Letting Apartment - Tax implications...

Cuauhtemoc

I've seen several threads on this and researched the revenue details etc.
I'd just like my figures to be double checked.
Have got married and looking to buy new house and am going to let out my apartment.
Have a two year lease agreement with with a tenant(rent & esb to be paid by social welfare)
These are the figures...
Rental Income 13200 (1100 p/m)

Mortgage payments 8460 (of which 4774 is interest)
Management fees 1600
Letting agent fees 910
Wear and tear can be included but i havn't worked that out yet.

So 13200 - 7284(total expenses) = 5916
5916 @ 42% = 2484 of a tax bill.

so 8460 + 1600 + 910 + 2484 = 13454
Net loss of 254 euro.

Thats allowable i believe off the following years rental income.
But still, am i missing something?
Doesn't really seem worth while doing the rental option. Granted the mortgage is being paid off but i assume most people do this to make a profit as well. Or are they all not declaring?

Any advice/input would be very welcome.
At this point i'm just considering selling and taking my money.

Cheers,

C.

madramor

most people are banking on capital gains not profit from rental.

your mortgage is being payed, so you are getting an asset payed for you.

8460 is a very small mortgage, and 1100 is around the average rent, so some people are left with a big shortfall each year when renting property.

does the stamp duty claw back apply to you,
if you haven't lived in the house for 5 years and got an initical stamp duty discount?

Cuauhtemoc

I'm ok on the clawback front thankfully.
As for the mortgage payments thats 8640 a year for the next 28 years, depending on interest rates etc. Not sure if you thought all i owed was 8640(i wish:) )
I see what your saying about capital gain, i just think i might be better selling now and getting 70k(minus legal and estate agent fees) to invest in our new home.

full forward

Yeah. that 70k locked up in the appartment is costing you extra interest on your new house. Thats about €200 per month extra interest you need to pay if you dont sell the appartment. So you could add that to your net loss. But the appartment could jump 10 or 20k in value every year until the crash comes ;-) .

madramor

Cuauhtemoc wrote:

As for the mortgage payments thats 8640 a year for the next 28 years, depending on interest rates etc.

thats 720 a month

Average House price 270,000
92% mortgage
over 30 years
at 3.8%
is 1,157 a month

thats based on 270K most people in dublin spend a lot more
than that, so double your mortgage payments would be closer
to the normal in dublin.

NOTES:
Against
1:
rates are starting to rise for the first time in 5 years
2:
no sign of a decrease in the number of new builds
3:
the rental deal is costing you money.

For
1:
hugh immigration into the country
2:
plenty of infrastructure projects and land banks to keep
the construction sector (which is supporting the whole economy) booming.
3:
you have the rent secured for 2 years, no harm in waiting
to see the suitation in 2 years time.

Cuauhtemoc

madramor wrote:

thats based on 270K most people in dublin spend a lot more
than that, so double your mortgage payments would be closer
to the normal in dublin.

So most people are obviously in it for the long term as they'd be making big losses if they're only getting the average rent on say apartments costing between 3-4 hundred thousand. Or putting a big amount of cash towards the purchase.

Could try to keep it and release some equity to help with new place.
But could sell now without cgt which is the option i'm leaning towards as once i relase equity it's not as viable.

Can i discount things i buy for the apartment against tax? Washing machine etc?
Letting agent says we can, but it doesn't look like that from the revenue site.

Thanks for the replies.

C.

lomb

that 200 or so euros u claim is a loss is not a loss and cannot be written off for income tax purposes. u ARE making a profit as long as the rent is greater than than the interest, repairs, service charges, and painting/decotating. the principle is not tax detuctable, as u are getting richer by paying it off.
tbh as the years go on the loan gets paid down, and u own more and more of it. the principle on the loan if its getting paid off is money in your pocket, not now but in 30 years, or when u sell.
the washine machine can be written off, at 12.5% straight line for 8 years. ie if said machine costs 1000 euros, u can write off 125 euros a year as an expense.
repairs are 100% allowable like painting, for example if u build a partition u cannot deduct it other than over 8 years as above, but if u repair that partition the repair is allowable.

the other thing to remember is that inflation destroys every loan, and a house bought today for 500000 will seem very cheap in 30 years...

the cgt is a factor i agree but the tax is exceptionally low in this country @20%. all things considered if u can afford it AND its in a PRIME location thats rentable 100% of the time, i would hold it, u are making money trust me;)

in actual fact, uve hit the nail on the head, renting property is cash flow intensive, in the there is probably negative cash flow in that there is money going out to pay the principle, but its still profit, so the moral is cash flow negative, profit positive

irishunion.com

If you want to cheat the "taxman" buy one property in any of the other EU states, or Bulgaria/Romania, but not Turkey(you're never too safe there....many reasons.Just for your own information they have the Death Sentence,in theyr law). Buy one property and no more than one in each country. They will be considered, each as your first house, where you live. But get yourself informed a bit about realestate law in the state you want to buy property from. In London you can buy your own room inside a hotel(a hotel room/apartment), live there if you want and get rental income for the time you don't live there(the hotel is renting your room).