Purchase of investment property in Finland

Buying profitable real estate in Finland is becoming an increasingly popular type of investment for Russians. The reason for this - moderate prices by European standards, as well as high return on assets, economic stability and legal security. It is especially important that there are no restrictions on the Finnish market for foreigners.
The main advantages of this type of investment remain high reliability and stability, regular income, as well as transparency of transactions and predictability of market development.

Answers to the most frequently asked questions
when buying a property in Finland

What does buying residential investment property in Finland really mean?

Residential investment property in Finland is bought with the intention of earning a return on the investment through rental income and profit from appreciation through the future resale of the property. An investment property can be a long-term endeavor or an intended short-term investment such as in the case of flipping, where apartment is bought, renovated, and sold at a profit. In Finland, "buying an apartment" actually means buying shares in a housing company (asuntoosakeyhtiö) - more commonly known in English as a housing cooperative. The amount of shares per apartment is proportional to the size of the apartment. A housing company is a legal entity that owns one or more residential buildings. No board approval is needed to buy shares (i.e. an apartment), which is usually done on the open property market through a real estate agent. Owning shares in a housing company, corresponding to "one apartment", actually means "owning your apartment". The obligation to ensure proper maintenance of buildings and apartments is shared between the housing company and its shareholders.

Are there any additional expenses on buying residential property in Finland?

Depending on the type of housing, costs include transfer tax and renovation costs. Transfer tax is usually paid by the buyer. Buyers must pay it on their own initiative. Transfer tax is 2% for apartments (shares in a real estate company) and 4% for real property (ex. a house with land). The tax is calculated on the total debt-free transfer price i.e. the sale price plus the portion of outstanding housing company debt for the apartment.

What is sale price and total price (free of debt sale price) in Finland?

"Sale price" (myyntihinta). Price to be paid to current owner; this does not include payment of any of the apartment's outstanding share of the housing company loan.

"Free of debt sale price" (velaton myyntihinta). This includes the payment to the current owner plus lump sum payment of the apartment's outstanding share of the housing company loan.

Loan payment (rahoitusvastike). If the housing company has a loan, and you do not pay the "Free of debt sale price" at the time of purchase - thus freeing the apartment of debt to the housing company - rahoitusvastike will be your monthly payment towards the housing company loan.

Maintenance charges (hoitovastike). This is the monthly fee for services, general maintenance etcetera. The charge per apartment is based on the size of the apartment in m². Yhtiövastike. This is the combined cost of Rahoitusvastike + Hoitovastike

When major work is required on the building, the housing company usually obtains a loan to cover it. The housing company then recoups the money from the shareholders i.e. the apartment owners.

The share of the housing company loan per apartment is based on the size of the apartment in m².

The loan share may be paid in monthly instalments, or in a lump sum.

What are the maintenance charges for the apartment?

The maintenance charges are 3 to 5 euros per 1 sq. m. Water and electricity are paid separately by the tenant (water costs are about 15-20 euros per person per month). The exact cost of maintenance is indicated in Investerra offer. The annual property tax is included in the maintenance charges so no extra payments are needed.

Do I need to furnish or renovate the apartment before renting out?

In Finland most of the apartments are rented out unfurnished and all apartments are fully-equipped when sold. New apartments are fully-equipped and are ready for renting out on the first day of the completion of the construction works. Old apartments are also fully-equipped (kitchen, home appliances, plumbing, furniture included). However, the apartments condition may vary. Some may require small renovation works. That should not deter you from purchasing, because the price difference is rather large and you can get a good discount if the interior of the apartment is poor. If that is the case our company provides renovation service with excellent combination of price and quality. We manage to create an attractive apartment for leasing and insure maximum rental income. Investerra policy is to solve all the arising questions for you and make gaining rental income and capital growth easy.

Can I get residential property loan?

The primary criterion for obtaining a home loan in Finland is the borrower's capacity to repay the debt. However, banks are cautious and if you are not a resident of Finland you may face many hurdles. The best way of getting residential investment property loan is buying a new apartment. You have access to a housing company loan to finance your residential investment property. If you take advantage of the housing company loan, you do not have to commit yourself to a bank loan and you can become the owner of the apartment by paying only the sales price. The remainder of the debtfree price is paid to the housing company monthly as a charge for financial costs. Housing company loans are granted without separate collateral. You’ll save time and effort as the housing company loan has already been agreed through competitive bidding.

Typically, the loan amount is up to 70% of the total cost of the apartment. Upon signing the sale agreement, you will only need to pay 10 to 20% of the apartment’s debt-free price. The remainder of the sell-price is paid when your home is completed and you are ready to rent it out.

Usually, for the first 1–2 years after the apartment has been completed, you’ll only pay the interest of the housing company loan. After this, the repayment of the housing company loan is added to the interest, increasing the amount of the charge for financial costs. You can also pay your proportion of the housing company loan in installments or altogether right before the construction of your home is completed. If you pay the housing company loan in full, you will not have to pay the charge for financial costs at all.

The apartment can be sold more easily if it is subject to a housing company loan. Potential buyers will not be turned away by the fact that they cannot secure a large enough loan from a bank.

What are the rights and responsibilities of the tenant and landlord?

In Finland, almost all tenancy agreements require that tenant pays a rent security deposit. The rent security deposit usually is one to two months' rent.

The tenant is also required to pay the water rate and to sign an insurance contract and electricity contract with an electricity provider himself. The water rate is often determined according to the number of residents in the dwelling. Since apartments normally have central heating, it is included in the maintenance charges and rent. The landlord pays the maintenance charges himself.

The tenant's responsibilities are to pay rent on time, to maintain the apartment in normal condition, and to adhere to the rules of the building and housing company.

What are the tax consequences and the costs of re-selling a residential investment property?

In Finland, real estate agent’s commissions on selling property range from 3% to 5%.

When you sell your apartment and make a profit, the capital gain will be taxable as capital income.

The tax rate on capital gain and other capital income is 30% if you receive €30,000 or less, and it increases to 34% on the part that goes over €30,000.

How long does it take to purchase residential property in Finland?

In 2000 the government removed the requirement that a nonresident must obtain a permit to buy a secondary residential property in Finland, putting foreigners on exactly the same footing as Finns. Thus the duration of the purchasing process depends on time to find an appropriate investment property. Residential investment properties in Helsinki can be difficult to find, especially at the lower end of the market and buying decision is often required to be done quite fast. Therefore, Investerra puts a great emphasis on establishing highly reliable and rapid communication between our Customer and manager. We use different kind of channels of communication, such as WhatsApp, Viber, Skype, Imo etc. As for the purchasing procedure it usually takes about two weeks to complete all procedures.

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