Becoming a Landlord – Rental Property #1


Seasoned real estate investors always say that you never forget your first deal. I hope this will be no different for us.

You’ll hope you have done everything right, didn’t overlook a small yet critical flaw or if you have used the right calculations. The practical side of things in real estate is not a mere waiting game. Getting in touch with a party to finalize a mortgage or another type of loan to fund the property. Finding a tenant that will move in as quick as possible and in doing so, reduce the time of vacancy. Make all the contracts in order. And if you want to, finding a trusting partner that manages everything for you. It’s this, and much more than you’ll face within real estate investing. Which is all part of the fun of course. 

In the past few weeks, months even, you have all been reading along on the journey we took buying our very first rental property, also known as unit #1. 

We’ve dropping some progress here and there in our monthly reports, and promising a full detailed report later on. Well, here it is. Today is the day I’m letting you in on how this deal has taken form. With all facts and figures, going the full monty.

Rental property #1 – the strategy

We had a pretty clear vision of our strategy, and on what segment of the market we had to focus on. We would focus on the gap that has occurred on the rental market between the social and private sectors. Which are the people with a middle income, earning too much to live in a home aided by social benefits but also earning too little to afford a high rent in the private sector (which is pretty common in the Netherlands). 

We chose a specific and large city, where the demand of living is high and the housing prices haven’t (really) caught up to the national growth trend that much. And we would work with a property manager with lots of experience in that specific area. Working together with a property manager helped us find the right property.

Related post: Our First Steps of Investing in the Real Estate Market

Finding a property 

From the start, we had already set up a target price. Our rental property had to cost between 100.000 and 120.000 euro. Why? Well, very simply put, the types of houses we were looking for, we’re listed for around these prices. And it would leave us enough wiggle room to finance a possible second rental property later on.

We worked closely with a local property manager in the search for the right opportunity. Her extensive knowledge of the area helped us by searching in the right neighborhood (down to street level). Because within real estate, location is everything. 

Our goal was to find a property which didn’t need any renovation except for some painting. And was big enough to house a small family. We reviewed a few properties. To eventually finalize a deal on unit #1. 

A few weeks after we made that deal, we had an opportunity in lowering our operating costs of the property.  Through an acquaintance, we came into contact with someone looking for a new home in that area and he became our first tenant. This resulted in the decision to do the management of the property ourselves and canceling the need for a property manager.

The need for a property manager does affect the tax rates, or so we thought. When a rental property falls in box 3, you will not have to pay any income tax on the rental income. Instead, you pay taxes based on wealth, which is close to nothing in our case considering the mortgage debt. However, the only way to do this is to outsource the management, because otherwise the tax authorities will view your investment as labor, and you will have to pay income tax.

As it turns out, we can manage the property ourselves, and still hold the asset in box 3. With the disclaimer, that we aren’t pro-actively adding services that increase the value or spend more than x amount of time on the management. 

Quick tip:

The real estate business is a rather small one, and knowing the right people can lift you up a level higher. For example, a lot of the properties that are interesting for renting out are hard to find. Knowing the right people, those who are dealing within that circuit (realtors for example), can help you get closer to those kinds of opportunities.

Financing the property

In the meantime, we also contacted several institutions that would be able to lend us the money. This way we could compare the different price points and conditions per mortgage/loan. The best part for us is that we got the mortgage approval very fast after we signed the purchasing contract of the property. For a first property, this largely took away some of the tension around it.

At the end of July, we signed the papers on a three bedroom apartment located in one of the Dutch big cities.

The purchase price of unit #1 came down to 110.000 euro. If we include the closing costs and some small renovations it comes at a total of 116.000 euro. Which is the cost of the total acquisition. The closing costs include costs such as taxes, cost of the notary and mortgage costs. The property doesn’t need any renovation in the coming years because the property is well maintained. 

Purchase price                                   € 110.000,-
Closing costs + renovation               6.000,-
Total acquisition costs                     116.000,-

We negotiated a 30-year mortgage, with a 2.65% fixed interest rate for the first year. We chose to fix the interest on a yearly basis because this gives us the flexibility to refinance the property with other banks that offer more favorable interest rates or terms and conditions when possible (without paying a fine for breaking up the contract). Additionally, we expect that interest rates remain low for the coming years.

