Real estate in Norway

[mooseman]

I live in Norway and would like to buy my first rental property. Unfortunately the prices are very high and no way close to meeting the 1% rule. At best a rental house would cover all expenses and part of the principal. Not a very impressive scenario, with large elements of risk such as bad tenants and large maintenance expenses.

The only advantage for the time being is low interest rates, but this won´t last for the duration of a mortgage. Fixed interest rates can not be had for longer than 5 years. Are there any Norwegian mustachians with input in regards to the real estate prices in general and how to make rental properties work? I assume the solution is to buy real estate abroad, where the prices make sense. But I would prefer to buy in Norway, so I could manage the property myself and do some maintenance.

[Crazydude]

Just came across this post in a search.

Disclosure: I'm not a Norwegian.

Have you researched real estate in ALL areas of Norway you could manage/buy rental property. If you still cannot find a profitable solution, have you considered purchasing in other countries or the US? Not sure what laws come into play here and I know it's far-fetched. But some people do it.

[arebelspy]

Many foreign investors buy here in the States when it doesn't make sense to buy RE in their home country.

That being said, you need to compare within a market and set goals for what you're looking for; you may find it there regardless of how it performs compared to another market.

[Vasco Da Lama]

If you rent out less than 50% of the house you live in, the rental income isn't taxed. This looks like the way to go in Norway, in my oppinion. But my math is based on the current tax policy, which is always subject to change. I wouldn't be surprised if they nerf this in the near future. :)

[Bjorn]

Are there any Norwegian mustachians with input in regards to the real estate prices in general and how to make rental properties work? I assume the solution is to buy real estate abroad, where the prices make sense. But I would prefer to buy in Norway, so I could manage the property myself and do some maintenance.

I live in Norway and made one property work.

It was bought one year ago at NOK 1.200.000 (300.000 downpayment, 900.000 mortage) and it yields 94.800 in annual rental income. Thats 8%. Its a tiny studio apartment (17 square meters) in an area students typically seek out, so the market is stable although not on the rise.

After interest, taxes and all costs it leaves about 29.000 to be paid on the mortage principal. It has a 25 year down payment plan so its paying some 16.000 on the mortage principal annually. This leaves 13.000 in positive cash flow. I don't expect any big maintenance to occur in many years until the kitchen (2013) and bathroom (2012) will start needing upgrades.

I think students are a good market to target in Norway. If I had the money I would go for a 70-90 square meter apartment in one of the bigger cities and make it a 3 or 4 bedroom so that you get 4.000-5.000 for each room in monthly rent - this is typically what students will pay. I've seen several viable ones in my city (Trondheim). Some of them are 2-bedroom that can be bought at under 3 million. Made into 3-4 bedroom this will often yield 8% and leave a positive cash flow if you can make 20-30% downpayment. Just do your research, run the numbers and make sure you pick the right location. I've been a student in Trondheim myself so I know the market. Almost every week I come across a project that would be profitable if I had money for the downpayment. For Oslo, I would have less of a clue. In any case: location is key so make sure to know the area you invest in.

Oh, and the "1% rule" can't be applied here. Its unrealistic. But in my case, where I put down 300.000 and leveraged it up to a 1.2 million rental unit, the yield on my downpayment is 12% before taxes. Had I put those 300.000 in stocks I doubt I would have made 12%. This is because of leverage, and real estate is excellent for leverage.