Advice on Renting out one home, and renting another

roughpatch

'm looking for some advice from anyone who has successfully rented out the property that they own/lived in (house/apartment), and then renting another property somewhere else.

Myself and my wife and baby son are currently living in the 2 bedroom apartment that we own (purchased in 2007). The apartment has suited us up to now, but with the arrival of the baby, we are looking to get into a house. Selling the apartment is not an option, as it's in negative equity somewhere in the region of €150,000 i would estimate - so we need to take the rental route. I'm sure this something that countless people have done successfully, so just looking for advice, and pointers to some queries i have.

1 - Matching Rent to Mortgage repayments.

If this is to work, i need the bank to agree to match (or come close to) the rent we would receive for our apartment to our mortgage repayments. I would be confident that we could achieve some where in the region of €950 - €1000 a month rent on our Apt, however the mortgage is approx €1250. Houses in the area that we are looking to move to are renting at between €1200 - €1400, so i'm not sure i could afford the make up the difference between rent received and mortgage, and paying rent on house. That gap will also widen, as i believe once i rent out my apt, i will lose my Tax Relief at Source which would bump up the mortgage by another €250-300.

So has any one negotiated with their bank to restructure their mortgage to match rental income? (my bank is PTSB)

2 - Tax Implications

Tax if payable on rental income, but i believe there are a number of ways in which you can right the tax off against things -any one got any ideas?

3 - Self Let or Agency - what's best?

Would love to hear from someone who has gone through a similar process.

RP

Ray Palmer

I think you have this seriously wrong.

If your rent match your mortgage you are already way behind as you HAVE TO pay tax on that income. There is no way around that other than not paying tax. You are not considering any running costs like replacing a fridge, bed or plumbing problems.

You will roughly get 50% of the rental income with things going well. So in your example

You are paying €750 to let people rent your place and then have to pay rent on the other property so €2150 roughly a month over all to do what you want. Does that sound like a good idea to you?

The tenant could just stops paying rent and it takes you over a year to get them out. You will be in financial ruin.

Have you just got one child or two? It is a little confusing in your post, 2 bed with one child should certainly be doable for a number of years. Otherwise you are paying a lot of money for more room.

roughpatch

Cheers - this idea is in its infancy, that's why i'm looking for as much advice and ideas as possible, so appreciate the feed back.

Agreed that the apartment is big enough for one child, but it's not always going to be big enough, so even if do stay there for a few more years, eventually I will be faced with this problem, the need to move. I would have thought that a lot of people do this...

D3PO

OP its doable but its not cheap.

As has pointed out your rental income will be taxable. You can reduce the taxable amount with deductions.

Mortgage interest 75% of which can be written off against tax
Management fees
Accountants fees (if you use one to do your returns and given your asking questions in this regard Id highly suggest it)
You can write down 12,5% against the contents etc.

If your clever you could get your tax bill down to a very small amount.

However your going to have to cover the difference between rent and your mortgage. Banks wont entertain your proposal as a fully up to date mortgage payer. There is no incentive for them to do so.

So your going to have to cover that, your also going to be left with some periods of unoccupancy so you will need some savings put aside for when that happens and it will happen at some point.

Renting a house is also likely to be more expensive Id imagine so your going to have extra expense that end too.

So with that in mind its going to cost you at least a few hundred euro a month to do, and that's if everything goes well. If you end up with a non paying tenant or the likes your going to be up the creek without a paddle so unless you have a decent amount of rainy day money saved just in case its a risky proposition to consider especially as you have only one child and a 2 bed apartment which does suit your needs as it stands.

Ray Palmer

roughpatch wrote: »

Cheers - this idea is in its infancy, that's why i'm looking for as much advice and ideas as possible, so appreciate the feed back.

Agreed that the apartment is big enough for one child, but it's not always going to be big enough, so even if do stay there for a few more years, eventually I will be faced with this problem, the need to move. I would have thought that a lot of people do this...

People who can afford it do it. Some risk not paying tax (no way advisable). This is the trap of negative equity and why it is such a big deal. The people who bought apartments are in the worse situation as they can't do anything to extend the property. Many people think it is possible until they look at the figure properly.

Look at space saving solutions to increase the longevity of the property. A wall bed could easily make the child's bedroom more useful. Not cheap but better than an on going €900-1000 a month.

