us). NIBC provides 70% in rented state, ING does 65% in rented state with linear mortgage (20 year amortization), RHNB might even do up to 80% of the market value.
      Hope this helps and good luck with your rental properties, hope you can increase your yield too by expanding!

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