Debate post: Lars Botten, civil economist (MBA)
Housing rental and property tax, and the combination of the two, are areas that many people have an opinion about, but have little insight into.
Since 2001, I have built up a small portfolio of rental properties near our permanent residence in Oslo. The family’s savings capital has in all years gone towards paying off the debt on the apartments. After 23 years of operation, we have now sold down to two rental properties, both of which are debt-free. Our tenants have lived in the apartments for several years. In return, we keep a moderate rent level.
Lars Botten. Photo: Private
Today we received the tax notice for 2023, which summarizes the profitability of our small business. Gross rental income amounts to NOK 322,800, which, with deductions for costs, gives a taxable profit of NOK 248,250. This triggers 22 per cent tax, corresponding to NOK 54,615.
The tax authorities believe that our two rental properties are worth NOK 5,984,618 and NOK 6,683,765 respectively. I believe this is well above the market price, and am willing to sell to whoever offers me such sums for the apartments. In any case, it is these sums, a total of NOK 12,668,383, which are the basis for calculating wealth tax. Since the apartments are debt-free, NOK 126,683 in property tax is offset on the secondary homes.
The calculation for renting the two apartments
| Net rental income | NOK 248,250 |
| Tax on rental income | – NOK 54,615 |
| Wealth tax | – NOK 126,683 |
| Income after tax | NOK 66,952 |
Source: Lars Botten
If the assessment office’s valuation is used as the basis for investment, this gives a return of 5.3 per thousand. This is a marginal business even with debt-free apartments. If I were to charge interest on a loan, the business would soon become unprofitable. That is probably the case for many in today’s market.
Tags: Housing rental profitable Finansavisen