I am a LL and I would never want to be in the situation where I would be that reliant on rent. It is too risky

ElKavo

Hey Rough Patch,

I'm in a very similar position. The tax implications do have to be taken in to account. Should you go down the route of declaring the income. Obviously you will also have to count the maintenance and refurb of the property. My house will only get approx 600 - 650 in rental income pm and the mortgage is currently 520. We're on a tracker too so the loss of trs will be small, as will the relief of tax on interest.

Ultimately you will have to decide on whats best for your family. Is it that brand new pair of shoes / nights out or a bigger and more suitable property. I wouldn't go letting other people sway your decision.

murphaph

You can only (totally unfairly but that's another thread) deduct 75% of your mortgage interest and the government had indicated it intends to eliminate this relief completely. Given that I think you're only financially sound option is to stay put and hope that property prices increase over the coming decade. They might in Dublin which is where I'm guessing your apartment is based on your figures. They might not. I do feel for you but at least you're in a 2 bed. Many are stuck in 1 beds with a child.

murphaph

ElKavo wrote: »

The tax implications do have to be taken in to account. Should you go down the route of declaring the income.

The days of hiding rental income are largely gone. Too many ways for Revenue to become aware of it, it's an asset that can't easily be hidden and severe penalties when caught. It's really not even an option these days, nor should it be of course. I'm sure you weren't advocating it so I'm not having a go, just pointing this out to the OP.

Ray Palmer

D3PO wrote: »

If your clever you could get your tax bill down to a very small amount.

.

Care to share because I have been in this game a long time and I know the tax system very well? There is no way to get your tax down on rental income I am aware of. You can certainly get tax breaks on expenditure but and technically you are paying less tax. It does of course mean you are spending more so no benefit if you don't have the money.

murphaph

Ray Palmer wrote: »

Care to share because I have been in this game a long time and I know the tax system very well? There is no way to get your tax down on rental income I am aware of. You can certainly get tax breaks on expenditure but and technically you are paying less tax. It does of course mean you are spending more so no benefit if you don't have the money.

Indeed. I have property in Germany and Ireland and you can deduct almost nothing in Ireland to reduce your taxable rental income. The things you can deduct will all have been real expenses so reduced profit or increased loss. In Germany for example you can deduct the reasonable costs of inspecting the properties such as flights and accommodation.

ElKavo

murphaph wrote: »

The days of hiding rental income are largely gone. Too many ways for Revenue to become aware of it, it's an asset that can't easily be hidden and severe penalties when caught. It's really not even an option these days, nor should it be of course. I'm sure you weren't advocating it so I'm not having a go, just pointing this out to the OP.

No I am in no way advocating tax avoidance. The Op will also want to register with the PRTB, I'm sure that they will ultimately share the information with the powers that be.

roughpatch

Apologies if my OP was confusing, it was a bit rushed. When i talked about writing tax off, what i meant was using credits etc to lower it, not completely avoid or evade it, it would be my intention to declare fully. I also should have pointed out that i am aware of the pitfalls that go along with being a landlord such as bad tenants, and running costs. These are all things that i have to take into account, as i said i'm at the start of this process (might also be at the end of it). Apt is in Dublin, in well serviced and central location, no pyrite or any nasties like that, so things of course could be worse. We do have some extra income that would bridge some gaps. The reason i brought up matching the rent to the mortgage (outside of the tax issues) was that at recent meeting with my bank, the financial adviser at our SFS meeting told us that restructuring the mortgage to meet potential rent received was something they could look at, due to the fact that we had a baby, and would need a bigger home. That could have been just her personal assertion, and not the stance of the bank.

Scortho

roughpatch wrote: »

Cheers - this idea is in its infancy, that's why i'm looking for as much advice and ideas as possible, so appreciate the feed back.

Agreed that the apartment is big enough for one child, but it's not always going to be big enough, so even if do stay there for a few more years, eventually I will be faced with this problem, the need to move. I would have thought that a lot of people do this...

Then you do it when the time comes in a few years time. As it is two bedrooms are all you need. People on the continent are easily capable of doing it.

Or you rent out the apartment at market rate and rent in somewhere like portlaoise and commute to dublin (if as I think you work in Dublin)

Or and it's a big or, you default on your mortgage and go on holiday to the uk for 15 months.
Both you and your partner would have to take this route as your both (most likely anyway) are jointly and severly liable for the mortgage.
You'd probably have to rent the rest of your lives (unless the bank get foolish again) but at least it's somewhere where you're happy.