Financing costs

We have a mortgage on this property of 79.050 euro. The monthly cost of this mortgage is 318,54 which includes the principal payment as well as the interest. 

To supplement the deal further we also closed a home equity loan (HELOC) on our own home. We’ll use 10.000 euro from this facility to finance the property. We only have to pay interest on this part of the loan. Because the interest rate is variable we’ll use this as a working capital loan (short-term). The monthly costs will be around 35 euro. Obviously, this amount can change per month, because of the variable interest rate. 

                           Loan Amount      Montly costs           Interest          Principal Payment
Mortgage            79.050,-                 318,54                     173,00                 145,00
HELOC                 10.000,-                 35,00                       35,00
Total                    89.050,-                353,54                     208,00                145,00

The financing costs related to this property comes at total 353,54 euro per month.


Our investment comes down to 27.000 for this property:

Total acquisition = 116.000 minus total loan of 89.050 = 27.000

In order to calculate our returns and the financial overview, we take a few metrics into account. Like the gross rent, operating costs, net operating income, cash flow after financing, the cash on cash yield (CoC) and the return on investment (ROI). It’s going to get a bit more technical, but we do want to give full insight in order to review this deal and to take lessons from (if you wanted to).  

Gross rental income

Our tenant will be paying us 850 euro every month, which is the gross rental income. The contract is already signed off for a one year period, and the tenant will be moving in there only a few days after we get delivered the keys on the 30th of November. The vacancy period is thereby reduced to a minimum, and will not be taken into account in the financial overview for the first year. Normally we would take 2 weeks per year into account for vacancy.

Gross rent per month      € 850,-
Gross rent per year          € 10.200,-

Operating costs

The costs to operate the property for the first year comes down at 128,91 per month or 1.546,89 per year. Operating costs are including the Home Owners Association fees (VVE), taxes related to the property and maintenance costs. Because we manage the property ourselves we don’t have to pay for any management fees. The costs for electricity, water and heating are for the account of the tenant. 

Net operating income

In consequence, the net operating income (gross rent minus operating costs) comes at 721,09 per month or 8.653,11 for the first year.

850 (gross rent) minus 128,91 (operating costs) =  721,09 (net operating income)

Cashflow after financing

The cash flow after financing will be 367,55,- for the first year.

Namely:  721,09 (net operating income) minus 353,54 (financing costs) = 367.55

This amount will be coming into our bank accounts for every single month and will be used to stack up some money for other RE deals in the near future.

Calculated over the first year this comes down to a total of 4410,60 euro.

Cash on Cash yield on investment (CoC yield)

The CoC yield gives an indication of how much of your own money (the investment) went in the property and how much cash you can put in your pocket at the end of every month. In our view, having a positive cash flow is important to have while investing in real estate. Which is why the CoC yield is a good metric to compare investments.

The cash on cash yield (CoC yield) on this property for the first year is:

4410,60 (cash flow after financing) divided by 27.000 (our investment) = 16,3%

Total return on investment (ROI)

The difference between COC and Total ROI, is that COC only considers the financial impact of Cash Flow on your return, while Total ROI considers all the factors that affect your bottom line. Total ROI is calculated as follows: Total ROI = Total Return / Investment Basis, where “Total Return” is made up of the components (Cash Flow, Principal Payments, Capital Appreciation). 

To keep it simple we don’t take capital appreciation (the icing) into account in the ROI.

Calculating our ROI like this gives us the following numbers:

(4410,60 (net cash flow) + 145 (principal payment) *12) divided by our investment of 27.000 equals an ROI of 22,78%.

Next steps

We won’t make additional payments on the mortgage for now. While we are still situated in the build-up phase of our real estate venture. The short-term loan – the HELOC – however, we will try to pay it off sooner. 

In this scenario, we can to add more units to our portfolio in the short term and generate even more passive income for the long term. After we believe we can slow it down a bit on the acquisition part of the business, we will start paying off our debts a bit more aggressively. 

We are well on our way to build up a real estate portfolio, and hopefully, it gave you some insight into how this works and the steps we’ve made so far. We’re curious if you are investing in RE yourself, have plans to do so or are just not interested at all (and why).

I’ve noticed while I was writing this, I’ve been using a few terms that are very common in real estate investing. But may not be that familiar to you. If there is anything you want to know more about or have a specific question, just let us know via a comment or connect with us via our contact page.

