New Belgian 25yo Real Estate Investor :)

[Thomas L.]

Hi BP'ers! Let me introduce myself :)

I am a 25 yo Belgian dude from the Antwerp area, now looking for my first multifamily property. I am looking for a 2-5 unit property with 8-10% gross return.

I know that a lot of you guys are looking for 12% + deals, and use the 1% or even 2% rule, but in Belgium, the real estate market is a little different. Which is awesome btw :) I'm not complaining at all. But it might be interesting for you guys to see what the market looks like overseas. 

• expensive housing: Belgium is a reaaalllyyy small country, with way too many people living there. The population density is 10x as high as in the US (372 vs 35 per sq. km), so properties are quite expensive. In the Antwerp area, where I am looking to buy, the price for a small (1-2 bedroom) appartment is about 120-150k. That's in euros, so x1.2 for dollar amounts. For a small single family house you easily pay 250-300k euros.
• low rent: renting out that same 150k appartment will make you about 600-650 euros/m, which is still decent. Renting out that 250k house on the other hand, will only make you about 750- 850 euros. That's only a 3 - 3.5% gross return for landlords..
• high acquisition costs: for a rental property, you will pay 10% "registration costs" on top of the purchase price. Add notary costs, mortgage costs, etc and you will often end up with 13-15% acquisition costs on top of the purchase price. Remember that 250k small single family house? Add about 35-37k acquisition costs to it that you will have to pay out of pocket.

So why would I still want to invest in real estate? Because we can still make 50% return on investment (ROI) per year. Here is why.

• cheap loans! This is the big one. If, like me, you take your time to compare banks and mortgage brokers, you might be able to find a loan at about 2% fixed interest. Recently I found a bank who eventually offered me a variable interest rate of 1.18%! Worst case scenario, that interest rate can double to 2.36% in a couple of years, but hey that's still incredibly low. And it won't make my montly payments more expensive. The extra interest cost will only add some extra months to my 20 or 25 year loan.
• 100% loans! For every property I will have to pay the acquisition costs, but after a long search I found a couple of banks who offered to loan me the full purchase price, over a period of 20 to 25 years.

If I combine those 2, that means that for a 200k property, I only pay off about 750 euros/month (4.5%) over a 25y period. Add an extra 1 or 2% for all kinds of costs like property taxes and reparations. Total cost: +- 6%

So remember I said in the beginning that I would love to find a 9% ROI property? That property will cost me about 6% a year (which pays off the loan for me) and make me another 3% passive income on the total value of the property! On a 200k property, that means:

• 12k costs (loan, repairs, taxes etc)
• 6k extra income (€500 a month in the pocket)
• ROI on my acquisition costs (30k), the only thing I paid out of pocket = 6k (increasing) cash + 9k loan payoff + property appreciation makes an easy 50% ROI possible.

Rental prices will be indexed every year, so that number will rise and so will the value of the property, while the loan will always stay at €750/month.

Of course, the example above means I will have to find a property which makes about 1500/month rental income which is really hard but not impossible. I just keep searching through thousands of listings to find that one multi-family gem  ;)

That was it guys! Leave a comment or ask all your questions! 

Thomas

[Robin Dassy]

Hello Thomas,

Good to see I'm not the only Belgian on here, I'm from Liège (Luik) myself. I'm currently living in Texas, looking to find a great deal in my market within the next 6 months. I really thought a bunch of strategies such as BRRRR would not be possible in Belgium, making it harder to keep purchasing properties in quick succession. Also the notary fees and closing costs are outrageous compared to what you pay out here. I'm also not sure property with delinquent taxes are easily accessible as they are here.

I guess this is mostly offset by the lower interest rates, I remember my family being completely shocked when I told them what mortgage rates are in the U.S.

Glad to see you still worked out numbers that would make it work for you in the homeland! I really hope you’ll be able to find one of these deals. What areas have you been looking at so far? Have you considered maybe acquiring a building with the potential of being turned into multiple “kot” student apartments in the big university towns? I hope you’ll find a great deal pretty soon, looking forward to seeing updates from you.

As for investing in the U.S., you can't really buy property without preparation. For example, you will need to apply for an ITIN number, which is a tax-processing number assigned to foreign nationals who are required to have a U.S. taxpayer identification number. I would advise you to do some research and potentially connect with people here, such as attorneys and/or seasoned investors, who have experience dealing with foreign investors. A good way to start your research would be to start looking into the legal side of it, and most likely to explore the terms of purchase of any State you're looking into. This Zillow Foreign Buyer's Guide would be a good start.

Let me know if I can be of further assistance.