Buy a student house and rent out a room to your own child, family or others

Renting out a room to your own child to help them during their studies is of course very nice. But buying a student house can also be a smart investment for you. Especially if your children also invite friends. The knife cuts both ways, but it is a choice that you should consider carefully. We are happy to tell you more about it.

Buying and renting out a student house: the buy-to-let mortgage

Do you want to buy and rent out a student house? Chances are you don’t just have that amount in your bank account. Fortunately, there are solutions to arrange financing. For example, a buy-to-let mortgage. This is very similar to a ‘normal’ mortgage, with a number of differences. With a regular residential mortgage you may not just rent out the house, with a rental mortgage you can.

The interest rates are on average a bit higher and there are additional requirements for the collateral. For example, the appraisal report, in which you must have the ‘value in rented condition‘ included. This value may differ from the market value.

Buying a student house, should you bring your own money?

With a rental mortgage you will almost always have to bring your own money. This is an important difference compared to regular mortgages, where you can borrow up to 100% of the market value, and most lenders allow you to borrow up to 85% of the rental value. You pay the remaining 15% (or more) plus the buyer’s costs yourself. A considerable part of the buyer’s costs of a student house is the transfer tax.

If you can purchase the student house competitively or inherit the house, it may be that you do not need your own resources.

That doesn’t mean you have to have all that in your savings account. You can also use the equity in your existing home to buy a second home. You can read more about this in the article ‘Withdrawing home equity to invest in real estate’.

In addition, you must be able to bear the mortgage costs on your income. What makes this calculation a bit more favorable is that the future (expected) rental income of your student tenants can be (partly) added to your income. The income from rent is added to your income in box 1.

With providers of a consumer rental mortgage, your borrowing capacity will always be looked at on the basis of your current income. If you can qualify as a professional real estate investor, there are lenders who only assess the real estate. In that case, income is less important. The quality of the property is central and whether the rental income can bear the costs of property financing.

Room rental: what are the rules?

Do you want to rent out the separate rooms in your home to people on separate leases? We call this ‘room rental’. Many lenders set certain conditions here. With some providers of rental mortgages, room rental is only permitted if at least one family member up to and including the 2nd degree lives in the home, for example a child, sister or brother-in-law. Third-degree relatives, such as cousins ​​and aunts, are not allowed.

Are there more things to consider? You can read more information about this in the following article ‘Buying a house to rent out, you should pay attention to this.

Student house and tax

In principle, rental income is tax-free in box 3. You therefore do not have to pay tax on the basis of the income from room rental. Because the student house is not your owner-occupied home, it automatically falls into box 3 as an asset. You pay wealth tax on the difference between assets and liabilities. With the arrival of the bridging scheme box 3 and the update of the empty value ratio, a number of tax matters have recently changed. In the future, the current government wants to levy a levy on the actual yield. A Bliss adviser can advise you on these tax matters.

Student house and municipality regulations

With the advent of purchase protection, many municipalities have introduced rules. Although an important exception to the purchase protection is renting to family, it is important to pay close attention to what is and what is not allowed within the municipality. Rules may also apply within the zoning plan, whereby the use of a home or parts of the home as a room rental company is not permitted.
If a home is not used for residential purposes, but for Bed & Breakfast, room rental to students or migrant workers, or if the home is split into two homes, this is called home withdrawal. If a house will be used for other purposes, you will need a withdrawal permit. This can also be referred to as a room rental conversion permit.

Rent out a room to your own child

Are there any other rules attached to renting out a room to your own child? In principle, your child will be treated as a ‘normal’ tenant. Please note that you ask for a reasonable rental rate. What is reasonable? The Tax and Customs Administration assumes the WOZ value of the home and considers 6% of the WOZ value to be a reasonable rental rate. If you ask little or no rent, it can be seen as a donation by the tax authorities. You may be charged for that.

What about the Owners’ Association (VvE) if my student house is an apartment?

Is the house you want to rent out an apartment? Then you may need permission from the Owners’ Association (VvE) before you can rent out. Sometimes additional conditions are included, for example that only a certain group may be rented (for example, the elderly or students). Sometimes rental is even prohibited by means of the deed of division. Read this deed carefully before purchasing and renting out the apartment.

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