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Buying an apartment as an investment

Things to consider

LockStock
post 22.Aug.2014, 11:28 AM
Post #1
Joined: 11.Dec.2011

As the rental prices have gone up significantly, while the interest rates are at almost all time low, i m thinking that it might be a good time to buy a second apartment for investment (i.e. renting out) as well as to be able to pass to the kids in the future. But I have several questions..
Is it possible according to law or föreningen policies and general bank practices (thinking of taking another mortgage) to own another apartment where I am not registered at (I am thinking maybe my wife could register herself there)?
If so, would I get the tax deduction (skattereduktion) on interest on both mortgages? Or just for the apartment I am registered at?
Any other pros and cons?
Any advice appreciated. Thanks!
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LLHope
post 22.Aug.2014, 12:13 PM
Post #2
Location: Stockholm
Joined: 1.Jan.2014

The BRF will have rules about if you are allowed to rent out and for how long, standard is 1 year and extendable with good reason. Whilst the law was changed to weaken the BRFs position it was specifically not changed to allow buy-to-rent. You have no right in law, nor via Hyresnämnden to be allowed to rent out just for economic purposes, unless it is because the market is weak and you cannot sell the property. So in all likelihood the BRF would not let you.

Most BRFs expect, and check occasionally, that the BRF member that bought the share is actually registered at the address, if they find you are not they will know you are renting out and might take action to get you to sell.

And remember, if you register your wife at the 2nd address and also rent out, Her official post, and other things where they get the name and address from the population register, will go to that address and potentially disappear into the hands of anyone you rented to, who might by accident break the law by opening the post!
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LockStock
post 22.Aug.2014, 12:53 PM
Post #3
Joined: 11.Dec.2011

Hi LLHope.. Thanks for the valuable comments!.. I understand that the BRFs still have the power to decide whether to allow renting or not.. But is there anything that prohibits me from buying a second apartment even if I do not rent it out? Just keep it without actually living there? I still believe it is a good investment even if I do not rent it out.. Especially with the low interest rates and the rising prices (No, I do not think or believe that there is a bubble in the economy, especially with so many newcomers to Stockholm area, so not much worried about losing money in a bubble burst especially given that it is a long term investment that I intend to make).
Do banks/BRFs/legislation have anything that would prohibit one from owning 2 "bostadsträttslägenhet"s?..
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magg
post 22.Aug.2014, 02:26 PM
Post #4
Joined: 7.Oct.2013

QUOTE (LockStock @ 22.Aug.2014, 12:53 PM) *
I still believe it is a good investment even if I do not rent it out..


Please share the math because I would love to hear it.
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Localer
post 22.Aug.2014, 02:32 PM
Post #5
Location: Stockholm
Joined: 27.Oct.2006

been there done there. you can always rent it out, just get an approval from BRF, they wouldn't ask anything or specific reason why you rent it out, just say you move to your sambo or new apartment.
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Somebody
post 22.Aug.2014, 09:13 PM
Post #6
Joined: 17.Oct.2011

QUOTE (Localer @ 22.Aug.2014, 01:32 PM) *
been there done there. you can always rent it out, just get an approval from BRF, they wouldn't ask anything or specific reason why you rent it out, just say you move to y ... (show full quote)

So you mean there is no time limit for that...you can rent it out for example for 10 years if I want to?
or even leave the country and still rent it out?
well...that's how it works in "normal countries"
It is quite ridiculous that you pay 2-4m for an apartment and still have to get an approval to rent it out?

or maybe there are different rules for hyresrätt and bostadsrätt? blink.gif

The whole market is weird here. It is based on buying and selling and then driving to IKEA with their ugly V70's to
buy crap furnitures...and then you pay just a fraction of capital part of a mortgage and full interest.
or they give you a mortgage for 50 years even though you are in your late 30's unsure.gif

perfect for the banks...not so great for the owners when market collapses...and it will, it simply has to..
give it a few years..it does not make so much difference for someone who wants to stay here
but if you want to leave and you are forced to sell (can't rent it according to BRF) then you are screwed! sad.gif

please, do correct me guys , if I am wrong...
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Cheeseroller2
post 22.Aug.2014, 10:55 PM
Post #7
Joined: 4.Jul.2009

Buy a house and then no problem with BRF.

If someone could tell me how to make money renting an apartment I have, it would be great. I tested this last year and the price people were willing to pay for an apartment in Vaxholm only covered the BRF fees and the interest payments on the mortgage.
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Mib
post 22.Aug.2014, 11:24 PM
Post #8
Joined: 7.Jul.2006

Some people are Malingsbo money bugning apartments off plan and them selling them on at a profit without ever moving in. It's all about timing to make money as with everything. Alternativet, find a renovation job at an apartment
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Somebody
post 23.Aug.2014, 09:22 AM
Post #9
Joined: 17.Oct.2011

QUOTE (Cheeseroller2 @ 22.Aug.2014, 09:55 PM) *
Buy a house and then no problem with BRF. If someone could tell me how to make money renting an apartment I have, it would be great. I tested this last year and the price peop ... (show full quote)

well...at least it does not cost you anything and you should make money selling it with a profit...that's how it works here..
It is all based on rising property prices..people do not pay off they mortgages just move to bigger apartments
and possibly pay more deposit on it, if they made some money on previous sale..
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gplusa
post 23.Aug.2014, 09:44 AM
Post #10
Location: Luleå
Joined: 4.Sep.2009

At the risk of repeating the various threads already addressing this issue, you do not buy an apartment in a BRF. You apply for the right to buy membership into an association. That membership comes with use of an apartment for the duration of your membership. You sell your membership, together with the right to use that apartment. Initial membership is subject to the approval of the board. The board have several criteria to consider before approving membership, such as your ability to pay the monthly association fees. They can also look at other factors, such as proof that the apartment will be your primary place of residence. Different associations have different criteria, depending on the general membership demographics and what the association is trying to achieve. Once approved, there is the possibility to rent your apartment out, for a pre-determined fixed period of time, with the agreement of the board. A reason for the rental must be given with the application to the board, such as an extended work period away, or study abroad. It is generally permissible to rent out an apartment to immediate family members. The BRF market is not designed to be an investors' market, and nor should it be in my opinion. There are plenty of other countries to do that in if that's your aim. Pick one of them.

