Reluctant landlord

irishmanmick

Hi all,

Wondering if I could tap into the collective for a bit of advice here. I'm about to become a reluctant landlord, in that we're moving out of our 2 bed apt after the arrival of our 3rd child and moving into a house. Our apt is heavily in negative equity so selling it is out of the question, so that means our only option is to rent it out. I know there is a guide to renting here but was wondering if anyone on here could give us a few tips on what to do on the dark side, renting out our place.

I know we've to register with the PRTB, and we'll have a tax liability from it but after that I pretty much know squat. We'll be moving in bout a month or so and want to use that time to swat up on the things we should be doing to attract the right tenants. If any one could point us in the direction of useful information I'd really appreciated it!

Cheers

Tokyo

http://www.citizensinformation.ie/en/housing/renting_a_home/

Read. Read. Then read it again.

Know your rights back to front, and importantly, know your tenants rights, particularly regarding Part 4 tenancies - i.e. once they're in for 6 months, they have the right to stay for another 3 and a half years, unless they breach contract or you move back in.

Santa Cruz

irishmanmick wrote: »

Hi all,

Wondering if I could tap into the collective for a bit of advice here. I'm about to become a reluctant landlord, in that we're moving out of our 2 bed apt after the arrival of our 3rd child and moving into a house. Our apt is heavily in negative equity so selling it is out of the question, so that means our only option is to rent it out. I know there is a guide to renting here but was wondering if anyone on here could give us a few tips on what to do on the dark side, renting out our place.

I know we've to register with the PRTB, and we'll have a tax liability from it but after that I pretty much know squat. We'll be moving in bout a month or so and want to use that time to swat up on the things we should be doing to attract the right tenants. If any one could point us in the direction of useful information I'd really appreciated it!

Cheers

Check out Irish Landlord.com Loads of very useful tips and info there relating to the letting of property

Sheep Shagger

Santa Cruz wrote: »

Check out Irish Landlord.com Loads of very useful tips and info there relating to the letting of property

Not a nice situation to be in - am in the same boat

Read the above site and check Revenue.ie for landlords (pay someone to do your tax as you can write the expense off anyway).

odds_on

Download, read and inwardly digest the Residential Tenancies Act 2004 and the Housing Standards for rented Accommodation 2008 and the amendment 2009.

Unfortunately, the RTA 2004 can be a bit complicated in parts.

You will have to vet your prospective tenants very well. Don't take for granted what they say is true and if phone numbers are provided for a reference, don't trust it; get addresses and visit the person if you can.

Also read through lots of threads here so that you may see what problems you may encounter and the answers given.

irishmanmick

Cheers guys ... Loads to sink my teeth into there

sunnysoutheast

irishmanmick wrote: »

Hi all,

Wondering if I could tap into the collective for a bit of advice here. I'm about to become a reluctant landlord, in that we're moving out of our 2 bed apt after the arrival of our 3rd child and moving into a house. Our apt is heavily in negative equity so selling it is out of the question, so that means our only option is to rent it out. I know there is a guide to renting here but was wondering if anyone on here could give us a few tips on what to do on the dark side, renting out our place.

I know we've to register with the PRTB, and we'll have a tax liability from it but after that I pretty much know squat. We'll be moving in bout a month or so and want to use that time to swat up on the things we should be doing to attract the right tenants. If any one could point us in the direction of useful information I'd really appreciated it!

Cheers

At the risk of pointing someone to another site there is a lot of detailed info on AAM on the tax implications of renting out a property, capital allowances etc.

In terms of the RTA etc., yes I would strongly suggest you bone up on it as things have perhaps moved on since the last time you were a landlord/tenant, some for the better some for the worse.

As far as attracting the right tenants goes, then check and double-check references. A mistake can be costly.

Santa Cruz

If letting a two bed the best hope is for two single people. A small family may work also. References from previous landlords can be of little use unless you know the landlord personally. Some landlords will say anything to get rid of bad tenants. First satisfy yourself as to their ability to pay the rent. I always ask where do they work and mention that I will be checking this out. A call to the HR office, explain that you are renting to people who say that they are employed there and ask for confirmation. As a rule that will be fine, particularly with professionals, as the new employer wants everything to work smoothly for their new employee. Get phone numbers, PPS No. and get them to pay by standing order. All these little factors will come together to help you make up your mind about them. If in doubt trust your instincts. A bad tenant will be an awful bother.
Remember this is a business not a friendship. Draw up an inventory, give them a copy of house rules, sign tenancy agreement, register with PRTB. Keep receipts for everything you purchase in relation to the apartment. It all helps to reduce the tax bill. Remember you can claim 600 or so expenses for phone, transport etc. (not a lot of people do this!)
Management fees, advertising costs, accountant costs can all be used to reduce tax. Don't even attempt top avoid tax because if you are caught they will screw you

Bold Abdu

Santa Cruz wrote: »

Remember you can claim 600 or so expenses for phone, transport etc. (not a lot of people do this!)

