Author Topic: Reader Case Study -  (Read 1878 times)


  • 5 O'Clock Shadow
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Reader Case Study -
« on: January 27, 2015, 03:29:29 PM »
* ~2000 net/month after optimal use of taxes (more below)
* ~500 net/month  building up in my tiny company ()

Current expenses:
* ~975/month home purchase related (see liabilities below for details)
* ~50/month utilities (natural gas, water, electricity, internet access)
* ~200/month food
* ~200/month restaurants (when visiting my gf, no kitchen available yet, she still lives with her mother )
* ~300/month transportation: 98% plane tickets (gf lives > 2 hours by plane away, where my tiny business is, company expense)
* ~200/month hostel (when visiting gf)

* house: ~350000 estimated value - perfectly renovated house in a rather expensive city near Brussels, Belgium, EU.
* bank accounts: ~1000
* pension funds: ~8000 (can't touch until the age of 60- known to be something the government likes to dip into)

Liabilities: Amount - rate - description
* ~170000 mortgage: 727.15/month 30 year mortgage 204105, variable income based subsidised loan, capped at 2.4% max)
* 16000 provincial renovation loan (2% fixed rate, 101.93/month ) until 203106 (balance: 16000)
* 6500  government energy loan (2% fixed rate, 144.60/month, until 201905)
* 7000 parents loan (started at 25000 in 201105, 0% rate, "pay it back when you can easily afford it")

Tricky stuff:
* My house came with some strings attached by the city council that sold it to me. I can't sell it within the first ten years (until 2021) or I have to pay a fine (diminishing with time elapsed). Though if I really wanted, I could probably use my close ties to local government officials to have that fine cancelled or minimised.
* Housing regulations in this part of the city are quite strict: no subletting of parts of a house. I could probably get away with sharing the house with 2 or 3 people. (Rental rates for similar houses are ~1100/month.)
* My mortgage came with some strings attached because government subsidised. I can't start a business in my house or rent it out, unless I want to pay the horribly expensive non-subsidised 2011 market rate(941 instead of 727, or ~210/month rate increase). Earning more as an employee than a strict limit has the same effect.
* Refinancing the mortgage at current market rates is ~7000 in expenses (taxes, notary, bank, ...).
* Buying a house in Belgium involves ~13% transaction costs (10% taxes, ...) , _excluding_
* Belgium is the tax champion of the world (53.5% taxes on a significant part of my income, few deductions possible, 25% dividend tax, 34% CIT, ...).
* I can't personally buy an appartment in Riga (but my little company can), or I'll lose my loan subsidy and fiscal advantage on my house in Belgium, a >300/month value.
* I actually _like_ the place in Belgium a lot.

Luxury stuff:
* My job allows me a LOT of freedom. Wednesday noon until Thursday evening is basicly my working week, plus a tiny bit of remote work. Holidays: spring 1 week, easter 2 weeks, July& August, autumn 1 week, christmas & newyear 2 weeks. Not transplantable to Latvia.
* Riga, Latvia feels like my second home city.
* A comfortable simple appartment in a clean neighbourhood close to the city center of Riga, with no need for a car can be had for ~50000.
* If you know the area a bit (I do), ROI's of 7-8% are feasible (low for US, but high for EU!)
* Tax rates are some of the lowest in the EU: corporate (15%), personal (24%), dividend (10%), real estate transactions (2%), rents, ....
* Commutes Belgium<->Latvia are frequent and cheap, between 80 and 150 door to door.
* Belgian job offers quite generous government pension.

What would you do in this situation? I've been mulling:

* Keep the .be house for now. Find some informal tenants until 2021 for part of the house.
* Keep the Belgium luxury job. Commute to Belgium once a week, ~35 times a year.
* Occupy a small area of own house a few days a week while in Belgium.
* Invest rental income wisely. A flat in Riga maybe...
* See how relationship and business evolve. Move to Latvia permanently if/when the time is ready.

« Last Edit: January 27, 2015, 03:41:25 PM by valsecito »