I know that if I was in your position and the position of many others is be heading to the uk.
Not going to be a popular choice on here and I know I'm going to get slaughtered for it, but my family and children's future come before the country's!

roughpatch

UK's not an option i'm afraid. Can anyone recommend any good online resources or information on tax on rental income other than revenue.ie - if find that site very hard to digest. Or anything on renting really?

Ray Palmer

roughpatch wrote: »

Apologies if my OP was confusing, it was a bit rushed. When i talked about writing tax off, what i meant was using credits etc to lower it, not completely avoid or evade it, it would be my intention to declare fully.

There are no special uses of taxes in anyway that I am aware of that can be used to reduce your tax liability. If you aren't using tax credits now the question would be why but you won't get anymore. The interest relief is it and it is very small and unlikely to last.

I never thought you planned evading tax. Not fully convinced you understand the pitfalls of being a landlord. One bad tenant could destroy you with this set-up very easily.

ElKavo

I find http://www.askaboutmoney.com/ to be a good resource.

ElKavo

Ray Palmer wrote: »

One bad tenant could destroy you with this set-up very easily.

Sorry Ray, Could you explain this? I'm in the same situation and I'll probably end up renting out my own property. Surely if a tenant is not paying up you just kick them out? shut off the electric / water. Or am I being naive to the extreme here?

Pawwed Rig

Is there an option for you to rent a cheaper house? If you leave the area you are in there are many places where you can rent a 3 bed for 500euro or less, it depends on where you have to be for work etc.
By the sounds of it you will not pay much tax on the rental income as you are paying alot of interest and presumably your house is decorated to a good standard.
There will be property taxes and other charges though.

ElKavo wrote: »

Or am I being naive to the extreme here?

Unfortunately you are. Read the horrow stories on this forum

roughpatch

Should have said that i am aware that there are pitfalls, and that it's not a stroll in the park when it comes to being a landlord, but i 100% see where you are coming from Ray - it's not a decision to be made lightly! From your (and other's) experience - is the Dublin City Council's Rental Accommdation Scheme (http://www.dublincity.ie/Housing/RAS/Pages/Information%20for%20Landlords.aspx) a recipe for disaster?

It seems to me that the hardest part of this equation is dealing with the property you own, and being a landlord. The being a tenant part is more straightforward. I think i'll look at the "selling with negative equity" forum

murphaph

Pawwed Rig wrote: »

By the sounds of it you will not pay much tax on the rental income as you are paying alot of interest

Unfortunately it would be a bad idea to base the decision on something that could likely be eliminated at the stroke of a minister's pen. Landlords are an easy target politically.

djimi

ElKavo wrote: »

Sorry Ray, Could you explain this? I'm in the same situation and I'll probably end up renting out my own property. Surely if a tenant is not paying up you just kick them out? shut off the electric / water. Or am I being naive to the extreme here?

Youre being naive unfortunately. You need to follow the legal process, which means going through the PRTB and waiting a long time for the case to be heard. If you do anything that would be considered to be against the law, even after an eviction process has begun, the tenant could end up winning and you could end up with a fine.

ElKavo

djimi wrote: »

Youre being naive unfortunately. You need to follow the legal process, which means going through the PRTB and waiting a long time for the case to be heard. If you do anything that would be considered to be against the law, even after an eviction process has begun, the tenant could end up winning and you could end up with a fine.

What is the best way to protect yourself from rouge tenants? Bar the obvious references etc?

Ray Palmer

ElKavo wrote: »

Sorry Ray, Could you explain this? I'm in the same situation and I'll probably end up renting out my own property. Surely if a tenant is not paying up you just kick them out? shut off the electric / water. Or am I being naive to the extreme here?

That just screams out how little you know and how oblivious to the dangers you are.

You certainly cannot switch off services. You cannot just kick a tenant out easily.

A tenant can simple just not pay you and you have to bring them to court to get them out. They will likely never pay the rent even if a judgment is made against them. Mean while your mortgage payment still have to be made.

RAS is meant to be a good system but you are talking about being approved first. Your property may not be seen as good choice and as an apartment this is quite likely. You are also reliant on a system that may drop the rent and/or failure by a tenant to keeping records up to date. This can mean sudden stops in rent and non payment.

