Housing history and lessons (1/2)

I’ll join the trend of reporting my short but changing housing history! But my main goal is to write down my lessons of real estate in Belgium.

My short history:

  • 2010-2011: Shared a rental apartment, 110m², with a friend in a hot spot in Antwerp. Price 850/2= 450EUR/m
  • 2012-2014: Shared a rental apartment, 180m², with 2 friends near Leuven: 1.150/3= 383EUR/m
  • 2013: Bought a major fixer upper, 180m². Renovation was ready in 2014.
  • 2017: Bought a second mayor fixer upper (2 apartments 180m² and 120m² and a home 180m²) renovation ready in 2018
  • 2019: Yes our current project is not yet finished but we already have plans for our next home. Plan is to live small and flexible. Build a movable home of about 60m². Inspiration https://www.skilpod.com/
  • Future wish 1: Live in a cohousing project with some shared infrastructure (garden, playrooms, cars, parks, ….) This would be great while our children are growing up.
  • Future wish 2: Build the Belgian dream J from scratch. The typical standalone home in a beautiful spot close to the city-center but in a peaceful land.

Lesson 1: Your house should match your current needs not your past and long term future needs.

I’m not like most Belgians strongly attached to the place I live. This idea probably started when I was growing up. I’ve moved 4 times with my parents before I was the age of 25. At the age of 25 I’ve left the home nest and moved already 3 times.

From 25 to 33 I’ve moved 3 times and there are 2 more moves in the pipeline. I have no intension in living my whole life in the same house. In fact in my mind this even seems a bad idea.

It seems the generation of our parents had the idea to build a large free standing home with lots of bedrooms. Which they only need for about 20 years until the children are out of the home. After they end up with a home that is way too big, requires too much maintenance and energy since it’s out dated.

From my point of view there are several phases in life that change your living needs.

  • Before children: Priority is a room to sleep and limit the commute time -> Live close by work and friends. Ideal for house sharing.
  • With young children: Priority: A decent home in the neighbourhood of good child care. Possibly also close to parents as they could be a great help. The required extra space is limited for young children as they will want to be near you anyway. You’d also want to limit the commute time since combining a long commute with child care and school hours is next to impossible.
  • With older children +10: I imagine you’d need more space. Living close by school will be handy since will become more independent and perhaps old enough to go to school by themselves. Living close by parents and child care options becomes less important.
  • Children our out of the house: Too much space at this point! Downsize?!
  • 65+: Honestly I see much of added value in cohousing or kangaroewonen. Not only on a financial side but mainly I think this will increase the quality of life for all involved parties. Let’s hope we have children who are open to this idea.

Lesson 2: “ready to move in” (instapklaar) is overrated

Lots of our friends seem to look for a home which requires no immediate work and is ready for them to move in. As they lead a busy life and have little experience with building I understand this reasoning. However there is a lot of competition for homes like that which inflates prices. Typically homes from the 70’s, 80’s and early 90’s are the worst. Furthermore the buyer usually pays for that kitchen and bathroom which they probably redo in a few years. And you stay stuck with that home that needs improvements elsewhere. I think it’s a better value for money to go for a completely new home or one in such a condition that requires a complete makeover.

Lesson 3: Building or renovating is a not to be underestimated job

Those who done it know it. A building project requires a lot of attention, time and stress. In return you hopefully get value. Renovating during a full time job was like having 2 fulltime jobs. Off course this can be outsourced to other architects or building coordinators but we like to do it ourselves. We decided for future project we will take a holiday for the time spend on the project

Lesson 4: Location, Location, Location, City centre or the countryside?

Yes off course the location is the most important parameter with investing in real estate. That’s the only thing you cannot change on your property and has a huge impact in value. But that’s not what I want to write about.

It’s been a long trend in Belgium that a standalone home in the country side had much more standing than a townhouse in the city. But this trend is changing. Living quality in cities has improved, gasoline has become more expensive and living close by public transport, stores and events have grown in importance. I grew up in small villages but having lived in cities I’ve become a big supporter! Do note that in each city there a different neighbourhoods  that vary much in environment.

