Real Estate Report – August 2017

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There is a lot happening in our Real Estate world, primarily good things fortunately. We are (very actively) looking at properties and found a couple that are interesting. Let’s therefore have a look at the Real Estate Report – August 2017.

Real Estate Report – August 2017

Rental Income

Our rental income for August is (again) above the €3.000 mark. There is one unit (Unit 1) that is also due for another (small) rental price update. We have let this one slip by accident and need to chase this one up shortly. We are also working hard to beef this monthly sum up to about double what it currently is, but more on this later.

The monthly income overview is provided below:

Real Estate Update - August 2017 Income

Real Estate Update – August 2017 Income

Rental Expenses

The costs for the month where the mortgage, personal loan and property management fees. That was it! “Cheapest” month on record. No insurance payments or property taxes were due this month. What a difference that makes. We also had not work done on the properties, so no maintenance costs either. I would like many more of these months 🙂

The expenses for the month are as follows:

Real Estate Update - August 2017 Expenses

Real Estate Update – August 2017 Expenses

Real Estate Report – Overview

We made a total of almost €2.444 in net rental income for the month of August (before taxes), a new record this year! The net cash-flow will come in at around €2.000. Our total YTD net rental income for 2017 is now about €15.743 (before taxes). We are now just about €500 shy of our target income for the year. But please remember that we are still anticipating a big bill in the coming months to pay for the outside restauration of two properties. This is assuming we get our act together and sort out quotes…..

Real Estate Update - August 2017 Overview

Real Estate Update – August 2017 Overview

Real Estate Report – Forecast

We finally got confirmation that our two tenants are leaving us. They have successfully bought their own place. The unit was put on the market the same day. A week later we had 7(!) viewings and yesterday morning agreed on a new tenant to move in. So no vacancy! Nice. However, this does mean new fees for the tenant selection….

For those of you that remembered our interest in German Real Estate investments (see here), we checked the tax implications and they are not favorable. We would be required to pay income tax, which boils down to 20-25% of the net profits. That’s a lot!

On the searching front, the property we looked at with 12 units has too much risk associated with it. We could get the numbers to work (was relatively good actually), but we could not get the exit strategy to match. There were also some permit concerns that were vital for this one to work. In short, we thanked the broker for the time and efforts and we moved on to the next……3 options.

Options?

Option 1: simple 70m2 condo. Reasonably priced, so we thought, but after the viewing earlier this week decided against it. Too much work to be done, lots of cracks in the walls. Partial bathroom remodel required. Kitchen needed professional cleaning (grease everywhere) and tile replacement. No time for this right now, getting a contractor would be too expensive and will impact return on investment. We walked away. Was potentially a 850 per month unit.

Option 2: Triplex with 3 very large units (+100m2 each). Have a scheduled visit tomorrow. Promising on paper, nice photos, good neighborhood but not the best rental market (i.e. not a large city with ditto companies). However, we are very interested to see where this is going. Current estimate is about 3.000 month in rental income if successful. Would also be cash-flow positive from day one. Friday update: what a disappointment…… make a detailed calculation to figure out the renovation costs to get it into rentable state…..€100k. That either means a lot lower purchase price (doubt that) or we need to walk away. Afraid it will be the latter. Bummer!

Option 3: House along a dyke (already looked at it last weekend). Currently 3 units with option to make it into 4. Large yard with two storage sheds (with potential to convert one into another unit). Requires extensive work, need to build two bathrooms and one kitchen. It also has a dated interior, which would require some upgrading. Potential rental income is also about 3.000 per month (for 4 units). Big upside: its cheaper than option 2, even with expected renovations (including safety margin). But the big downside is the amount of work. Time to book a viewing!

We are having so much fun! 🙂

 

How about you, any interesting news to share? Any recent purchases or issues? Let us know

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11 comments

  1. It’s very hard to find deals that work now. The property cycle is well under way. The only way I can see a lot of deals making good sense is if the market goes nuts, like what happened in Sydney, Melbourne, Vancouver, Toronto etc. because then it’s possible to cash-in on the capital gains, which becomes the name of the game really. But then you’re into speculator territory, not pure investment. This is what happens in a strongly rising market with little inventory.

    The period 2012-2014 was a once in a lifetime opportunity IMO. Seems you collected yourselves a good amount of property during that period, so we can count our blessings that we didn’t miss out and were left trying to obtain an initial entry in the current market. That would suck.

    I genuinely believe it’s a possibility that the market does go nuts, because I see a lot of indications that the government, for example, is gearing up for lower-for-longer interest rates. For example, proposing to completely and *massively* the second-pillar of the Dutch pension system, because the ultra-low interest rate environment has already badly broken the existing system.

    I also see a lot of proposed measures to reduce taxes which should increase purchasing power and enable people to borrow more which will perpetuate the current boom.

    In one of my probable scenarios I reckon NL could end up a mild state of Switzerland where nothing makes sense ie. interest rates are crazy low, property prices and rents are crazy high and no deals make sense except in C-grade fringe locations. And because economic strength looks sustainable, the government starts to gradually re-calibrate lending standards and allows more risk again.

    The possibility to find AAA grade property deals in the Randstad may soon be gone forever.

    Or the cycle top is nigh and everyone will think the crisis is back and those who haven’t sold yet will bring their inventory to the market and we’ll get softer conditions and a minor correction. But even if that happens, I think it will be short-lived because there are too many economic tail winds and too few probably causes of an economic downturn.

    So IMO the bottom line, if we want to continue to acquire property, we might need to switch to speculation mode ie. try and buy and sell within the same market.

    But it’s a tough market right now for buyers. If you save 50keur and your target property is 250k and goes up 10% during the same period, the purchasing power of your deposit is cut in half. Very tough for those who *need* to buy additional property. Hard to get ahead because it’s running away and everyone who isn’t in already is chasing the market. And as I said about, most indications seem to be that more money will come to bear on the market in the coming few years, which should keep things ticking along in an upward direction.

    Good for us. Bad for us. 🙂

    1. Perhaps looking across the border is starting to make sense. Spoke with a South African RE invester a couple months back, he’s making some pretty good returns on his invesments. But I could not get Mrs CF to buy into this one 😉

  2. Sounds very good! Wrt German RE, if you could register yourself in one of the units, you could avoid paying source tax, or qualify for the exception till 8.500,-.? Not sure if this possible.

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