Renting my house

MsRyan

Hello
I’m looking for advice on renting out a house.
For the last few years I have been doing rent a room scheme as I was living alone in the house.

I am engaged now & will be moving in with my fiancé so will have to rent out the house.

I’m just wondering if my thinking of tax is correct:

Rental: €500*12mths = €6000

Less expenses:
Property Tax €90
Maintenance (painting, bulbs, batteries, new appliances etc) €200
Bills will be paid to me so I cannot deduct?
Total: €290

€6000-€290=€5710
Less: Wear & Tear
€2000 x 12.5% = €250

Total: €5460 Taxable

I do not meet my SRCOP each wk, €73 under
€73 each wk x 52wks = 20%
(3796*20%=759.20)
Balance: 5460-3796=€1664 @ 40% = €665.60

Total tax to pay €1424.80
Is this aprox correct?

Also-there is somebody asking me about HAP.
I presume this won’t cause me any extra headaches?
What I made out is that the tenant pays them so much & they top it up & pay me the full value say €500. It Is up to me to pay tax. Is there any come back if tenant destroys house or anything?

Do I need to register with PRTB?

Thanks in advance
A worried-Landlady to be

Gumbo

You have to pay USC and PRSI also I think. Deffo USC.

You 100% have to register with the PRTB, it's the law under the RTA.
Have you allowed your interest payments to be off set also?

Victor

MsRyan wrote: »

Property Tax €90

I'm not sure if this is an allowable expense.

Maintenance (painting, bulbs, batteries, new appliances etc) €200

This seems low.

Bills will be paid to me so I cannot deduct?

Madness. Ensure everything is in tenant's name. Otherwise you'll be picking up other people's bills.

Also-there is somebody asking me about HAP. I presume this won’t cause me any extra headaches?

You will need to complete certain forms and guarantee the property to the council for a number of years. You may need a tax clearance certificate from Revenue.

Is there any come back if tenant destroys house or anything?

The council will deny responsibility. You take the tenant to the PRTB / sue them. You will wait years and likely get little if anything.

Do I need to register with PRTB?

Yes. If you don't you can't take tenant to PRTB or claim mortgage interest as an expense.

MsRyan

Thanks guys.

Gosh-I didn't think there was USC & PRSI to be paid also
Won't even nearly cover mortgage....(join the club says ye I know!)

I was unsure about mortgage interest-So this is allowable to be set off once registered with PRTB?

I am still receiving Mortgage interest relief-I take it this goes if i Rent out the house?

The maintenance is just an aprox.
Do receipts have to be kept for everything which can be set off? Most of my stuff are years old at this stage so I don't have receipts.
I am sure I will find a list of allowable expenses on Revenue's site.

Note taken on utility bills-you are right Victor. I can't be too trusting!

murphaph

Victor's points are all valid. With respect to your further questions...

You may only deduct 75% of your mortgage interest and yes, you TRS would be cancelled but it will be worth a lot less than the interest deduction.

You are allowed to assign a reasonable cutrent value to your capital items for which you have no receipts, which can be depreciated over 8 years. Anything with a receipt and which is less than 8 years old can be depreciated from current depreciated value until it is 8 years old and has zero book value.

Yes, receipts must be retained for audit. Keep very good records!

Mrs OBumble

Make sure that you have a back-up plan for how you will pay the mortgage if the tenants stop paying the rent. Seriously. If you are particularly unlucky with tenants, you could be without rental income for a year or more while you go through the PRTB process.

Some people believe you can reduce the risk of this by renting rooms individually: it's unlikely that they will all stop paying at once. But this can be more hassle for you, eg if the "house mates" don't get on, and some LL's believe that there is more wear-and-tear with this approach.

The_Conductor

500 a month seems improbably low- of course this depends on location and property type.

HAP- is handy- but is set at below market rates (typically 10% below).

The figures you're suggesting seem a bit overly optimistic-

Realistically you should count 11 rather than 12 months per year.
Property tax is not an allowable expense.
Maintenance of 200 Euro- seems ridiculously low- you may get away with it a couple of times- but its as likely to be a multiple of this.

Bills- under no circumstance should they be paid to you- that means if a tenant runs up a mad bill (thinking heating in the winter months for example) and vanishes overnight- you're left stuck with a bill for hundreds (or more even).

You mention a deduction of 2k for wear and tear?
On what basis are you coming up with this figure- and why do you imagine its tax deductible (presuming you do not have receipts with dates of purchase for everything you are proposing to attribute 'wear and tear' to).

The rental income is added onto your gross income- so the fact that you don't meet your SRCOP currently- is moot. Its not a valid assumption.