Where did you get €600 figure from?

Sligo1

Take photos of the property interior and exterior before the beginning of the tenancy! Amd make sure they are electronically dated. The more detailed the better. Will be evidence for you of there is anything damaged during the tenancy.

the world wonders

Santa Cruz wrote: »

Remember this is a business not a friendship.

This is the most important thing to remember.

1. Your tenant is not your friend -- don't let yourself fall for hard luck stories about the dog eating the rent cheque or whatever. (I realise that there are good people in genuinely difficult situations out there, but it is the Department of Social Welfare's responsibility to look after them, not yours. If turning down someone makes you feel guilty then donate to the VDP or Threshold.)
2. Your tenant is not your enemy -- if problems do arise you should try and minimise the losses for your business, not try and get revenge on them

If you look back through the history of this forum, you'll see any number of amateur landlord threads along the lines of "I let them move in without a deposit because I felt sorry for them, but now they won't pay rent -- is cutting off the electricity the best way to get them out? Or should I send my husband over with a baseball bat to change the locks?"

the_syco

Santa Cruz wrote: »

I always ask where do they work and mention that I will be checking this out. A call to the HR office, explain that you are renting to people who say that they are employed there and ask for confirmation. As a rule that will be fine, particularly with professionals, as the new employer wants everything to work smoothly for their new employee.

On this, Google the employer, ring the official number, and ask to be put through to the HR. This will stop you from ringing their mate, as opposed to a mate of the possible tenant in a house.

Look up no your rights, and what to do if they stop paying, and when to issue the letters.

Ignore the sob stories, or you'll be in for a world of pain!

sunnysoutheast

Santa Cruz wrote: »

I Keep receipts for everything you purchase in relation to the apartment. It all helps to reduce the tax bill. Remember you can claim 600 or so expenses for phone, transport etc. (not a lot of people do this!)
Management fees, advertising costs, accountant costs can all be used to reduce tax. Don't even attempt top avoid tax because if you are caught they will screw you

All of this is very good advice but I am not sure about the part I've bolded - can you provide a link to justify? The professional advice I was given is that you can claim reasonable admin expenses (fee for lease agreement, stamps, etc.) but the property is treated as the place of business by the Revenue to which the travel is not claimable. I am aware that people often put a "bit of petrol money" in their tax return but it has no basis as far as I know. A claim of 50/month would not be justifiable for a single property.

Also ensure that any and all capital allowances are claimed. Informal Revenue guidance at present appears to be that, if an item can be removed from the property without significant damage allowing it to be used somewhere else, it can be depreciated.

Santa Cruz

Bold Abdu wrote: »

Where did you get €600 figure from?

My accountant claimed it on a rental income of about 14,000.
You could claim more but you would only have to start producing petrol receipts, telephone bills etc. and it's more hassle than it's worth. However if you live a long distance form the rental property it might be worth it.
He has claimed this for years with no bother.
It's a reasonable annual cost when you consider trips to check the property, do repairs and make telephone calls.

Santa Cruz

the world wonders wrote: »

This is the most important thing to remember.

1. Your tenant is not your friend -- don't let yourself fall for hard luck stories about the dog eating the rent cheque or whatever. (I realise that there are good people in genuinely difficult situations out there, but it is the Department of Social Welfare's responsibility to look after them, not yours. If turning down someone makes you feel guilty then donate to the VDP or Threshold.)
2. Your tenant is not your enemy -- if problems do arise you should try and minimise the losses for your business, not try and get revenge on them

If you look back through the history of this forum, you'll see any number of amateur landlord threads along the lines of "I let them move in without a deposit because I felt sorry for them, but now they won't pay rent -- is cutting off the electricity the best way to get them out? Or should I send my husband over with a baseball bat to change the locks?"

"Or should I send my husband over with a baseball bat to change the locks?"

I'd love to be at the PRTB hearing when he is trying to justify that.

Bold Abdu

Santa Cruz wrote: »

My accountant claimed it on a rental income of about 14,000.
You could claim more but you would only have to start producing petrol receipts, telephone bills etc. and it's more hassle than it's worth. However if you live a long distance form the rental property it might be worth it.
He has claimed this for years with no bother.
It's a reasonable annual cost when you consider trips to check the property, do repairs and make telephone calls.

