Amber Tree Leaves

Roth IRA Challenge: Amber Tree Leaves

The reds are running and I’m off with the family to go fishing! (I’ll reveal this year’s catch on the blog next week!) Meanwhile, today’s Roth IRA Challenge comes to us from Belgium! The author of Amber Tree Leaves is another parent on the journey toward financial independence. Go check out his blog! Today’s post discusses real estate in Belgium with fascinating perspectives on ownership and its implications. Enjoy!

Back in 2001, when I broke with my girlfriend, I moved back home. After a few years living alone when studying, and then with the girlfriend, it was a change in life. Time to get a place of my own.

After looking around, I did find a nice duplex in a smaller town in Belgium. The construction was still ongoing, so I could choose myself some of the finishing. I went to look a few times and decided to buy it.

With the help of my parents and a bank loan, I got all the cash I needed to buy and decorate the house.

The big mistake I made: I did not negotiate the loan with my bank. It took the first offer they made me. It was a yearly variable rate. Due to luck, the years after that, the rate dropped and I got to shorten my mortgage duration. This was actually a good feeling. Seeing that it would take a few months less to own the place was great.

When living on my own and paying a mortgage and other apartment related costs had an impact on my budget. A few months, I spent way more than I earned. At this time, I got into serious budgeting and follow up, including paying myself first and saving for holidays and an emergency fund. In a certain way, this was the start of my money aware lifestyle that I still have today and are the basis for our savings rate.

Fast forward – meeting my future wife

When we first met, I owned an apartment, she rented. After a few months, we decided to live together. This reduced my expenses and I was able to save more.

As the relation went well, we decided to make the next move: buy a house so our future kids can play outside. After more than 50 visits, we found a place we liked.

That brought out the big debate: Do I keep the apartment or do I sell it.

I was not so fond of paying off 2 mortgages and having most of our money in our house. Both my mother and wife saw things differently and persuaded me to rent out the apartment. After some number crunching I pulled the trigger and rented out the place.

The rent was actually higher than the mortgage costs and other expenses like housing tax. There was also some fiscal positive effect to sweeten the deal. In short, the apartment was cash flow positive.

At work, all started to go well and some nice bonus payments came my way. I decided to put these windfall almost fully into the rental mortgage. It turns out I am not a big fan of having a mortgage, despite the leverage they offer on an investment.

Then came a great day: the rental mortgage was gone. All the rental income was now great passive income. After all costs, I estimate the income around 580EUR per month (after all costs). That is a nice income. All this income is directed to a separate savings account.

Tenants Review:

The first 2 tenants were a couple. After about 2 years I got a letter declaring that they wanted to end the rental. Reason: they broke up. Instead of leveraging the contract that states a 3 months break up fee, we went for an agreement.  IF they are flexible for visits and I manage to get new tenants without rental loss for me – including them moving out- I would drop the clause. Flexibility on their site.

In comes the second couple and out they go: They wanted a dog. We made the same agreement. Welcome third tenant.

This time, a married couple. First real issue I get with the rental is a hot water problem. When I go to inspect, It turns out that the boiler fell off the wall. I still can not understand they did not go and look themselves… Anyway, I get a repair in for 2500 EUR. This reduces my savings of the rental.

While on holiday, I get a call. They want to move out as they can now go live in a rent free apartment from one of the parents. We make the same flexibility agreement. I set up about 15 visits in one week time. In the middle of the visits, a new call. They will stay as the rental deal gets cancelled due to “family issues.”

About one and a half year later, I get a letter from the wife with the request to remove her name from the agreement as they are divorced and she moved back home. When I contact the husband to discuss some points, I find out he is going back to school!

What?! How is a student going to pay the rent? The first unpaid months start. Long story short: he decides to move out and in the end I lost approx 50 EUR. It could have been worse.

After almost 5 years of living in the apartment and renting it out for 7 years, some uplift work is needed. A few quotes from professional workers come in and I look at a 10K bill. The alternative is that I do all the work myself. It is mainly painting. I did it once.

Things are different now. I am married, have 2 kids I want to spend quality time with.

Serendipity happens

One day, I empty the mailbox and find a flyer from real estate agency. They sold an apartment last week in the street and have interested buyers. As we have plans to redo a big part of the garden, I am interested. This time, there are no other forces in play.

After a comparison between agents, I settle for the flyer agent. While preparing the paperwork, it turns out there is a building violation on the building. I never knew this. I guess the notary that assisted me did not do a great job (I was actually the notary of the building promoter).

Once the property is on the market, I sell within 1 week.

All ends well:

With all costs of the transaction included, the sale of the apartment created 95K of capital gain in 12 years. To this, I would need to add the rental income minus costs for about 6 years: 40K. This might not seem a lot to the average US reader with the house prices that swing up and down. In Belgium however, property has a nice and stable price increase. During the 2008 crisis, the housing market did not collapse, it stayed steady and resumed with a slow growth afterwards. All in all, I am very happy with this adventure. It is the basis of my current amber index.

Lessons learned:

1- negotiate the mortgage with the bank

2- know that tenants can overnight change their mind and decide to leave. DO not take it personal.

3- When you think it is time to sell, lock out emotions.


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  1. Hey Maggie,

    thx for setting up this challenge series!


  2. ATL, you went through a lot but had a happy ending with the sale. I like your point about locking out emotions. It’s often the right thing to do. Another lesson we can learn from you is that you can save money as a landlord if you’re handy. Doing the painting yourself was a smart move.

    • MaggieBanks

      Great comment. I agree with you. Locking out emotions is hard in so many aspects of finances.

      • Agreed! I know a few people that do not want to sell something because emotional bands. Being it the parents house or a stock portfolio they inherited.

        • MaggieBanks

          We’re that way with so much *stuff* – “but great aunt Bessie gave us this ripped blanket when we graduated from kindergarten!” 🙂

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