Nuisances of being a Landlord

tharmor

Folks is it advisable to buy a house and rent it say after 4-5 years if you are not planning to stay in Ireland ?

I am planning to buy but won't be staying more than 3-4 years in Ireland as I have other plans...

So just wanted to know if its advisable to buy and later rent out...how easy it is to manage if u are outside the country.?

Is it a wise decision financially ?

Thanks.

Paulw

tharmor wrote: »

Folks is it advisable to buy a house and rent it say after 4-5 years if you are not planning to stay in Ireland ?

I am planning to buy but won't be staying more than 3-4 years in Ireland as I have other plans...

So just wanted to know if its advisable to buy and later rent out...how easy it is to manage if u are outside the country.?

Is it a wise decision financially ?

It would be your call. Very hard to judge what way property prices and rental prices will go, but currently rental prices are going up.

A good management agent will manage the property for you, if you are not around. Just shop around and get recommendations.

Just make sure you do everything by the book - tax declarations, PRTB registration, etc etc etc

No reason why you can't do it. It would not be that uncommon.

tharmor

Paulw wrote:

Just make sure you do everything by the book - tax declarations, PRTB registration, etc etc etc

Do landlords pay higher taxes for the rent they earn ?

Van.Bosch

tharmor wrote: »

Do landlords pay higher taxes for the rent they earn ?

Higher than what/who? Rental income is treated as income and thus taxed at your marginal rate. There are specific rules if you were to move abroad but I'm not an expert on that.

athtrasna

Tax and USC is payable on the rent received less certain deductible expenses, mortgage interest relief etc. Like with any income tax, the more you earn the more you pay.

Senecio

I'm an overseas landlord (living in Ireland, property in Australia). Its not a lot of fun looking after a property from so far away even with a EA handling most of the day to day things. Getting up at 5am to call tradesmen for quotes wears thin real quick. I've been in Ireland for 4 years now and I'll probably dispose of the house this year before I have to pay CGT on it.

I wouldn't advise on it, its a pain.

dori_dormer

When you are not resident in Ireland you must pay 20% tax on all income. There are no exemptions or deductions.

You would also have to pay an estate agent to manage your property. They usually cost between 10-12% of your monthly income.

To be honest it's no really a viable option when you live abroad unless your income is hugely greater than your mortgage or you have no mortgage. Between bills and fees and insurance, upkeep, management fees, we made no money, even a loss one year. If you hit one glitch like your tenant decides to stay past their lease, or doesn't pay up and you have a prtb case, you get hit very very hard.

emo72

one house is hard enough to run.

Santa Cruz

Running accommodation is the same as any other business. If you put the proper management structure in place it can be done. Living abroad means that you cannot have a hands on approach. The best approach is to have the house as user friendly as possible. Have a management agent you can trust who has a good repair teams e.g. plumber, electrician etc. available as required.
However if you think that you can do all this yourself from abroad you will only bring hardship on yourself

johnp001

From today's Indo
'Renting our apartments has been a window into the worst of human behaviour'

radharc

dori_dormer wrote: »

When you are not resident in Ireland you must pay 20% tax on all income. There are no exemptions or deductions.

This is incorrect.

Michael D Not Higgins

johnp001 wrote: »

From today's Indo
'Renting our apartments has been a window into the worst of human behaviour'

I have a number of issues with the outlining of his outlays, e.g. there is no Second Home tax anymore, the management fees are independent of whether the place is rented, etc.

I do feel sorry for them in the second half of the article. Two bad tenants in a row is bad luck. I'm not sure what exactly was going on with the guy paying in cash, did they have an agent or not at that stage and what happened when they tried to call over to collect the rent?

He also doesn't mention anything about any PRTB process of trying to recover damages or lost rent.

Mrs OBumble

Senecio wrote: »

I'm an overseas landlord (living in Ireland, property in Australia). Its not a lot of fun looking after a property from so far away even with a EA handling most of the day to day things. Getting up at 5am to call tradesmen for quotes wears thin real quick. I've been in Ireland for 4 years now and I'll probably dispose of the house this year before I have to pay CGT on it.

Get a better EA.

I'm an overseas LL in a very similar situation, and find it a piece of cake. All I have to do is remember to renew my LL insurance every year. The agent does everything else, including organising and managing repairs - including some complex ones, eg replacing all pipe-work in the place. Yes I paid for their services, but it was totally worth it.

tharmor

radharc wrote:

This is incorrect.

Is it ? Can you shed more light ?

athtrasna

tharmor wrote: »

Is it ? Can you shed more light ?

