Inherited a house.

danotroy

Hello all. I have come here for advice, I hope this is the right forum. A family member has passed and has left me a house. The house is in Ballincollig (10 km west of Cork city) and valued at €160,000, no mortgage outstanding. I have also a cash lump sum of €40,000. I am 24, live in London and have a permanent job in the public sector. I don't see myself returning to Ireland at all (my family weren't Irish). I have no other remaining family members; no siblings, parents, aunts, uncles, cousins that I can ask for advice).

I'm thinking of renting the house out. I would go with a letting agent to manage the letting and the rent (i've been told) would be about €700-800 a month.

I could also sell the property and invest it in something like property in London. I know I wont get much for €200,000 or so in London but it would be a good chunk of a deposit. Property prices in London are on the rise and see no signs of stopping. Rising population -V- lack of housing seems like a good investment to me.

What are the pitfalls I need to be aware of? What are the taxes like for landlord? what would I make into my account every month if rent was €800? could I keep the property in Ireland and use it as equity to buy a property in London?

Should I sell up and try to buy a 3/4 bed property in London on a buy to let mortgage and rent out the rooms?

Thanks for reading. Help is very much appreciated.

athtrasna

I would sell up and take advice on investing in the UK from someone over there. Rental tax is significant here and without a mortgage you lose one of your biggest income tax reliefs (75% of mortgage interest is deductible).

As well as income tax here you would be liable for property tax, Universal Social Charge, PRTB registration, letting expenses, repairs and maintenance. To say nothing of the risk of non paying or overholding tenants or significant property damage, or even empty periods.

As a former landlord here, in your position I would sell up and take the money. Getting out of the game was the best thing we ever did.

danotroy

Hello Athrasna,

Thanks for your advice. Some friends back home have given me anecdotal advice that has been passed down from their parents about renting. They echoed your sentiments. Whilst there is a massive lack of rental properties in the Cork area there is no incentive to become a landlord they said.


Cheers

beauf

If you have no intention of ever returning, or using it as a holiday home. I would just sell and invest in the UK.

Delphinium

Don't forget you will have to pay capital aquisition tax or inheritance tax. Not sure if you pay here but allowances here are very low.

danotroy

Delphinium wrote: »

Don't forget you will have to pay capital aquisition tax or inheritance tax. Not sure if you pay here but allowances here are very low.

Won't apply as im under the threshold. €220,000 i think. Property is only worth €160,000. €40,000 is my own due to sheer luck in another case. thanks

athtrasna

danotroy wrote: »

Won't apply as im under the threshold. €220,000 i think. Property is only worth €160,000. €40,000 is my own due to sheer luck in another case. thanks

Depends on your relationship with the deceased.

danotroy

athtrasna wrote: »

Depends on your relationship with the deceased.

Oh right, not sure of the specifics however my solicitor has confirmed no tax is payable due to relationship with deceased and value of asset.

Pawwed Rig

You will only pay tax at 20% on your rental income in Ireland assuming you have no other Irish income but may be hit with UK tax on the same income.
Being a landlord however is not a good way to make money though. Far better idea to pump money into a pension scheme.

bonzos

Pawwed Rig wrote: »

You will only pay tax at 20% on your rental income in Ireland assuming you have no other Irish income but may be hit with UK tax on the same income.
Being a landlord however is not a good way to make money though. Far better idea to pump money into a pension scheme.

Quick question guys,if you inherit a house and dont have the money to pay the inheritance tax will a bank lend you the money if it could provide rental income to pay back the loan?

Pawwed Rig

Oh and bear in mind that the exchange rate between uk and EURO is rubbish at the moment and probably going to get worse in the short term at least.

The only investment advice I will give you is not to buy dracmas

Pawwed Rig

bonzos wrote: »

Quick question guys,if you inherit a house and dont have the money to pay the inheritance tax will a bank lend you the money if it could provide rental income to pay back the loan?