And lay off V70s.I have one and I even used it to drive to Ikea and buy my new kitchen. Got a problem with that ?
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Localer
post 23.Aug.2014, 01:10 PM
Post #11
Location: Stockholm
Joined: 27.Oct.2006

We bought an apartment in Liljeholem by the water since 2009. Then 2012 bought an another newly built 72 sqm apartment in Fruängen for 1.7 MSEK, sold it for 2.6 MSEK year later. Then bought an another 76 sqm apartment in Liljeholmen for 3.2M SEK, moved in and stay here since Jun 2014 and rent out our old apartment for 17,500 SEK per month.

Now basically we are paying only around 6000 SEK for both apartment.
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Opalnera
post 23.Aug.2014, 01:43 PM
Post #12
Joined: 16.Aug.2010

QUOTE (LLHope @ 22.Aug.2014, 12:13 PM) *
The BRF will have rules about if you are allowed to rent out and for how long, standard is 1 year and extendable with good reason. Whilst the law was changed to weaken the BRF ... (show full quote)

'
Spot on as always.

QUOTE (Localer @ 22.Aug.2014, 02:32 PM) *
been there done there. you can always rent it out, just get an approval from BRF, they wouldn't ask anything or specific reason why you rent it out, just say you move to y ... (show full quote)


That depends on the BRF, some are more relaxed than others, it depends on the board.

QUOTE (Mib @ 22.Aug.2014, 11:24 PM) *
Some people are Malingsbo money bugning apartments off plan and them selling them on at a profit without ever moving in. It's all about timing to make money as with everyt ... (show full quote)


This is a very common practice, it's a bit of a gamble though. I know some people who did it in Uppsala in Kapellgärdet and unfortunately they were forced to sell the apartment for cheaper than they bought it because more apartments were being sold than there was demand for in that area.

We bought an apartment in 2010 and sold it in 2013 with a 500k profit. Once you factor in taxes, real estate agents fees and the cost of renovations (which are not entirely tax deductable) we ended up with about half of that in our pockets.
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LLHope
post 23.Aug.2014, 09:35 PM
Post #13
Location: Stockholm
Joined: 1.Jan.2014

QUOTE (LockStock @ 22.Aug.2014, 11:53 AM) *
Do banks/BRFs/legislation have anything that would prohibit one from owning 2 "bostadsträttslägenhet"s?..

You have to check with each organisation, there is no law that prevents you owning more than 1 apartment, but there can be tax differences wen you sell 1 of them. e.g. You may have to pay the tax on any profit immediately and cannot defer it.

BRFs have their own rules, most are similar and many do require that the property be the primary residence, which they check every now and then in the population register.

Banks can sometimes be a little fussy, one can always negotiate wink.gif Some have a general policy that they do not want you to have 2 apartments and insist one is sold within a certain period, but again it is a general policy and can be negotiated. Others will not allow a standard rate on the 2nd property so you may end up paying a slightly higher interest rate. As always with banks it is the ability to pay and your general worth that is the guide.
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skogsbo
post 24.Aug.2014, 07:23 AM
Post #14
Joined: 20.Sep.2011

QUOTE (Opalnera @ 23.Aug.2014, 01:43 PM) *
Once you factor in taxes, real estate agents fees and the cost of renovations (which are not entirely tax deductable) we ended up with about half of that in our pockets.

QUOTE (LLHope @ 23.Aug.2014, 09:35 PM) *
Banks can sometimes be a little fussy,

Agree.

You really need to do your maths in advance and have very realistic, not dreamy eye projections.

Sweden differs from many countries in that the rental income allowance which is tax free (50k kr) is the limit. It does not matter if your loan interest rates are higher etc..which in some countries are offset against income. Many banks will charge you more if they know you are a landlord and I would imagine most will have small print clauses saying you need to tell them if you change part way through an existing loan.

As localer has shown, you can make money, but you need to know the game and the area you are shopping in to limit your risk.

Houses - few Swedes rent houses, often just as a stop gap between properties or people moving abroad buying themselves 6mths breathing space. You'll be forever advertising, changing tenants, handing over etc.. Just a 1 or 2 months a year without rental income will kill any margin you have. On our UK property we probably charge about 5-10% below the market rate, our letting agent keeps asking us to put it up, but keeping it sensible means you keep your tenants longer. But, you don't want to go too budget and attract dross. Better to buy a smaller place in a nicer area, you are more likely to get better, low maintenance tenants.
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LockStock
post 24.Aug.2014, 09:03 AM
Post #15
Joined: 11.Dec.2011

Thanks for valuable inputs!!

Well as I said i believe it is a good investment to buy an apartment in Stockholm. Especially once with UTHYRNINGSDEL in it.. i.e. separate room with a second entrance + bathroom..its like "owning" (for the lack of a more practical word for the Swedish setup) two apartments..

Magg.. regarding the math..I currently own one apartment with the above specific, and rent it out which more than covers my monthly avgift and some of the interest payments.. i bought it in 2012 with around 400k downpayment (i.e. initial investment) and now the prices have gone up by almost a million.. which I think is a pretty darn good Return On Investment..

Localer... Did you pay cash for the second apartment or got another mortgage? If so which bank gave the second mortgage?
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