If you get someone (paid or a family member/friend) to act as your agent for Revenue then they can file a tax return on your behalf and you will be liable for normal income tax, not a flat 20% of rent rate.

tharmor

athtrasna wrote:

If you get someone (paid or a family member/friend) to act as your agent for Revenue then they can file a tax return on your behalf and you will be liable for normal income tax, not a flat 20% of rent rate.

But is the tax not 20% for income upto 42k ??

dori_dormer

If someone collects the rent for you here, ie an estate agent then your tenants don't have to pay the 20% tax. But you still have to at the end of the year as you are still not resident.

We had an estate agent collect our rent, and we had a tax consultant / accountant do our taxes for 3 years while abroad. The first and last year we qualified as residents. The middle year we did not.

beauf

I think the issue will be with all the expenses can costs what's the return. Considering you have to factor in damages and losses from various reasons. Which you'll get hit with at some point.

Mrs OBumble

tharmor wrote: »

But is the tax not 20% for income upto 42k ??

No.

The first 7600 (ish) is tax free. It's 20% from there to 33,800 - but actually it's more than that because you're now liable for PRSI and USC on rental income.

And it's even more complicated than that, because you may need to also declare your worldwide income, or you may need to declare your Irish income overseas (and possibly receive a tax credit there for the tax you pay here). The rules can vary, depending on your citizenship status, and ordinary vs habitual residency.

Using an accountant is strongly recommended.

lcwill

I am living abroad but have 2 apartments rented out in Dublin 8.

I have a good estate agent who takes care of everything for a 6% letting fee (6% of annual rent when he gets a new tenant) plus 5.5% monthly management fee (5.5% of monthly rent every month).

My only involvement is responding to the occasional email and paying the Local Property Tax and Building Management Fees. The estate agent takes care of all repairs, insurance etc. and deduct directly from the rent.

I get paid the full rent after expenses and am registered for self assessment for tax - I pay an accountant E185 to do my tax return every year and benefit from the same deductions as an Irish resident but only pay 20% flat tax on all profits (income less allowable expenses).

The country I live in has a double tax treaty with Ireland so here I declare the income and submit a copy of my Irish tax return as proof all necessary taxes have been paid. The only extra tax I pay is a tax on properties held overseas but the Local Property Tax in Ireland can be used as a credit against this.

It is worth it as I bought at the bottom of the market for cash and thanks to the 20% flat tax for non resident landlords. Overall I net around 60-70% of gross rent depending on whether there are any surprises during the year.

Even if I move back to Ireland I would still use an agent to fully manage the apartments - self managing a couple of rental properties is rarely worth it.

cerastes

athtrasna wrote: »

If you get someone (paid or a family member/friend) to act as your agent for Revenue then they can file a tax return on your behalf and you will be liable for normal income tax, not a flat 20% of rent rate.

The 20% flat rate may work out better and less hassle though.
Im interpreting what you and possibly some others are saying is that availing of normal resident tax status is better? when in fact it may work out more expensive.

In any event, who pays what in a non resident landlord scenario?
eg if the rent is 1000 per month,
My understanding was the tenants simply deducted 20% (€200 in this case) and paid the landlord the balance of 80% (in this case €800).

I dont know as I amn't in that situation, but its something Im curious about as I thought the above was how it worked. I considered there were no allowances and that the 20% deduction was on the full amount?

Does the tenant pay the 20% to revenue? I understood from a previous thread they had to fill in a seperate form? but I didn't think they had to pass on the balance (ie €200 using a rent example of €1000 per month).

tharmor

cerastes wrote:

Does the tenant pay the 20% to revenue? I understood from a previous thread they had to fill in a seperate form? but I didn't think they had to pass on the balance (ie €200 using a rent example of €1000 per month).

I am a tenant and i pay full rent to my owner....

Santa Cruz

Its a business. There are good business people and bad business people. Too many bought investment properties in the boom without knowing what they are getting in to.

TheChizler

tharmor wrote: »

I am a tenant and i pay full rent to my owner....

Where does the owner live?

etoughguy

Santa Cruz wrote: »

Its a business. There are good business people and bad business people. Too many bought investment properties in the boom without knowing what they are getting in to.

This.

Its not for the faint hearted and you need to treat it like a business. Educate yourself on tenant and landlord rights, tax implications, make sure you have money set aside for breakages, periods of non occupancy etc
Some landlords become rich, some lease out to nightmare tenants and lose a fortune.

tharmor

TheChizler wrote:

Where does the owner live?

Ohh i get it...he lives in ireland..

cerastes

Santa Cruz wrote: »

Its a business. There are good business people and bad business people. Too many bought investment properties in the boom without knowing what they are getting in to.

