Real estate investment in Denmark

[John Libbert]

Hi all,

My first post here on BiggerPockets. Fantastic site, wish I had found it sooner.

I decided that I today had to post on this forum and would start with a question about your take on investment strategies in Denmark.

Some basic information about real estate in Denmark.

Rents

Tenants are well protected in Denmark. For example if a tenant feels like the rents is too high, this person can file a complaint to an institution. If the institution rules in favor for the tenant the future and historic rents can be adjusted. So you actually have a risk that you have to pay back rent to the tenant. I have heard of situations where a rent has been adjusted from $1.200 a month to $400 in a $400.000 property. Who would move from that kind of rent?

So the 2% rule (rent / purchase price) is almost impossible in Denmark. The ratio would most often be around 0,5%.

Tenants

Not many tenants rent a family house in Denmark. Therefore, in most areas you have few potential tenants for a single-family house. This does not go for apartments - easy to rent out.

Home improvement / construction

Contractors cost around $60-$80 an hour, so more expensive than other countries. However most Danes does not want a DIY project.

I just read an article stating that new development in Denmark is more expensive that most parts in Europe.

Selling a home

It is difficult getting a real estate license. Lawyers can do deals, but most people (non-professional) will only purchase through real estate agents.

Selling a $300.000 house will often cost $10.000-$15.000 in commission and fees.

My thoughts on a strategy.

Buy multifamily homes -> do repairs -> rent out for 3-5 years -> sell or keep for longer period.

This is based on:

• Few people want a DIY project, hence many good deals out there.
• It is fairly straight forward to build equity, that is getting a valuation that is higher than purchase price + cost of improvements
• Rent / price of property ratio is low, so difficult to get a good return on rents.
• Selling costs are high
• The market is still recovering from 2007 crash.

Example

My house is a multi-family. The numbers are:

• Purchase price: $380.000
• Costs of improvements (used much of my own time): $70.000
• Current valuation: $530.000
• Monthly rent: $2.000

Note: I currently have two apartments and a multi-family house (buy and hold).

Hope to hear your take on this!