Lesson 5: Know the fiscal implications

There a lots of fiscal rules when buying and selling a home to much to write them all in detail but a small overview off the top of my head:

  • Much of the fiscal rules are built around a “cadastral income (KI)” Which is an outdated number (not updated since 1975) that is supposed to reflect your annual rental income.
  • Your KI will determine how much property tax you pay on your home.
  • The KI will determine how much registration tax you pay when you buy the property 5% when it’s low and do not own other properties and 10% when the KI is above 745EUR. This will be reformed in the near future to 7% on the sales price. This high registration tax is also the reason real estate prices are more stable in Belgium.
  • You get a tax cut on a part of your financing. This means the interest rate on the first 100k is neutralised with the tax advantage. (free lone) Number depends on income, interest rate and based on 2 buyers.
  • If you only own one property you can get a partial refund on the registration tax if you buy and sell your current property and buy a new one within two years.
  • If you buy and sell the same property within 2 years you can get a refund of registration tax of 3/5.
  • There is no capital gain tax (meerwaarde belasting) on your home if you were registered there for one year or you owned it for more than 5 years.
  • Consider to split your mortage between a mortgage (hypotheek) and a mandaat to avoid costs related to the registration of the mortgage.

Lesson 5: Know the financing playing field

Fist of, the question is not what CAN you lend but the right question is how much do you WANT to lend.  As a general rule the banks allow you a monthly mortgage of about 1/3the of your income. But up to you to decide what kind of investment you wish to do.

As most know you should shop around for a real estate loan. I just love to do this but most of my peers seem not so keen on this. A good way of knowing market realistic rates are to check sites like rodv.be or spaargids.be. To get an idea or if you don’t like negotiating with the banks it’s interesting to go to a financing brokerage like hypotheker but generally you’d get a better deal negotiating directly with the bank.

What I do hate is the mentality of most banks this is our offer and please come back if you find a better one so we can counter it. It’s a waste of the bank’s, but more importantly also my time. I do understand the commercial reason behind this. But you can avoid this by letting them know you are aware of the current market rates and you do not wish to play the game as their default customer.
You can also save lot’s of time by calling them and check via the phone if they can improve your current offer.

What makes it difficult to compare is the products that are bound to the financing. They should be included in your comparison. Know that you can not only negotiate the interest rate but also the extra costs, fees and included products. You can even skip some products such as the life insurance if you put in enough of your own capital.

One mistake I made with our first mortgage is to pay the life insurance in full instead of over the years. I will lose this partially because we don’t live there for the entire period of the insurance.

One extra tip: If you are flipping houses you can consider a bullet-financing or a straight-loan in which you only pay interests and not capital. This makes it easier to lend a large sum.

This post is already long enough so I’ll split it up.

More to come:

  • Know your way around financial incentives
  • Bigger is not always better
  • Sharing is saving
  • Renovating know the advantages and disadvantages
  • What’s the best period to sell?
  • Return in Belgium on renting out properties
  • The advice of your parents could be outdated
  • Renting is not always money thrown away

Please also check out the posts of the community:

AmberTreeLeaves (EN)

Cheesy Finance (EN)

Geldnerd (Dutch)

Meneer en Mevrouw (Dutch)

Hypotheekweg (Dutch)

Lekkerlevenmetminder (Dutch)

Divnomics (EN)

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3 thoughts on “Housing history and lessons (1/2)

  1. Great post, and interesting insights too. Love the story on flipping houses, I’m just still a bit afraid of the amount of work involved (because we have had contractors do similar work for us, and they are fast!).
    Looking forward to the next post!

    Like

    1. Hi CF,
      Thanks and you’re right there is a lot of work involved in renovating.
      Off course we pick projects that no one sees any value in and do a major makeover. This is very work intensive but we believe this is where our (my wife’s) added value is.
      Contractors do a faster and better job than we could so we to try to outsource the bulk of the work. But still it will require a lot of work coordinating, choosing, checking and explaining. We’ve found it’s the best value if you hire labor on hourly rate and instead of a fixed price (with reserves). Off course this does require some knowledge in construction too not get ripped off.
      Another way of flipping is buying cheap giving it a lick of paint a new kitchen and sell it again. A lot less work, a bit more risk. Not sure if this our thing. Time will tell.

      Like

      1. I’m a fan of managing the work myself and hire labour where I lack the knowledge or skills, makes for a good combination (the management part I do as port of my work, this helps).

        Like

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