Considering renting out your second home? This is how it works

Buying a second home can be a smart investment. Mortgage interest rates are low, housing is in high demand, and the returns are often higher than from a savings account. What issues will you need to consider if you are renting out your second home as a private individual?

Buying a second home or holiday home with the objective of letting it does not automatically mean you are an entrepreneur. Other different tax regulations apply; for example, you may not deduct the mortgage interest for a second home. Below, we have outlined some of the main issues to consider if you intend to rent out your second home.

Register with the Chamber of Commerce KVK

You are only required to register with KVK if you professionally rent out several homes. In this case, your details will also be passed on to the tax administration. This also applies if you provide services related to the rental, such as preparing breakfast or dinner and cleaning the house for your tenants.

Choosing a legal form

If you register with KVK, you need to choose an appropriate legal structure, for example, eenmanszaak (sole proprietorship) or besloten vennootschap (private limited company). Choose a legal structure that is best suited to your situation. The choice of a legal structure is determined by liability issues and tax implications.

Taxes

Unlike the home you use as your main residence, your second home is classified in Box 3 on your income tax return form. The income you earn from rent is classified in Box 3. You do not need to provide this information to the tax administration (in Dutch).
You will pay tax on assets above the duty-free limit (in Dutch) of €50,560 per person in 2022. The value of immovable property (WOZ value) with reference date 1 January of the year for which you file a tax return minus your mortgage debt, determines the value you must specify in Box 3.

Mitigating risk through a lease

When renting out your home, there are certain risks you will need to mitigate. You will need to enter into a lease contract, as this will save you a lot of hassle afterwards. You will find examples of lease contracts online, including model contracts containing general terms and conditions (in Dutch) of the Raad voor Onroerende Zaken (Real Estate Council of the Netherlands, ROZ). If you want to make certain that you have worked out all the legal details, ask advice from a lawyer specialised in tenancy law. There are two types of leases you can enter into when renting out your home for a fixed period of time.

• Lease for renting out your home for a maximum of 2 years
  This is also known as temporary rental (in Dutch). Remember to send your tenant(s) a message in time to remind them of the expiry date of the lease: this is a maximum of 3 and a minimum of 1 month before the end of the lease term. If you do not, the lease will be automatically turned into a permanent lease. And then your tenant(s) will enjoy full tenancy protection. That means you, as the landlord, cannot simply terminate the lease.
• Long-term lease for a fixed-term
  This contract (in Dutch) will not result in automatic termination of the lease. You can enter into a fixed-term lease for more than 2 years if the home is a separate unit. So, with its own entrance, kitchen, and sanitary facilities. Or 5 years for shared facilities. That is, without its own entrance, kitchen, and sanitary facilities. If nobody terminates the lease, the lease will continue as a fixed-term lease.

The lease contains the following items:

• A description of the property (what it does and does not include)
• The floor space of the property The rent
• The payment terms
• Whether or not the rent is indexed annually
• The building’s purpose
• The lease period
• How and when the lease can be broken
• Any general provisions and any service charges
• Agreements on utilities
• Agreements regarding maintenance
• If any changes made by the tenant during the lease term must be undone afterwards
• Subletting agreements
• Agreements regarding municipal taxes, including property tax and waste tax
• Options for renewing the lease after the lease period expires

Is there a maximum rent?

If you rent out a house in the private market, you can set the rent yourself. The private market does not have maximum rents; it is a matter of supply and demand. You are also entitled to raise the rent once every 12 months. However, you must notify your tenant(s) at least 2 months in advance in writing that you will be raising the rent. In addition, an interim rent increase is only allowed if you have demonstrably improved the house

Mortgage

Mortgages on second homes are subject to different rules than mortgages on the main residence. The mortgage interest on your first home is income-tax-deductible. Mortgage interest for second homes are not deductible. Interest rates are generally higher and different rules apply to the maximum rental amount. You will generally be required to use your own funds. Because of rising property values, many people have equity in their homes, and they intend to benefit from this equity. You can use this equity to take out a second mortgage for a second home, holiday home, or home for your children.

Please note: If you intend to rent out your second home, you will need to ask permission from your mortgage provider.

Insurance

Needless to say, you will want to insure your second home and its contents. You can do this by taking out property insurance (opstalverzekering) and, in some cases, home contents insurance (inboedelverzekering). Not all insurance companies allow you to rent out your home. Since rental entails a higher risk for them, a higher rate generally applies, and cover is limited. The insurance you buy for your second home is therefore always tailored to your individual needs and requirements.

Did you know that...?

• Since 1 July 2021, owners of holiday homes/properties used for tourism purposes are required to register their property.
  Some local councils may require that you apply for a registration number if you are renting out your home to tourists. You must list this registration number in any adverts you post on platforms such as Airbnb, Booking.com, and Vrbo; this gives local authorities a better idea of addresses and individuals who rent out properties to tourists.
• You require an energy label (in Dutch) for your property when renting it out?
  As a landlord, you are required to provide your tenant(s) with an energy label. This only applies to the property as a whole. If you are renting out rooms or student accommodation, the energy label is not required.
• A smoke alarm (Rijksoverheid, in Dutch) is required by law? Homeowners and landlords in the Netherlands are required to install a smoking alarm in all rental properties. 

Renting out your home through a platform

If you intend to rent out your second home through Airbnb, Booking.com, Vrbo, or another platform, you are required to list your registration number. If you are renting out your property temporarily, this does not automatically mean that you are a company. Some municipalities set their own requirements. For example setting a maximum number of consecutive nights you can rent out your property per year. Check this with your local municipality.

Renting out your own home

If you are renting out your own home through one of the platforms listed above, you will need to report your rental income to the tax administration (in Dutch). Note: you are not required to do so if you rent out your second home.