25 thoughts on “Becoming a Landlord – Rental Property #1

  1. Congrats on the deal… I might need to look into the Netherlands for an investment. Let it be the start of a nice passive income flow.

    In a major Belgian city, 120k will get you a studio that you might rent out for 450 per month… You can get it for 100k on a shabby neighborhood.


    • Thanks! A 120k appartement for a 450 a month rent doesn’t sound that profitable indeed. But there might be coming better days. Options and stocks are a great alternative 😉


  2. Congrats on the first property, well done! Couple of notes though, yes, you can manage the property yourself, but you are still at the discretion of the tax man how he will assess your situation. With a property manager your “guaranteed” a box 3 classification. Without you simply are not, as there is no definition on the X amount of management hours you can spent. It’s a very grey area. Also, screening of tenants is an art, a good property manager can really save you @$$, that is why we still use one.
    I’m a bit surprised about the low operating costs, curious to see a breakdown of that (including the tax assessment).
    Another point I’m missing is maintenance. Yes the building is managed via the VvE (condo board), but the inside is not. Have you accounted for costs to replace/repair flooring, kitchen en bathroom? This may be low now, if it’s all new, but you will need to start replacing items at some point in time (heating systems, dishwasher, oven, etc.?). Think your overall ROI is therefore ok for the first year, but too high for the years thereafter (simultaneously your monetary investment in the property also increases, lowering your ROI). Not saying that it’s not a good investment (personally think I will be), but a word of caution, don’t count yourself rich! 🙂

    Liked by 1 person

    • Thanks for your constructive comments!

      It’s indeed a grey area. As we both have a 40 hour work week, and currently only have 2 properties, we don’t expect the tax man will see us as ‘active’ investors. There is no guarantee, but there has been some jurisdiction about this.

      Agree with you on the screening tenants part. We will have to pay extra attention while doing this. For the next tenant we will do this with the help of an investor that we closely work with so we get the hang of it ourselves.

      The taxes are split out in:
      Hoa fees (VVE) 70,- p/month
      Maintance costs 40,- p/month (This might look optimistic, but as said the apartment is very well maintained) We’ll see how things work out going forward.
      Taxes (property tax, water tax and sewage tax 20,- p/month

      We know that investing in RE is a capital intensive business. So we will always hold sufficient reserves to cover huge expenses such as replacing items as heating systems, dishwasher etc. But increasing the rent on a yearly basis, further principal paydown and capital appreciation should keep the ROI around the same level in our view.

      Liked by 1 person

      • Thanks for the elaborate response. Those are some very low HOA fees, certainly hope they stay this low. Guess it is a newer building without an elevator?
        How did you calculate the maintenance allowance? Bottoms up, estimate of first anticipated upcoming items or as percentage of the property value?
        It might be well maintained, but a new dishwasher is already €400-500, which is your yearly budget (just to put things in perspective).


      • Yes it’s a building without elevator. One of the things we did in the process of buying the property was scrutinizing the VVE documents. The balance sheet looks healthy and there are sufficient reserves to cover expenses for maintenance. Also necessary maintenance was done in previous years. Hope indeed that the fees remain low in the years to come!

        For the maintenance allowance we took an estimate of first anticipated upcoming items indeed. We expect the bigger items will need to be replaced in later years. Our reserves will be bigger than. But indeed if a big item need to replaced in the first year it will have an impact on the budget. Understand your point of view!

        Thanks! 🙂


  3. Thanks for a great article! It looks like Real Estate investment is really profitable in the Netherlands when looking at your numbers! Of course, I believe the biggest part of it comes to research and analysis you made before investing.
    Looking at the prices of properties and rent prices, it makes a lot of sense to buy your own property rather than renting a flat. I guess the down payment is the hardest part and that’s why many people are renting (including me).
    In Lithuania (my country) the situation is a little bit different. E.g. I am renting a flat for EUR500/month and I was able to find a flat of the same level in the same building for sale for EUR145.000. That’s not such a good investment. But I guess you just need to really look for something valuable and you could find a more attractive deal here as well…
    Congrats again on start of your Real Estate empire 🙂


    • You’re welcome and thanks BI!
      Of course, this is just one example, and is definitely not a overview of the total RE market in the Netherlands. Just as in the stock market, opportunities can be found everywhere as long as you search for them.