There are fine that can be placed against you if you fail to follow out things properly. While it is not actually as likely as people like to say here it is certainly a large risk if a tenant is well informed and intent on not paying rent. There are people who do this repeatedly and ask for money to move out too.

murphaph

ElKavo wrote: »

What is the best way to protect yourself from rouge tenants? Bar the obvious references etc?

Checking references!

Ray Palmer

ElKavo wrote: »

What is the best way to protect yourself from rouge tenants? Bar the obvious references etc?

There is very little to pretty much nothing you can do. Making sure somebody has a good job is about it. Avoiding RA tenants is certainly something I would say to any novice LL. It is very frustrating system and easily messed up.

ElKavo

Ray Palmer wrote: »

That just screams out how little you know and how oblivious to the dangers you are.

You certainly cannot switch off services. You cannot just kick a tenant out easily.

A tenant can simple just not pay you and you have to bring them to court to get them out. They will likely never pay the rent even if a judgment is made against them. Mean while your mortgage payment still have to be made.

RAS is meant to be a good system but you are talking about being approved first. Your property may not be seen as good choice and as an apartment this is quite likely. You are also reliant on a system that may drop the rent and/or failure by a tenant to keeping records up to date. This can mean sudden stops in rent and non payment.

There are fine that can be placed against you if you fail to follow out things properly. While it is not actually as likely as people like to say here it is certainly a large risk if a tenant is well informed and intent on not paying rent. There are people who do this repeatedly and ask for money to move out too.

So it would seem, have you ever had any tenant like that? I don't want to take tenants from RAS or with rent allowance after reading up on it. My house is in a small rural community and I would imagine that I will probably know the tenant or know their family. I am moving to provide a better life for my family and to cut my commute from 3 hours to 1 hour. The last thing that I want to do is bring more hassle to my door. Surely landlords must be able to get decent tenants or why would they bother?

ElKavo

why can't you just switch off water / power? surely if the tenant isn't paying their rent then they have no right to be there?

Pawwed Rig

murphaph wrote: »

Unfortunately it would be a bad idea to base the decision on something that could likely be eliminated at the stroke of a minister's pen. Landlords are an easy target politically.

It is not an irreversible decision though. If things get tough he can just move back in or get a cheaper house.

Ray Palmer

ElKavo wrote: »

So it would seem, have you ever had any tenant like that? I don't want to take tenants from RAS or with rent allowance after reading up on it. My house is in a small rural community and I would imagine that I will probably know the tenant or know their family. I am moving to provide a better life for my family and to cut my commute from 3 hours to 1 hour. The last thing that I want to do is bring more hassle to my door. Surely landlords must be able to get decent tenants or why would they bother?

Yes of course you can get decent tenants but to a certain extent it is a gamble each time. The point is other LL aren't on a knife edge with their finances so can afford to take a loss. I have had tenants who just point blank refuse to pay the rent. One who got RA and spent it and refused to move on. A lot of places over a long time so generally not that bad. A tenant actually just disappeared two weeks ago on me. The place was absolutely disgusting. All carpets, cooker, fridge had to be thrown out. I may even have to replace the kitchen sink as I can't get it clean. I don't know how he lived like that as a year ago the place seemed fine.

ElKavo wrote: »

why can't you just switch off water / power? surely if the tenant isn't paying their rent then they have no right to be there?

You can't because it is illegal. It makes perfect sense that if they believe the legal route is the way you have to go that you can't interfere with the property while that is going on.
While you are trying to evict somebody you are also under the same normal rules as a LL. So if their fridge breaks down you still have to fix it even though they aren't paying the rent.

camphor

ElKavo wrote: »

Surely landlords must be able to get decent tenants or why would they bother?

Large numbers are not bothering. That is one of the factors behind the rise in rents. Look at the irish landlord forum. Nothing but hassle.

djimi

camphor wrote: »

Large numbers are not bothering. That is one of the factors behind the rise in rents. Look at the irish landlord forum. Nothing but hassle.

In fairness the problem with internet forums is that you will only see one side of the issue, and you will only hear from posters when they have an issue. To look on places like Irish Landlord and on here you would swear that it is an absolute apocalypse out there when it comes to renting, however the reality is that almost everyone I know who rents (either as a tenant or a landlord) does so with virtually no issues whatsoever. Im not saying that its all rosey and perfect, but for every problem tenancy there are many more that are running quite smoothly for both parties.

