All Forum Posts by: Bas Land

Hi BP!

I would like to tap into your collective knowledge to help me make a good decision. 

I'm 23 years old, wanting to get started in real-estate (long term buy and hold) but don't have enough saved down for a 30% down payment (required in The Netherlands). However the real estate market is recovering from a recession in the last couple of years and rents are inflating even faster than property value. It seems like a good moment to get into the market now (although I'm already exposed to appreciation through my residential property I would like to add another one as a rental).

I found a partner with money and a lot of real estate experience in the UK that is willing to invest in The Netherlands with me. I know him through work, we're both consulting to the same client/project and therefore work together a lot.

The deal we came up with is the following: 

1. We divide the ownership 1/3 for me and 2/3 for him (both ownership, appreciation, cash flow, mortgage etc)
2. He will put down 60% on his 2/3rd of the mortgage, thereby allowing me to put down only 10% on my 1/3rd
3. The price for this is my "sweat equity" by doing all the work regarding the acquisition of the property, sorting out the mortgage etc.
4. We will look for a 40-50 sq. meter studio and convert that into a 1-bedroom apartment to add value (in Utrecht comparable sized 1-bedrooms are more expensive than studios)
5. We'll rent it out, split all costs and profits according to the 1/3 and 2/3 ownership
6. After a few years we refinance (when there's enough capital in the property by adding the bedroom plus hopefully appreciation), and that's where he pulls out all his initial capital plus some (effectively going from 60% to 70% LTV and upping the mortgage), and I will pull out a little bit of capital because I will go from a 90% to a 70% LTV.
7. I will be doing the property management, for which I'm getting paid (we work out the going rate, and he will pay me 2/3rds of that monthly rate out of his cash flow so effectively we're both paying according to the partnership split but I'm receiving the money)
8. I will be able to tap into his experience and knowledge with a small amount of money into the deal during the start. 

How does this sound to you guys? Any red flags I need to take care of, or tips/tricks? I hope we can discuss this in depth :)

Thanks in advance!

Cheers,

Bas

Thanks for the responses guys. Nice to see some fellow Dutchies on here. I will definitely keep you updated. 

Hi all! Let me introduce myself on these forums!

I'm Bas, a 23 year old guy from Utrecht, the beautiful city in the center of The Netherlands, about 30 minutes from Amsterdam. Since about three years ago I'm really interested in personal finance and financial indepence. Since I started working two years ago I've been saving and investing my money in the stock market, in a few broadly diversified and cheap index funds diversifying over the US, UK and continental Europe as recommended by almost all personal finance experts.

I earn a living as a business consultant, advising clients about and helping them implement information systems, financial/management reporting, and how to automate this process.

I've gotten interested in real estate investing because it is a little more hands-on than the financial markets, plus the tax system in Holland is very REI-friendly (we basically pay no tax on our rental income). Also, since you can leverage your investment in properties, returns can potentially be higher. Through this interest I started to Google and found Biggerpockets. I subscribed to the podcast on iTunes and listen to it every week since. Since I travel a lot as a consultant I try to use that time to catch up with the podcasts.

My original plan was to keep dumping my money into the markets and in a year or 5 buy my first property when my nest egg is large enough for a down payment (typically 30% on an investor's mortage). However I found a partner that is willing to help me get into the real estate market a little sooner than that through a combined deal that I will talk about in another post in the deal analysis forum.

I already own an apartment in the city, where I currently live. It's a nice place, in a really new (2012) building (so no big mainenance), and also I got really lucky with the market conditions, both buying near the bottom of the Dutch real estate market, and right at the bottom of the interest market. This means my costs of living are low through a small mortagage (1.9% 30 year mortage 10 year fixed interest rate). But it also exposes me to some appreciation and capital gains since the real estate market is rising again and the city of Utrecht itself is booming already. 

I'm looking forward to meeting people here and learning a lot!

Cheers,

Bas