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Investing in real estate is an effective way to increase your wealth, but to ensure your investments are working for you, you need to ensure the property is rented out as much as possible. It is this activity that can cause stress and worry, but it can all be avoided as long as you are well informed about the potential risks and how you can mitigate them.
The “Yes, but” that you hear the most
When you tell your friends and family that you are going to rent out property, there will undoubtedly be a few that say “yes, but”… This is why I thought it would be a good idea to list the most common “yes, buts” and how you can solve them.
Yes, but what if your tenant does not pay you?
Rent arrears are indeed very annoying, but let’s face it, it can happen to anyone. Even the tenants who look the best on paper can stop paying their rent all of a sudden because, for example, they lose their job. More importantly, how do you solve this?
You must report a non-paying tenant as quickly as possible to a collection agency or bailiff, ideally immediately after not having received rent for one month. Why? Because a bailiff or collection agency is not emotionally involved with the tenant and they act on behalf of your interests. As a landlord you can sometimes be receptive to the arguments of a tenant, allowing them more time to come up with the rent, but this will only increases the debt and vacancy percentage.
By reporting them immediately you also build a good paper trail, which you may need if matters end up in court. If a tenant does not pay for three months, you can immediately apply for evacuation at the court. The quicker the tenant is out, the quicker you can rent out your home to another tenant.
It is also possible for the tenant to make a payment arrangement with the bailiff. They will keep an eye on this for you. This saves you extra work and stress.
Yes, but what if the tenant damages or even destroys your property?
One “Yes, but” that we hear a lot is the potential damage caused by the tenant. Damage is of course relative. If you rent out a property for a long period of time, wear and tear is normal. Marks on the wall and scratches on the floors are to be expected. However, it does sometimes happen that a tenant causes extensive damage to a property, such as breaking doors/windows or worse… setting up a marihuana plantation!
These are damages that can run into the tens of thousands of euros. These risks can also be limited. Everything revolves around proper screening of the tenant. There are initiatives on the market where you can have your property insured against marihuana plantation damage with a well-approved file from the tenant. One such initiative is, for example, Huurcheck in the Netherlands.
Yes, but what if I cannot get rid of a tenant?
A doom’s day scenario for many landlords. “What if I can no longer get my tenant out of my building?” The rent law has changed since the 1st of July 2016 in the Netherlands. An important change was that from that date onwards, landlords are allowed to provide fixed-term contracts. This means that you as a landlord may provide a contract for a minimum of 6 months and a maximum of 24 months, whereby you can let the tenant know at the end of the contract that the contract will not be renewed. This must be done at a minimum of 1 month and maximum of 3 months before the end date of the contract. In that case, the tenant must leave the property and cannot rely on rent protection.
How do you provide the correct rental agreement?
Tenants have a lot of rights and that is why it is important that you, as the landlord, enter into the right rental agreement, so that your rights are also guaranteed. The agreements that you make with your tenant are laid out in a rental agreement. Rental agreements come in different types. Therefore, make sure that you enter into the correct rental agreement that matches your wishes as a landlord A fixed period rental agreement
As mentioned above, since 2016 it is possible to provide a fixed period rental agreement. In this instance the rental agreement terminates in accordance with the law after the term and the tenant cannot rely on rent protection. Make sure you meet the following requirements:
-The rental agreement must be for a term of minimum 6 and maximum 24 months
-The tenant may cancel the agreement at any time during this period with 1 months’ notice
Make sure you inform the tenant within a minimum of 1 month and maximum of 3 months prior to the termination date of your wishes to not renew the agreement
Some landlords benefit from long-term rental or want to keep their tenant to a minimum period. In that case you must conclude a rental agreement for an indefinite period. As a landlord you can specify a minimum period within this lease. This means that you can, for example, include the fact that the tenant may not prematurely terminate the lease during the first 12 months.
After the expiry of the 12 months, you as a landlord cannot simply expel the tenant from the home. You can always make a request for termination to the tenant, but if the tenant does not agree with this, you can only submit a request for eviction through the court.
How do I take care of the maintenance of my home?
Finally, property maintenance gives landlords a lot of stress and worry, because it is difficult to decide who is responsible for what.
I sometimes compare a home with a car. Like a vehicle, a home needs regular maintenance in order to continue to function. During the rental period, the tenant is responsible for minor maintenance. This is precisely described in the “Small Repairs Decree” in the Netherlands. As a landlord you are responsible for major maintenance. Think of replacing a shower or painting the outside of a property.
I always advise landlords to give the property a kind of MOT when they change tenants. Everything is checked and repaired at that time. In this way the property remains in good condition and the tenant can use a rental property without surprises.
Investing in real estate without any stress?
For real estate investors who do not want to experience any stress at all and do not want to deal with the headaches of dealing with tenants or paperwork, there are alternatives. For example, you can invest in a real estate investment fund
Investment funds come in various formats. Terms are usually between 5 and 10 years and yields can be fixed or projected. The big advantage of investing in a real estate investment
fund is that are not confronted with renting out property or managing the property and you are part of a bigger portfolio (spreading your risk). Besides that, you have the ability to start investing from a small amount of money and invest in various funds, which spreads your risk even more.
Would you like to receive more information about this subject or other real estate related subjects? Feel free to contact me! You can also follow me on LinkedIn.
Written by Esther Dekker Msc., property director of Max Crowdfund and Max Property Group and rental specialist at Max Property Rentals in Rotterdam.
About Esther Dekker Msc.
Esther has worked in the residential real estate industry for over 15 years and now boasts an abundance of experience in the Dutch property market. She is highly qualified to provide professional advice on many real estate issues, having earned a postgraduate title in social sciences specialising in real estate and as a member of the VBO (Real Estate Professionals Organisation).
“Creating possibilities and using new technologies in this dynamic market is what gets me out of bed every morning