ElKavo

djimi wrote: »

In fairness the problem with internet forums is that you will only see one side of the issue, and you will only hear from posters when they have an issue. To look on places like Irish Landlord and on here you would swear that it is an absolute apocalypse out there when it comes to renting, however the reality is that almost everyone I know who rents (either as a tenant or a landlord) does so with virtually no issues whatsoever. Im not saying that its all rosey and perfect, but for every problem tenancy there are many more that are running quite smoothly for both parties.

That is good to hear. For both the OP and myself will be LL's not by choice per say, more out of necessity. What do landlords do if they do not have tenants in their properties? I had heard that commercial landlords would rather have no one in their properties rather than reduce their rents as they can right off vacant property's from tax. Is that true? How does that affect single dwelling LL's ( for want of a better phrase)? I.E. if I have no one in my property and I'm renting a property is their any break? what about mortgage? I should be able to cover the mortgage even if I'm in a rental and my own property isn't rented. What happens if I suddenly can't? Is it a case that the bank just have to wait? ( not advocating non payment of mortgage)

Thanks

camphor

ElKavo wrote: »

That is good to hear. For both the OP and myself will be LL's not by choice per say, more out of necessity. What do landlords do if they do not have tenants in their properties? I had heard that commercial landlords would rather have no one in their properties rather than reduce their rents as they can right off vacant property's from tax. Is that true? How does that affect single dwelling LL's ( for want of a better phrase)? I.E. if I have no one in my property and I'm renting a property is their any break? what about mortgage? I should be able to cover the mortgage even if I'm in a rental and my own property isn't rented. What happens if I suddenly can't? Is it a case that the bank just have to wait? ( not advocating non payment of mortgage)

Thanks

You are hearing too many fairy stories.
Landlords of commercial properties often have to pay rates while the property is vacant.
The bank doesn't care whether you have your property is let or not. Your contract is to pay the money on time. If you can't pay the bank will appoint a receiver/repossess/ruin your credit rating etc.

djimi

ElKavo wrote: »

what about mortgage? I should be able to cover the mortgage even if I'm in a rental and my own property isn't rented. What happens if I suddenly can't? Is it a case that the bank just have to wait? ( not advocating non payment of mortgage)

If you cant cover the mortgage then it goes into arrears. Im not really sure what else you would expect to happen?

ElKavo

camphor wrote: »

You are hearing too many fairy stories.
Landlords of commercial properties often have to pay rates while the property is vacant.
The bank doesn't care whether you have your property is let or not. Your contract is to pay the money on time. If you can't pay the bank will appoint a receiver/repossess/ruin your credit rating etc.

Probably am alright . I have a house next to me that has been vacant for nearly three years now. I know the mortgage hasn't been paid and no sign of anyone coming down to repossess it. Now I have another neighbor who has abandoned their house and is renting a house in a town close by. They too haven't payed the mortgage in a year too. Now their leaving the country. Perhaps its just me but it seems that the country is rampant with non payment of mortgages.

ElKavo

djimi wrote: »

If you cant cover the mortgage then it goes into arrears. Im not really sure what else you would expect to happen?

Oh I know the mortgage goes in to arrears obviously but as I say I have seen two houses in my own estate just left sitting and no bank official has been anywhere near them. I would only hope that their is something going on in the background to try to recoup the loss. Ultimately its you and me who will end up with the tab other wise.:mad:

ElKavo

Is there any allowance for paying rental? I think there used to be many moons ago. If not there isn't really any helping hand from the government for all the people whom are now in houses that do not suit them and can not sell because of massive negative equity. Although I suppose they seem to care less and less about the Irish people and more about the troika etc.

Has anyone actually managed to sell a house in negative equity and just took the loss as a personal loan? How do banks look at something like this? I'm on a tracker and my bank looses out on it. Has anyone actually managed to negotiate a write down on the loss I.E. bank takes a hit and I take a hit? but ultimately they earn interest on the personal loan portion of the negative equity.

My Mortgage is not in arrears ( just to make that clear and I am in no way advocating non payment of mortgage either)

Sorry for all the questions, Just trying to explore all my options.

Pawwed Rig

ElKavo wrote: »

Is there any allowance for paying rental?