€600 just sounds a bit high to me. I've seen lesser figures questioned in Rev' audits.

Santa Cruz

Bold Abdu wrote: »

€600 just sounds a bit high to me. I've seen lesser figures questioned in Rev' audits.

Maybe but I get through every year.

The_Conductor

Bold Abdu wrote: »

€600 just sounds a bit high to me. I've seen lesser figures questioned in Rev' audits.

Ditto......
You may get through- you may not.
Their current hit list appears to be those who have been avoiding paying the property tax- this doesn't mean you're off the hook- just that landlords (for once) aren't as high profile targets, as they normally are. If you put something stupid in- you will possibly be challenged though- and if you don't have receipts for the preceding 3 years- good luck to you.

riclad

my friend showed me her tax return,
mortgage 12k,
rental income 6k.
profit , zero.
Revenue sent her a letter , in regard to tax income due on rental income, 2012, 75 cent tax due,charge .
they,d said it wont be charged , as sum is too small to process.

IF you are not making a profit, on the house , theres no point in claiming tax credits on mortgage interest or accountants fees.
SHE CANT sell up ,in negative equity 80k approx.
SHE pays property tax, and registered tenant cost 200 euro.

SHE claims zero tax credits on the rental unit,
on her tax return she puts mortgage paid, interest paid,annual
rental income, her total income ,service charges 1000 euro .
her bank accounts, dirt, interest on her savings account.
EG rental plus income from her job.

it takes her about 40 minutes to fill out her tax return ,
shes on paye ,Works for a large company since 1994.

she filled out the first tax return last year in respect of the rental property.

THE law is you must keep records on everything,
expenses,insurance, rental income ,mortgage, loan interest, for the previous 5 years in respect of a rental property and make a tax return ,every year.

EVEN if you make zero profit on it.

eg you make a tax return as a landlord ,
this is regardless if you work for company x,
under the paye system.


yes you can claim for repairs ,accountants fees,fixtures,fittings, maintenance, cooker, etc that,s

IF YOU make a profit,
eg rental income is more than your mortgage ,and service charges , insurance paid, on the property.

murphaph

Santa Cruz wrote: »

Maybe but I get through every year.

You don't get audited every year. You've likely never been audited or you'd know.

murphaph

riclad wrote: »

yes you can claim for repairs ,accountants fees,fixtures,fittings, maintenance, cooker, etc that,s

IF YOU make a profit,
eg rental income is more than your mortgage ,and service charges , insurance paid, on the property.

You don't claim for these things. You use them to calculate net profit or loss. In the event of a loss you carry that forward to next year and use it to offset any gains or add it to next year's loss and carry forward again and so on. In short you ALWAYS use your expenses to calculate profit or loss.

The_Conductor

riclad wrote: »

my friend showed me her tax return,
mortgage 12k,
rental income 6k.
profit , zero.
Revenue sent her a letter , in regard to tax income due on rental income, 2012, 75 cent tax due,charge .
they,d said it wont be charged , as sum is too small to process.

The 75% of the mortgage interest was obviously greater than her rental income- exempting the income from tax. Vis the 75c being wiped- even sending her the letter costs 60c, normally gross sums of under a fiver (I stand to be corrected on this) aren't processed.

riclad wrote: »

IF you are not making a profit, on the house , theres no point in claiming tax credits on mortgage interest or accountants fees.
SHE CANT sell up ,in negative equity 80k approx.
SHE pays property tax, and registered tenant cost 200 euro.

You don't have to be making a profit to owe tax- just because you're not making a profit does not mean that there is no point in claiming the mortgage interest, accountants fees or indeed any other costs associated with the property.

riclad wrote: »

SHE claims zero tax credits on the rental unit,
on her tax return she puts mortgage paid, interest paid,annual
rental income, her total income ,service charges 1000 euro .
her bank accounts, dirt, interest on her savings account.
EG rental plus income from her job.

Standard practice.

riclad wrote: »

it takes her about 40 minutes to fill out her tax return ,
shes on paye ,Works for a large company since 1994.

she filled out the first tax return last year in respect of the rental property.

40 minutes? I do a PAYE return- it can often take me 3-4 hours just to get the paperwork in order- on top of registering the box to the Revenue Commissioners etc.

riclad wrote: »

THE law is you must keep records on everything,
expenses,insurance, rental income ,mortgage, loan interest, for the previous 5 years in respect of a rental property and make a tax return ,every year.

EVEN if you make zero profit on it.

eg you make a tax return as a landlord ,
this is regardless if you work for company x,
under the paye system.

