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Renting out your second home: what about it?

Jan. 20, 2021
7 min reading time

Investing in real estate has become increasingly popular in recent years. Of course, it can also be a very smart investment to buy a second home in addition to your own and rent it out. With this it is possible to get a stable and good return from the investment, with a reasonably low risk over a long period of time. If all goes well, you will not have to do much about it and will have extra income every month. Especially right now is a good time to rent out your second home. Mortgage rates are still very low, homes are in high demand and the return on money in a savings account is minimal. But renting out a home obviously involves some things, and only if everything is properly taken care of is it a smart investment. In this article we are going to look at what you need to pay attention to if you are also planning to perhaps rent out a second home.

rent out second home

Registering with the Chamber of Commerce

The first step for many businesses, and renting out a house is of course just that, is to register yourself with the Chamber of Commerce. This is usually not mandatory in this case. Only when you are renting out several properties as a business are you obliged to register with the Chamber of Commerce and pay taxes. Also when you offer other services together with the rental you have to register. Think of breakfast or cleaning the house. In practice, this is often only true if you always rent the house for short periods of time.

If you do register with the Chamber of Commerce, you must also choose a legal form. This is especially important for your taxes and liability. Make a good choice, if you do not know it yourself it is wise to get help.

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You need permission from the mortgage lender

Most people who buy a second home to rent it out take out a mortgage to do so. If you do or plan to do this, you should always seek permission from the mortgage lender to rent out the house. Not every lender gives such permission, and others have certain conditions attached to it. This will help you avoid hassles and possible penalties.

Also ask permission from the VVE

If you buy a house or apartment, you may have to deal with a VVE. In that case, it is also important to ask permission to rent it out, as there may be a prohibition against doing so. If you rent it out anyway, the VVE can impose fines on you for this.

What about taxes?

Your second home falls under your assets in box 3, unlike your main home. Rental income from your second home falls into box 3, You do not have to declare it to the IRS. You do, of course, pay tax on the additional equity you have with the second home. This is the WOZ value for that year minus the mortgage debt. That is the amount you have to declare in box 3.

Consider insurance

You will want to insure the house you are going to rent, as well as its contents. You do this with buildings insurance, and possibly contents insurance. Again, not all insurers accept rental properties, so be aware of this. Renting out presents a higher risk and therefore the rate is higher. Because this also sometimes reduces coverage, you need to look very carefully at your insurance policies when renting out a home.

Determining the rent

As a private landlord, you are operating in the free sector, which also means that you may pay the rent yourself. So you are not dealing with a maximum rent here. You may also increase the rent once every 12 months, but you must give two months' notice. In this case, however, the house must be demonstrably improved.

Lease

A very important part of renting out a second home is drafting a good lease. You want to keep the risks as low as possible, and a written lease is the easiest way to do this. You can find examples of this type of contract in many places, including the Internet. If you also want to get everything right legally, you can seek advice from a specialist for this, which can save you a lot of hassle. There are two types of rental contracts you can enter into, indefinite and fixed-term. Regarding fixed-term, you have two options, which we will highlight below.

Temporary contract for up to two years

We also call this temporary rental. You can do this for up to 2 years. However, you have to let the tenant know in time that he has to move out. If you do this, the contract automatically becomes indefinite.

Long-term fixed-term contract

You can also sign a temporary contract for more than two years. If no one then officially terminates the contract, this contract also becomes an open-ended contract.

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What if you want to terminate the lease?

There are certain rules for entering into a lease; this is no different for termination. You have to follow certain rules both as landlord and tenant. What rules these are depends on the type of contract, the type of property and other variables. You always have to deal with a notice period, if you do not keep to this it can possibly mean that the lease is extended for an indefinite period.

Delve into legislation

Drafting a lease involves certain laws, for both parties. These are set forth in Civil Code 7. This is the basis for any lease. In total, there are 23 articles of law that deal with this, 9 of which are meant for the landlord. The bottom line here is that you continue to make a rental property available during the period of the contract. In addition, you are responsible for much maintenance in and on the rental property.

The remaining 14 articles of law are for the tenant. Among other things, the tenant must pay the rent, behave properly and treat the property nicely, accept certain work, and return the property in pre-arranged condition at the end of the contract.

Renting out your home for shorter periods

Most people choose to rent out a second home long-term. This is the least amount of work and provides a lot of security. Of course, you can also rent it out for shorter periods of time, where you have more work but also have a chance of higher returns. You then rent out your home through online platforms such as Airbnb. This is also not directly a business. However, you will have to deal with extra rules in certain municipalities. If you are interested in this, learn more about these rules.

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