No reason why people shouldnt be allowed get out of it, banks had billions written off and so on, but unintented landlords who couldnt dispose of their property are stuck in the quagmire, allowing people to sell houses or dispose of them at least would free up some property for the sale/purchase end of the market, but thats not good for the banks either, they dont want a glut of for sales or prices and profits would go down.

tharmor wrote: »

Ohh i get it...he lives in ireland..

lol, 100% what else did you think you'd be paying :pac:

athtrasna

cerastes wrote: »

The 20% flat rate may work out better and less hassle though.
Im interpreting what you and possibly some others are saying is that availing of normal resident tax status is better? when in fact it may work out more expensive.

You would owe a balance to revenue which they would follow up on, there's no way of doing better out of it.

cerastes

athtrasna wrote: »

You would owe a balance to revenue which they would follow up on, there's no way of doing better out of it.

Im not sure you're being very clear here, or Im picking this up wrong?

It may be less hassle to pay the 20% and have nothing to offset, but how would anyone owe a balance? if the tenant has deducted for the 20%

athtrasna

cerastes wrote: »

Im not sure you're being very clear here, or Im picking this up wrong?

It may be less hassle to pay the 20% and have nothing to offset, but how would anyone owe a balance? if the tenant has deducted for the 20%

If more than 20% is due. Rental income is now also subject to USC and rental income is also subject to income tax thresholds. Depending on the landlords ' other income they may owe more.

Peregrinus

tharmor wrote: »

Is it ? Can you shed more light ?

A non-resident landlord is liable to Irish income tax at the usual Irish rates on the rent from his Irish property (and on any other Irish-source income he may have). In calculating his Irish tax liablity, he generally does not get Irish tax credits, but this does depend on the details of his situation and of his other income. Anyone in this situation should be taking professional advice to ensure that he does get the benefit of any Irish tax credits that he may be entitled to.

If he does not appoint an Irish agent to receive the rent on his behalf then the tenant is obliged to withhold 20% of the gross rent, and pay this over to the Revenue Commissioners. However the landlord's tax liability is still computed and due in the ordinary way. The landlord has to file a tax return. He can claim the usual deductions. His liability is computed and any overpayment/underpayment is then dealt with through a partial tax refund, or an additional tax payment, as the case may require.

The landlord is, of course, also likely to be liable to tax on his income (including his Irish-source income) in the country in which he resides. Depending on what country that is, there may be relief available under a Double Taxation Agreement between that country and Ireland.

johnp001

johnp001 wrote: »

From today's Indo
'Renting our apartments has been a window into the worst of human behaviour'

Interesting....
"I bought my apartment in 2005 for €335,000. If I sold it tomorrow I'd be lucky to get €250,000 for it."


"My wife, before we met, bought hers for €299,000. Similar properties are selling now for around €170,000."

"
Located in the property hotspots of Dublin, they are on course to become valuable assets which one day may even help fund a house purchase in Sligo.

A happy ending could finally be in sight."

They are quite likely over the worst of it imo, I'd hang in there until the mortgages are cleared if I could, especially if renting in Sligo for €650/month

Santa Cruz

Augeo wrote: »

Interesting....
"I bought my apartment in 2005 for €335,000. If I sold it tomorrow I'd be lucky to get €250,000 for it."


"My wife, before we met, bought hers for €299,000. Similar properties are selling now for around €170,000."

"
Located in the property hotspots of Dublin, they are on course to become valuable assets which one day may even help fund a house purchase in Sligo.

A happy ending could finally be in sight."

They are quite likely over the worst of it imo, I'd hang in there until the mortgages are cleared if I could, especially if renting in Sligo for €650/month

Good advice. There is a bit of a pschological thing with prices following introduction of the property tax bands. Apartments that are approaching say 300 thousand in price seem to stay below the 3 mark for some time but then once one sale breaks the 3 mark its open season. I would certainly bide my time as prices in Dublin are rising albeit slower than expected

cerastes

athtrasna wrote: »

If more than 20% is due. Rental income is now also subject to USC and rental income is also subject to income tax thresholds. Depending on the landlords ' other income they may owe more.

I was talking about if the landlord is not resident in Ireland, are you?

sunnysoutheast

cerastes wrote: »

I was talking about if the landlord is not resident in Ireland, are you?

Higher-rate income tax bands and USC still apply to non-resident landlords. PRSI doesn't.

In any case a landlord would be crackers to allow a tenant to deduct 20% of the gross and rely on them handing over the withheld 20% (in my opinion of course). If they just foxtrot oscar with the money the landlord still gets chased.