Yes- its the law- and yes it must be followed. There has been a crackdown- and if you cut corners, you will be caught- its simply a matter of time, you most certainly will be caught though.

riclad wrote: »

yes you can claim for repairs ,accountants fees,fixtures,fittings, maintenance, cooker, etc that,s

IF YOU make a profit,
eg rental income is more than your mortgage ,and service charges , insurance paid, on the property.

Keep in mind- this is a PAYE return- you can carry some of the net losses forward, and indeed some of them may be used to offset against other taxable gains- its not a zero sheet calculation. Rental income, is one source of income- you have others (presumably).

riclad

If you have 1 property, you make a loss, after paying mortgage, interest, insurance, service charges, You won't be able to claim a credit for accountants fees,

as you are in loss, you have no taxable income, profit, on the property to claim against her taxable income last year, was 75 cents.

She is on PAYE, she pays the same tax as any other single person in her company in the PAYE system.

http://www.revenue.ie/en/tax/it/leaflets/it10.html

http://www.revenue.ie/en/tax/it/leaf....html#section7

But she has to fill out a self employed tax return every year, in respect of she's taken to be a landlord cos she rents out 1 apartment. She is not going to pay any accountant as she cannot claim tax credits on the fees, as she makes no profit on the rental income, after expenses. Yeah, it takes about 3 hours to get all the documents ready, for the tax return, bank statements, interest paid etc.

if you are working for a company, the PAYE tax is taken out of your salary, it is completely separate from your tax return, apart from on the tax return your put your total income for the year, that includes your income working as a PAYE employee. Look on revenue i.e., search landlord rental income,

This is not PAYE return, its completely separate, in theory you could be paying 5k tax, in the PAYE system, if you were working in a shop, and also pay 10k tax as a self employed landlord, if your rental income was 50-60k per year. There is info there, on revenue.ie, search landlord rental income.

The PAYE system is separate from your tax return as a landlord. She can't claim expenses, fees on the rental unit against her income as a PAYE employee. You have other income, so it'll be taxed under the PAYE system as before, f you work for a company. Your PAYE tax will not increase or decrease because you are now making an income as a landlord. See below, you are making a tax return,

Self assessment, basically in respect of income earned outside the PAYE system, in this case rental income earned,

Income Tax Self-Assessment

Self-Assessment applies for Income Tax purposes to:

Self-employed persons (i.e. people carrying on their own business including farming, professions or vocations)

Persons receiving income from sources where some or all of the tax cannot be collected under the PAYE system, for example: profits from rents, investment income, foreign income.

If you buy carpets, cooker, furniture you can claim tax credits against rental income profit, for 8 years, e.g. new fridge 800 Euro, claim 100 per year. But if your taxable profit, rental income after expenses, is say 10 Euro, there is no point in doing this, e.g. you can't claim tax credits on a cooker against your PAYE income, e.g. in theory in 20 years my friend will make a profit as her mortgage will be paid off, when she's 65 years old.

You can't claim your net losses in 2012 against non-rental income in 2014, her net losses are about 6k per year, she can't carry that loss to 2014 to claim against some other income. She be in loss till 2040 at least. Maybe she buy a 500 Euro cooker in 2039 and claim for that for 8 years forward, if she's, still alive to claim anything.

riclad

In theory your income under paye as an employee of ,say ibm, could be 65k,
but you,ll pay zero tax under self assessment if your taxable profit on the rented house is zero euros.

murphaph

Riclad, small scale rental income can indeed be declared on a Form 12 if the person is PAYE or a pensioner. Some losses can be offset against other gains in the same year but they must be the right case. Rental income is case IV so can't be offset against PAYE type income. Thems the rulez.

riclad

SOME losses can be offset against gains ,
i do,nt understand that ,

IN her case rental income, is 6k, mortgage is 12k,

wheres the gains coming from?

her income as in employee is taxed under the paye system,
as for the last 20 years.

she has one property ,1 tenant .

ARE you referring to someone who has 2 rental units ,

one of which makes a profit?

SO as i said your rental income,, or expenses is totally separate from
your paye income .

i cant claim 300 euros accountants fees against my paye income ,
as the accountants fees are for doing my self assessment returns ,

in respect of my rental property .rental income.

its like ,im 2 people ,
under the tax system,
1 person for paye,

1 person for self assessment tax return in respect of my rental income,

thats why i need to fill out a fulltax return ,

even though i,m a paye employee.


claiming expenses or loss,es re rental property, against paye is not allowed.

riclad

this is a self assessment tax return ,

COMPLETELY separate from my paye income,

i was on the paye system as an employee ,

i never filled out a tax return for 30 years .
never claimed for anything ,not even medical expenses .
i got a p60, payslip , thats about it.

i never even seen a tax return as my only income was working for the company.


