Wholesaling in Netherlands legal?

Question

Dear all,

I am a dutch engineer living in Taiwan. Started from last year september i started to focus on investing in realestate. I have been reading lots of books and keep listening to the podcast. After a few months of reading I decided the most important thing is to take action. Because i lived on the other side of the world, it was difficult to do walkthroughs and put out offers. Since then i have done 15 -20 walkthroughs and have put out 10-15 offers. Non of them were taken. But hey its a numbers game right, so i keep on going.

After a while the market got so hot that it is difficult to find deals on the market. So i switched to deals that are of the market. Thats when i found a great deal.

It is a legal rent by the room house(kamerverhuur pand). It has 14 rooms and a good cash flow. I think it would be an amazing deal to wholesale. Since i am at not in the Netherlands to deal with all the tenants moving in and out, the deal is not that interesting for me.

I was trying to google (in dutch) about wholesaling but couldn’t find any i formation. Is it legal to wholesale houses in the Netherlands?

Anyone has any experiences  wholesaling in Netherlands?

Thanks everyone for your time!

Ivor Grisel · Answer

Hey Tamar,

Wholesaling is legal, but most people don't like it because it gets used by criminals to launder money. So in Dutch, it is known as a ABC deal. A sells to B and B sells to C.

If you do this, be sure to get a notary which is familiar with these kind of deals as most of them are not that keen on doing them (they don't want to help criminals obviously).

Also be aware that some buyers won't like this (again, criminals...). So be aware that that might happen. It might also be that the government might be coming knocking on your door, as they might be curious to see where the increase in property value came from.

Also be aware that you have to have a fallback plan. If you get the property under contract and the buyer backs out, you will have to purchase it or forfeit the koopakte, which will result in quite a hefty fine (because of the 14 students).

Also curious about the deal (as I might wanna do these deals in the future). If it is a student house with 14 students and good cashflow, the owner is probably an investor right? So why would he give you a deal which can make you enough money to consider this? And do you have a network to sell it to? Have you compared other investment properties out there? Are you also taking into account taxes, as these kind of deals might fall in Box 1, which results in you having to pay quite the amount to the government? And I don't want to burn the deal, just being the devil's advocate here to make sure you covered your bases.

Hope it works out!

Wouter Krusemann · Answer

Plus the added benefit that property in Zeeland has that u can always rent it by the night to tourist. Tourism has been a major economic driver in that part of The Netherlands so I think that will a good alternative.

Ivor Grisel · Answer

You are using professional knowledge to gain profit. The government might consider that regular work. They might not mind for the first property, but if you stack up a few during a year, they will take notice and you will be taxed in Box 1. You could of course do it anyway, take a risk they won't find out. Just be sure to keep some cash on hand, in case they figure it out later and you have to pay them back.

You should listen to the podcast from Esther Dekker from Max Property Group, the one about financials. The question of Box 1 and 3 is discussed there. It might help out in your consideration.

Ivor Grisel · Answer

Yes, I have a property which is used on a per room basis. I don't need a license yet (under the norm in Arnhem of more than 4 you need a license - but that will change). You never know if they are going revoke the licenses, but I don't think they will anytime soon. If they would, they would need a very good reason. And doing that, they would remove a big chunk of living for students.

But if you are in doubt, what are your other possibilities? Can you rehab it into appartments or studios? Or maybe revert it back to one house and sell it that way?

So what we're doing is paying off the mortgage, so our loan to value becomes less. In the case we are forced to sell, we have less to lose. We might even get out on top by rehabbing it and either renting it out as a regular appartment or sell it at that point.

I'm not sure how Middelburg is like, but having a property with a student housing license on it can be quite valuable if the municipality is not handing them out anymore (or it is harder to do it).

If you keep it yourself, Box 1 won't be a problem, you can keep it in Box 3.

Also, you can always see if you can sell it and what people are willing to pay. If it doesn't pan out the way you want, keep it yourself.

But 850k isn't a small deal. How did you find it?

Tamar Oranje · Answer

@Ivor Grisel thank you for your reply! Thanks for explaining the abc deal. I will look further into this.

I have started to shift my mind toward keeping the deal.

The deal is good in my opinion, but its difficult to get comps. Since it is located in Middelburg, Zeeland. I didn’t find any recent sales in the area for these kind of properties. So i compared with deals on belegginspanden.nl. All current listings use ratio’s higher then 13.

The purchase-price: 850.000 and the net income of the property is 5900 a month.

The ratio : 12.

In 2014 there was a sale of a 8 unit student house in middelburg with a ratio￼ of 12.1. The cash flow like this would be around 1000eu a month. I didnt take taxes into account but calculated for a property management company . I think that should save me from box 1, right?

I have some worries about the property since it has a relatively high m2 price, so if it would loose the license to function as a “kamerverhuurpand”, it would loose value. Not sure if the government can pull the license though.

Ivor, I remember you did a deal with kamerverhuur before. Did you ever think about this before? How would you deal with that?

Any other things i need to keep in mind if i continue with this deal?

Wouter Krusemann · Answer

Hi Ivor,

What would define wholesale as income. The sale of an asset, or the right to buy this asset would be defined as capital gains and therefor qualify as box 3?

Wholesaling in Netherlands legal?

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