Life – a user's manual Part II - Boksidan

Individual homes
An alternative to investing in apartment blocks is to buy individual apartments and sublet it. In the UK it is
very common and I know several people who have done it there. In Sweden, it is less common because:
1. The rents that can be taken, without the risk of being liable to repay to the tenant, is quite low in
relation to the investment in the cities where it is easy to get tenants.
2. Property Law Associations usually does not like the business and it is reasonable to believe that they
will not let such tenancies continue for an extended period. Unlike from the UK where they have
another type of condominiums, which among other things is resulting in that the owners do not need
to ask anyone for permission to sublet.
The variants that are common in Sweden is instead to rent out summer residence’s during periods when
the owners do not utilize it themselves, or buy a bigger apartment/villa/holiday home to live in yourself
and make some of it to a separate residence for rent (or to build a smaller house on the property for the
same purpose). The first variant has the disadvantage tha,t beyond regarding mountain huts, the season is
very short.
Say that it is possible to rent out a vacation home, for example, on Gotland from graduation until school
starts again. Thus, at a maximum about 10 weeks. Suppose the landlord on average get 4 000 SEK/
week. Then a season would give 40 000 SEK. It departs perhaps 1 000 SEK for garbage collection, 3 000
for insurance, 3 000 in property taxes, maintenance (maybe) 5 000, electricity 1 500 SEK, a total of
perhaps 10 000 per season, and thus the gain will be around 30 000. A gain that is also quite easy to hide
from the tax authorities. But if the house costs 1.2 million SEK and the interest rate is 4%, the cost of
capital after tax deductionsis type 40 000 SEK. A back business thus. But if the owner uses the house in
the second part of the year, or live in the guest house during the high season, the rental may be a way to
finance a dream that he or she would not otherwise be able to afford. But the risk is always that it will
not be leased out or that a tenant generates costly repairs.
If the dwelling is on warmer latitudes, however, the season is much longer and the chance of a positive
return is much higher.
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