Can I make it this way or will I fail? Please let me know!

General Real Estate Investing
1

Hello all,

As said in a previous post I’m trying to learn as much as possible and for now my “main” lessons would be:
1 Get off the couch now
2 You make your profit when you buy
3 Cash(flow) is King
4 Treat this as a business not as a hobby

I live in Holland and over here EVERYTHING is regulated and real estate is no exception. For example:
You can not charge too much rent for a given appartment (max would be app 600,= EUR/month)
You can not evict renter: renter protection is really extreme
You can not raise yearly rent by more than the inflation rate (this year 1.6%)
Most mortgage’s are guaranteed by a special fund in case of default

I’m targetting on appartments with after repairs value 100.000,= EUR (give or take). Due to the above restrictions it’s (to my knowledge anyhow) impossible to buy these appartments for less than 65%-70% ARV (already rented out).
Using the 50% rule this would not make sense:
Rent: 600
Expense: 300
NOI: 300
Cashflow: 100
Left for mortgage: 200 => max 35k (@6%, 30 yr) = 35% ARV?!

I think I already read some posts (can’t really pinpont anymore, so MUCH information out here :biggrin) about some regions where the same problem existed…All this got )e thinking:
ARV: 100.000,=
Price: 65.000,= (including renter)
Buyer cost: 6.500,= (10% over here)
Equity: 28.500,=

On average people will move every 7-8 years. So if I sell after the renter is moved I will ge the equity out (and any principal repayment on the mortgage the renter paid for). The financing part:
Total investment 71.500,=
Mortgage 50.000,= => 300,=/month (@6%, 30yr) = 0 (initial) CASHFLOW
Downpayment 21.500,=

What do you think about this? I feel a bit mixed because my lessons 2 & 3 seem to be conflicting…

Any thought very much appreciated (Oh, conservative estimate above, no appreciations…)

Greetz, Raymond

2

You will fail trying to rent out ONE apartment at a time.

You MUST buy apartment buildings to achieve any meaningful cashflow.

With 1 apartment you are buying it at 100 000$ / unit. With apartment buildings you are buying them at much much much less $ / unit. Do not buy condos.

Questions:

  1. What do you mean you can’t charge much for apartment? What if it is a really hot market and renter want to pay more for apartment? What if area is more desirable? What if property is more desirable?

  2. So how long does a non paying renter get to live in property? Forever? Impossible and I don’t believe it.

3

Tien, he means they have rent control.

In some European (and some third world countries) it is virtually impossible to get a tenant out. Once they are in the door, they stay until they move of their own free will.

4

IF it is so that you cannot kick a tenant out even if they don’t pay rent or destroy your place, I see no reason to ever be a landlord.

I’d go after commercial RE instead.

Must be a lot of foreclosures then.

5

Hello,

I think it already shows I’m not a native speaker (sorry :biggrin). I indeed wanted to say we have rent control and as Tatertot mentioned we have to wait until they move of their own free will. It will be different if the renter doesn’t pay the rent! Then you can go to court to get the renter out, this will take appr 6 months.

My idea is to “make the money when you buy” so pay 65-70% ARV and wait till the renter moves to get the equity out.

Hopes this explaines :slight_smile:

Greet Raymond