      The renting vs. buying is always an interesting comparisation. That being said, we don’t see our own home as an investment, yet do beleive that that the more worth you get for what you pay is always a better deal.


  4. Congratulations guys, these are indeed very exciting times. I believe you made a super purchase. Finding an EUR 110k property that is well maintained and can be rented out for EUR 850 is fantastic. Ours was 141k and we’re renting it out for the same amount.

    I had a few questions in mind about the operating expenses, but they were all asked by Cheesy 🙂 I’m personally calculating with higher maintenance costs, but I have only a few more weeks of landlord experience than you guys 🙂

    So the choice seems excellent, the only thing I might have done (and actually did) differently is the financing. But so far on paper your numbers look way better than ours.


    • Thanks! 🙂

      Re the operating costs. I think you took euro 80 per month in the calculation for maintenance costs. Other investors take 1% or 1.5% of the property price into account for maintenance costs. Will be good for the learning curve to see how things work out down the road. And as said we’ll always hold sufficient reserves to cover capital expenditures.

      On the financing part we chose to use the equity in our home to fund down payments for new investment properties instead of allocate all the equity in one investment property. In our case this way of financing creates and optimal balance between the ROI and cashflows.

      And we like the flexibility of a home equity line of credit. You only pay interest on the amount you take up, and you can pay if off whenever you like.


  5. Congrats on becoming a landlord. Seems like more and more of us in the DGI community are getting their feet wet with real estate. Being able to manage the property yourself will save a lot of money down the road. I just hope that it doesn’t become a full time job for you. Look forward to reading all the good and bad that’s associated with real estate.


  6. Im trying to buy a second house at the moment and was wondering about the taxes. If there is no loan on the rental house. Do you have to pay the eigen woning forfait tax?


  7. Hi, nice and interesting article! Great read.

    Just a few questions:

    1) how do you intend to finance further real estate properties? Through leveraged financing? If so, how do the Banks/lenders consider your existing mortgages in their credit risk assessment processes? I always assumed that it would be quite difficult to get multiple mortgages in parallel (at least with Dutch banks). Do you also disclose to your bank/lender that the property is rented out?

    2) was your rented apartment furnished? If so to what extent has this been factored in the cash flow projections (future maintenance) and the various return metrics?

    3) Not sure what the weight is of maintenance costs in the 128EUR operating cost figure you provided, but it may mean that either the maintenance costs or the VVE costs are understimated. Speaking from experience, a figure of ~130EUR covering both VVE (ie reserves for major maintenance to the overall building) and maintenance costs within the apartment itself (eg broken washing machine, broken shower etc) at first sight seem on the low side. On the basis of ~4k net annual cashflow, any upward adjustment in these operating costs may translate into a relatively high negative impact on your annual net cashflow.

    4) further on the other cost assumptions: from experience i also know that if you assume annual or bi-annual turnover of tenants (also to avoid that the concept of ‘huurbescherming’ effectively kicks in) a vacancy projection of only 2 weeks per annum may prove to be too optimistic. A more prudent assumption could be a full month; moreover you may want to model the financial impact of needing to engage a rental agency to ensure a timely completion of finding a new tenant. Nowadays, these agencies charge 1 month of rent to the owner. So if you deem the above assumptions to be valid, you would actually have to increase the 2 weeks vacancy to 1 month and assume a month’s rent as additional cost. You can model this either as an annual or a bi-annual event, depending how conservatively you want to project your cash flows.

    Cheers, Jack


    • Hi Jack, thanks for your comments.

      1) Yes we’ll use banks, crowdfunding etc for financing. Some bank also look at the income the property produces. They take this into account in the risk assessment. The bank is aware that the property is rented out.

      2) Not furnished.

      3) This has been discussed in previous comments above.

      4) Let’s see how this works out. We’ll look for tenants ourselves by the way. Also discussed in previous comments above.

      Thanks for stopping by!


  8. Hi there,

    Just stumbled upon your blog. You guys got an excellent deal on that mortgage, I’m only running into 3.6% deals for 5 to 10 years with the few banks that do rental mortgages. Which bank did you use if I may ask?



    • Hi TPP, we’ve managed to get a mortgage with Rabo, but only after many talks and convincing from our part. We got a bit lucky since we’ve heard that they aren’t taking on many of these. For the other deals we made, we have mortgages with other banks and higher interest rates.


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