Impossible to say as it will depend on your circumstances. You would be assessed the same as any other customer. They would certainly take the value of equity into account.

ted1

With the current exchange rates you would be absolutely mad to change a large sum of euro into sterling. Rent it out and sell it in a few years when the rates become more favourable

Mrs OBumble

ted1 wrote: »

With the current exchange rates you would be absolutely mad to change a large sum of euro into sterling. Rent it out and sell it in a few years when the rates become more favourable

Or invest here, but not in property.

njs030

danotroy wrote: »

Won't apply as im under the threshold. €220,000 i think. Property is only worth €160,000. €40,000 is my own due to sheer luck in another case. thanks

Is it an inheritance from your parents or child? That's the only way it can be a threshold of €225,000.

If you inherited from a parent you're ok. If not the threshold is €33,500 and you pay 33% on the excess, so you are looking at a CAT liability of approx €42,000.

Pawwed Rig

[Deleted User] wrote: »

If you inherited from a parent you're ok. If not the threshold is €33,500 and you pay 33% on the excess, so you are looking at a CAT liability of approx €42,000.

Not necessarily true.

loyatemu

Pawwed Rig wrote: »

Not necessarily true.

you can't just say "Not necessarily true" without providing some information to back it up - the IT thresholds are here and the current non-parent/child limits are only €30,150 & €15,075

Pawwed Rig

loyatemu wrote: »

you can't just say "Not necessarily true" without providing some information to back it up - the IT thresholds are here and the current non-parent/child limits are only €30,150 & €15,075

I can and I will. The OP has not asked about inheritance tax as he has already gotten legal advice on it so I am not going to second guess a solicitor who has more information than is available to us here. Giving tax advice on the Internet is a dangerous thing to do as everyone has different circumstances. To write about every situation regarding group thresholds would take half the day and consist of alot more text than anyone would be willing to read.

enda1

ted1 wrote: »

With the current exchange rates you would be absolutely mad to change a large sum of euro into sterling. Rent it out and sell it in a few years when the rates become more favourable

Could you also give me next Saturday's lotto numbers while you're at it?

loyatemu

loyatemu wrote: »

you can't just say "Not necessarily true" without providing some information to back it up - the IT thresholds are here and the current non-parent/child limits are only €30,150 & €15,075

Well as an example there is a relief know as favorite nephew/niece which if meeting the criteria can mean a group A threshold between a uncle/aunt and their niece/nephew. I'm not saying this is the case but just an example of one exception to the standard rules.

The fact the OP mentions having few if any living relatives means their may well be some relief or exception at play in his situation.

As a rule of thumb, you will be left with about half the gross rent after paying expenses, repairs, agents costs and tax... so around 400EUR a month.
You will also have an asset that is illiquid, difficult to cash and located in another country.
Personally, I would sell it and invest the proceeds in a basket of bluechip shares in the UK; BP, BT and suchlike. This will give you a divident paying asset with good prospects of capital gains and which, if needed, can be converted into cash in a matter of days.

loyatemu

Baylee Drab Shipyard wrote: »

Well as an example there is a relief know as favorite nephew/niece which if meeting the criteria can mean a group A threshold between a uncle/aunt and their niece nephew. I'm not saying this is the case but just an example of one exception to the standard rules.

The fact the OP mentions having few if any living relatives means their may well be some relief or exception at play in his situation.

cheers - somewhat more helpful answer there...

handlemaster

OP . In your shoes I would sell and invest in thé UK market maybe not even london but a city location none the less .

Johngoose

You are in a very enviable position. I'd love to have your problem. I'd sell if I was you. Use the money to travel, pay your rent in London and generally enjoy life. At 24, the world is your oyster.

danotroy

Johngoose wrote: »

You are in a very enviable position. I'd love to have your problem. I'd sell if I was you. Use the money to travel, pay your rent in London and generally enjoy life. At 24, the world is your oyster.