Total tax will be determined in your tax return.

I would seriously suggest you employ an accountant to do your tax return for you the first year- it'll give you a template to use going forward (and the cost of the accountant is a tax deductible expense).

Comeback if the tenant destroys the house- thats where the deposit comes in. If there is the potential for significant damage to occur- make sure you have a sufficient deposit to cover any potential damage. In most cases- a month's deposit is not sufficient- 2 or even 3 months- are being sought in many areas- and with rental property as scarce as it is- is being paid by tenants.

Yes- you have to register each tenancy with the PRTB (and renew the registration annually- even if the same tenant is still in the property). Your PRTB fees- are a tax deductible expense.

In all honesty- and I'm not saying this flippantly- I'd seriously suggest selling the property rather than becoming a landlord- it can be a significant work load- and the potential for things to go skew-ways is just too high (the legislation and the regulatory regime- as it stands- favour the tenant- even if you get a judgement in your favour if the tenant destroys the place, its a foregone conclusion that you won't be able to collect on the judgement).

Becoming a landlord is not for the faint hearted.

Shelflife

I dont see any figure in there for house insurance, you will have to insure the house and the tenant will insure their own personal belongings.

Maintenance as was said earlier is very low, €200 wouldn't cover you for a plumber or electrician to call out once.

Rent €6000
Insurance 500
Maintenance 500
Taxable 5000
Usc 350
Prsi 200
Tax 1400
prop tax 90
prtb 90

Balance €2870

This is just a rough est, add in advertising the house, cleaning it after a tenant leaves calling into the house to check it out and sort out problems that the tenant has etc etc.

Personally its a pain in the arse and hardly worth it for €50 a week and thats assuming you get a good run at it.

One bad tenant can ruin a few good years.

Sell up and save yourself the headaches.

filbert the fox

Shelflife wrote: »

I dont see any figure in there for house insurance, you will have to insure the house and the tenant will insure their own personal belongings.

Maintenance as was said earlier is very low, €200 wouldn't cover you for a plumber or electrician to call out once.

Rent €6000
Insurance 500
Maintenance 500
Taxable 5000
Usc 350
Prsi 200
Tax 1400
prop tax 90
prtb 90

Balance €2870

This is just a rough est, add in advertising the house, cleaning it after a tenant leaves calling into the house to check it out and sort out problems that the tenant has etc etc.

Personally its a pain in the arse and hardly worth it for €50 a week and thats assuming you get a good run at it.

One bad tenant can ruin a few good years.

Sell up and save yourself the headaches.

Alternatively, in the interim, with all due respects to your fiancee, STAY PUT and collect all of the Rent -a- Room scheme TAX FREE.

You will need every penny for your wedding/honeymoon/and life in general.

campingcarist

The_Conductor wrote: »

a

Yes- you have to register each tenancy with the PRTB (and renew the registration annually- even if the same tenant is still in the property). Your PRTB fees- are a tax deductible expense.

Becoming a landlord is not for the faint hearted.

http://www.rentalincome.ie/prtb-faq-help/
http://www.prtb.ie/faq
6. Is the registration an annual requirement?

The registration of a tenancy lasts the length of the tenancy agreement but is subject to a maximum duration of 4 years. If a tenancy has been in existence for four years it must be re-registered with the PRTB. Thus, the registration may not be an annual requirement.
However when the tenancy is terminated, any new tenancy created in respect of the dwelling must be registered with the PRTB.

Or is the above out-of-date?

MsRyan

Hmm--maybe a landlord is not for me....But once I get married next year I won't have a choice. Id love to sell the house once settled with hubby to be-but like so many more I'm at a loss at the minute. I bought for €170-Houses going for €90 now so really have to try to keep for few years in the hope it may creep up a little. All I've been paying since 2007 is interest-Its a killer to look at the statements.

Your clever Filbert the Fox!
I might half stay in the house till the wedding looking at all that tax payable on rent & continue with rent a room.
I'm so shocked that USC & PRSI are charged on rent!!

As for the low rent-the house is in a village about 30min drive from city so this is the going rate. Might stretch to €550 as the tax is so high & it is a nice house in the nice part of the village.

Maintenance was only a figure I put in.
My furniture-equipment etc is still in good shape so was thinking i'd get some Wear & Tear value for it...But no receipts for most of it.

As for bad tenants-I will try to make sure to know the tenants in the hope they are as decent as we think they are. That is the plus of a small village I guess-but then how well do you know people!

I will have to seriously consider what to do...
Thanks for the input everybody-Has opened my eyes to this tough world