No it was abolished

ElKavo

Pawwed Rig wrote: »

No it was abolished

If only there was an unlike icon I could use!

whatnext

Below is a very simple exercise I carried out on my own place (changed the actual figures to save some dignity :-) )
The figures are for illustrative purposes only.
No allowance made for letting agent or accountancy fees

Prop 1 Per Annum

Mortgage 16800
Management 2040
Total 18840
Rent 12100 11 months revenue (1100 per month)
Balance -6740

Tax
Income 12100
Mgmt -2040
Interest -7200 800 per month 75% relief
Fixtures + Fittings -375 3000 12.5% capital allowance
Profit 2485
Taxed at 52% 1292.2

Liability 8032.2 + Property tax + PRTB fee Annual Cost (balance + tax)

NB: no allowance made for repairs or replacing goods or furniture

So effectively it would cost me over 8k pa to rent out my place before I pay for somewhere else

roughpatch

Very useful @whatnext - thanks.

This might be a stupid question, but that 52% rate, where does that come from?

Ray Palmer

whatnext wrote: »

Below is a very simple exercise I carried out on my own place (changed the actual figures to save some dignity :-) )
The figures are for illustrative purposes only.
No allowance made for letting agent or accountancy fees

Prop 1 Per Annum

Mortgage 16800
Management 2040
Total 18840
Rent 12100 11 months revenue (1100 per month)
Balance -6740

Tax
Income 12100
Mgmt -2040
Interest -7200 800 per month 75% relief
Fixtures + Fittings -375 3000 12.5% capital allowance
Profit 2485
Taxed at 52% 1292.2

Liability 8032.2 Annual Cost (balance + tax)

So effectively it would cost me over 8k pa to rent out my place before I pay for somewhere else

As I said in the second post it is rough 50% you will pay on the rental income. It is much safer to use that as a rough guide as it makes allowances real world situations like appliances breaking and vacancies.

Use that you get about €10k annual cost. Having that inbuilt contingency is good practice and much more accurate I find.

As for mention that most renting has no problems I think that might not be quite true. I would say it is at least 1 in 10 that are problem and the lower you go down the renting market that increases. People who don't normally gamble seem to underestimate risk and take bigger gambles as a result.

whatnext

Ray Palmer wrote: »

As I said in the second post it is rough 50% you will pay on the rental income. It is much safer to use that as a rough guide as it makes allowances real world situations like appliances breaking and vacancies.

Use that you get about €10k annual cost. Having that inbuilt contingency is good practice and much more accurate I find.

As for mention that most renting has no problems I think that might not be quite true. I would say it is at least 1 in 10 that are problem and the lower you go down the renting market that increases. People who don't normally gamble seem to underestimate risk and take bigger gambles as a result.

Hi Ray.
I just put that up to emphasise that there is likely to be a significant cost no matter how simple it looks. As you say no allowance made for what happens in real life. I too am a landlord and would agree that the majority of tenants are well meaning and honest, but the ones that are not can cost thousands in a very short period of time.

Even looking at that now I realise that I did the figures before the PRTB or Property tax came into play, they are other expenses to be taken into account. (will edit)

Anyone looking to go down this route needs to be very careful. Even if the figures seem ok on paper on an annual basis you have to consider cash flow too. All the expenses could conceivably come in on the same month, would you have the cash reserves to handle it?

Ray Palmer

whatnext wrote: »

Anyone looking to go down this route needs to be very careful. Even if the figures seem ok on paper on an annual basis you have to consider cash flow too. All the expenses could conceivably come in on the same month, would you have the cash reserves to handle it?

I agree the dangers are huge in doing this especially without a decent contingency fund. I would want to have €10-20k put aside before venturing into the situation myself. Too many important things at risk if something goes wrong.

ElKavo

Mortgage 5720
Management I'll have to do this myself
Total 5720
Rent 7150 11 months revenue (650 per month)
Balance + 1430

This is where im a bit unsure if anyone has any input to help me out that would be great.

Tax
Income 7150
Mgmt 0
Interest - im on 1.45% per month 75% relief How does this work?
Fixtures + Fittings -375 3000 12.5% capital allowance How does this work?
Profit ??
Taxed at 52% ?? My income is 37.5k so I don't think much of the rental income would fall into the higher bracket.


Thanks guys... I feel like johny 5 at the moment (need input)

Pawwed Rig

roughpatch wrote: »

This might be a stupid question, but that 52% rate, where does that come from?