IN THIS thread i,m refering to someone who has 1 rental property , in negative equity
probably working as an employee under the paye tax system.

riclad

MY friend has 2 propertys , 2 mortgages,

she lives in 1 ,

rents out the other one .

SHE cant sell unit 2, as its worth 80k less than the mortgage ,

so she,s a reluctant landlord.

sunnysoutheast

riclad wrote: »

this is a self assessment tax return ,

COMPLETELY separate from my paye income,

i was on the paye system as an employee ,

i never filled out a tax return for 30 years .
never claimed for anything ,not even medical expenses .
i got a p60, payslip , thats about it.

i never even seen a tax return as my only income was working for the company.

Riclad I think you are getting confused between PAYE income, from employment, and income from the letting of property.

The former is deducted at source.

With the latter, a surplus (gain/profit) or deficit (loss) is calculated for each property with the total amount chargeable to tax being the aggregate of these.

Expenses and allowances can be claimed if they are wholly related to the business of letting the property. Of particular interest are depreciation for fixtures and fittings and any capital repairs.

The reason allowances should be claimed in each year, even if they do not on the face of it change the financial position for that year for the particular property, is that "unused" allowances can be carried forward and used to offset gains in future years or for other properties within the same portfolio. It is not possible to claim these retrospectively, hence they should still be claimed every year.

You are correct in that, unfortunately, rental losses can not be offset against non-rental income.

Losses from "uneconomic" rents, i.e. set deliberately low vs. market rate, cannot be offset.

http://www.revenue.ie/en/tax/it/leaflets/it70.html#section14

This is one of those areas where a good accountant is well worth his/her fee.

DK man

Make sure that utilities are transferred into tenants names - even if they said they did it ring up company to double check.

I got stung for an electric bill of €300 from a group who were in a house of mine for 8 years - they said bill was in their name when they moved in and I just took their word for it

Best of luck

riclad

yes I understand ,
but i,m posting about some one that has ONLY one property ,rented out.

SO if you are not making a profit, theres no point in trying to claim tax credits from previous years ,eg 3 years ago,

UNLESS you are claiming for an item, say a cooker ,fridge, over 8 years.

i,m saying in general ITS not worth paying an accountant IF are making no profit on rental income, AFTER mortgage, interest, expenses.

as a landlord you can claim 75 per cent mortgage interest paid on the
rental income as an expense , also service charges on the property.
fees to the prtb etc
ITS pretty easy to fill out a tax return if you keep records ,
bank statements, statements of interest paid per year.
reciept from prtb etc

if you are making a profit then pay an accountant to fill in your tax return .

sunnysoutheast

riclad wrote: »

yes I understand ,
but i,m posting about some one that has ONLY one property ,rented out.

SO if you are not making a profit, theres no point in trying to claim tax credits from previous years ,eg 3 years ago,

UNLESS you are claiming for an item, say a cooker ,fridge, over 8 years.

i,m saying in general ITS not worth paying an accountant IF are making no profit on rental income, AFTER mortgage, interest, expenses.

as a landlord you can claim 75 per cent mortgage interest paid on the
rental income as an expense , also service charges on the property.
fees to the prtb etc
ITS pretty easy to fill out a tax return if you keep records ,
bank statements, statements of interest paid per year.
reciept from prtb etc

if you are making a profit then pay an accountant to fill in your tax return .

I'm not sure whether I just misunderstand what you're trying to say, it may be the same as me, but I've explained the way I believe it works as simply as I can.

You are not claiming tax credits. You are carrying forward losses which may be of use in future years to reduce the tax bill at that point.

It may not be worth paying an accountant if you are comfortable with doing your own return, true, but this is a complex area and easy to get wrong.

riclad

yeah I understand what you are saying ,
BUT my friend wont make any profit in the next 15 years.
so theres no point in her carrying forward losses,
SHE will have no taxable rental income in the next 15 years at least.
she will have no tax bill ,
TO use carried losses against .
i UNDERSTAND some landlords who make a profit will want to carry forward loss,es to use against taxable income.
i think an Intelligent person should be able to fill in a tax return ,
its not that complicated .
IF you are making a profit ,you may as well pay an accountant
as you can claim the fee as a landlord,s expense.

The_Conductor

Riclad- I'm going to move your posts- and the responses to them, off into their own thread- where both you and the OP can have individual circumstances looked at.

As an aside- never say never- its impossible to reliably say that your friend is not going to have a taxable income from renting the property, over the next 15 years (or over any other timescale). Proposals are to do away with mortgage interest as an allowable expense (its at 75% at the moment)- if this happens, it will fundamentally change the landscape of the market.