41% tax + PRSI + USC


Income 7150

Mgmt 0

Interest - im on 1.45% per month 75% relief How does this work? It is the amount you pay. Say your interest for the year is €3,000 then you can deduct 2,250

Fixtures + Fittings -375 3000 12.5% capital allowance How does this work? Cap allowances 12.5% of the cost of the F&F say 4,000 then you deduct €500 per annum

Profit

Taxed at 52% ?? My income is 37.5k so I don't think much of the rental income would fall into the higher bracket. - All of it will unless you are married.

D3PO

ElKavo wrote: »

Mortgage 5720
Management I'll have to do this myself
Total 5720
Rent 7150 11 months revenue (650 per month)
Balance + 1430

This is where im a bit unsure if anyone has any input to help me out that would be great.

Tax
Income 7150
Mgmt 0
Interest - im on 1.45% per month 75% relief How does this work?
Fixtures + Fittings -375 3000 12.5% capital allowance How does this work?
Profit ??
Taxed at 52% ?? My income is 37.5k so I don't think much of the rental income would fall into the higher bracket.


Thanks guys... I feel like johny 5 at the moment (need input)

you should know roughly how much interest you pay on your mortgage !! If you don't you need to figure it out,. Your bank would provide you a statement of this yearly so for rough guide use last years statement of interest.

Capital allowance you should know what you spend on fixtures and fittings and you can deduct 12.5% of this yearly for depreciation. Make sure you can prove your figures with receipts should you be audited.

If your income is 37.5k ALL your rental income will fall into the higher bracket as your already in that bracket for income tax and this is additional income on top of that.

ElKavo

Pawwed Rig wrote: »

41% tax + PRSI + USC


Income 7150

Mgmt 0

Interest - im on 1.45% per month 75% relief How does this work? It is the amount you pay. Say your interest for the year is €3,000 then you can deduct 2,250

Fixtures + Fittings -375 3000 12.5% capital allowance How does this work? Cap allowances 12.5% of the cost of the F&F say 4,000 then you deduct €500 per annum

Profit

Taxed at 52% ?? My income is 37.5k so I don't think much of the rental income would fall into the higher bracket. - All of it will unless you are married.

Ok great I'll do some sums on the interest and I am married so I think my ceiling is 42k. What is the best way to work out the interest? is it on the original loan amount or the current balance? Still owe approx 185k. I'm pretty sure have a statement from the bank. I may just give them a call and ask.

whatnext

ElKavo wrote: »

Mortgage 5720
Management I'll have to do this myself
Total 5720
Rent 7150 11 months revenue (650 per month)
Balance + 1430

This is where im a bit unsure if anyone has any input to help me out that would be great.

Tax
Income 7150
Mgmt 0
Interest - im on 1.45% per month 75% relief How does this work?
Fixtures + Fittings -375 3000 12.5% capital allowance How does this work?
Profit ??
Taxed at 52% ?? My income is 37.5k so I don't think much of the rental income would fall into the higher bracket.


Thanks guys... I feel like johny 5 at the moment (need input)

If you are on a capital repayment mortgage (ie not interest only) there are two parts to your payment. Capital & Interest.
The interest part on a repayment of 1200 could be say 800. only 75% of this is a deductible expense ie €600 per month or 7200 per year.

If you have white goods and furniture in the apartment they are expensed as a capital allowance. so if the good / furniture are worth €3000 you can write off 12.5% of this per annum as an expense.

re your own tax situation I dare not comment - too many variables.

For the sake of €200 or maybe a free consultation I would strongly recommend anyone thinking about this talk to an accountant.

I've been doing this for 15 years and I still don't make a decision without phoning my accountant. The implications of getting something wrong are so vast that my accountants fees seem cheap.

ElKavo

D3PO wrote: »

Capital allowance you should know what you spend on fixtures and fittings and you can deduct 12.5% of this yearly for depreciation. Make sure you can prove your figures with receipts should you be audited.

I have already fitted the house out. It is our home. surely I cant deduct 12.5% from stuff we have already had for 6 years. If i even have receipts for them... Or can I? ** frantically looking through man drawer for receipts folder**

D3PO

whatnext wrote: »

For the sake of €200 or maybe a free consultation I would strongly recommend anyone thinking about this talk to an accountant.

.

which is tax deductible aswell should you do it