I realise I am very lucky, and eternally grateful. your advice is probably the worst advise i've been given from making the most of my luck in the long term.

I could easily blow that amount of money in 2 years if I took your advice. for instance a one bed room flat near where I currently live (in a share house) can go for 1,600 pounds. I wouldn't be long pissing all my money down the drain if I did that.

enda1

I'd keep my money in EUR initially by selling the asset and feeding the cash into a trading account buying a diverse range of ETFs such as TD International based in LUX.
Then drip feed it back to the UK every year in March, maximising your ISA so that you have tax free investment for life.
Some of that can you put into REITs if you're determined on investing in property, but I would avoid buying a permanent home myself at such a young age and presumably without a life partner.

pwurple

Sorry for your loss.

If I were you I would approach a UK bank/estate agent and see what you can get with a chunky deposit over there. Then see what you could buy there, live in that property, possibly with a lodger to reduce the rent even further.

The irish govt has done a lot to weaken landlords here, financially, and in terms of protecting the asset. Every other day I hear politicians and the public calling for rental caps and limits. It is financially tricky to remain as a landlord here unless you have a larger set of properties which can absorb the losses you can easily incur in one or two.

On the other hand, you have no other income here, so I don't know what tax you would have to pay. You may well come in under the higher income thresholds... And not do too badly. Maybe earn 6-7k net per year? You could sit on it and rent it out for a few years, see how things go and then reconsider your options. One of the very few ways it is possible to evict is if you are selling.

Johngoose

Johngoose wrote: »

You are in a very enviable position. I'd love to have your problem. I'd sell if I was you. Use the money to travel, pay your rent in London and generally enjoy life. At 24, the world is your oyster.

Not good advise, throwing it away on travel or high rent etc is a poor use of money that could be used for making your life in the future much more comfortable. Even if it was just left sitting in an account waiting to be used for a house deposit it wound be better than spending a chunk of it on nothing.

pwurple

pwurple wrote: »

On the other hand, you have no other income here, so I don't know what tax you would have to pay.

You will have to pay income tax, prsi and social charge to the irish authorities and also declare it to the Uk authorities who might charge you extra income tax as they will be considering your total income.
You will also be liable for Irish capital gains tax when you sell (assuming it gains something). This, I think, is 30% and there is no adjustment for inflation allowed any more.

The_Conductor

Pawwed Rig wrote: »

You will only pay tax at 20% on your rental income in Ireland assuming you have no other Irish income but may be hit with UK tax on the same income.
Being a landlord however is not a good way to make money though. Far better idea to pump money into a pension scheme.

You would offset your UK tax against the Irish tax paid- we have reciprochal tax arrangements (as we have with all EU countries- and numerous other countries). So- its not a double tax- you'd simple pay the same amount gross- that you'd have done in the first instance, were the tax earned in the country of tax residence.

Pawwed Rig

Exactly but it is something which the OP needs to consider in that tax in Ireland may not be the end of the matter along with the cost of paying a tax advisor in both countries should it be required and the hassle of filing 2 returns.

nompere

The_Conductor wrote: »

You would offset your UK tax against the Irish tax paid- we have reciprochal tax arrangements (as we have with all EU countries- and numerous other countries). So- its not a double tax- you'd simple pay the same amount gross- that you'd have done in the first instance, were the tax earned in the country of tax residence.

That's not necessarily true.

The nature of double tax treaties is generally that relief is given at the lower of the two average rates that apply.

So if rents are taxed at 20% in the country where the property is situated, but the taxpayer has an average tax rate of only 10% where he is resident, then the maximum double tax relief will be limited to that 10% - leaving half the foreign tax being unrelieved.

The_Conductor

Ok- we're going off the reservation discussing tax law here.......
OP- suffice to say- you'd need to do a tax return in both countries- and if you had a professional prepare the returns for you in year 1- you could then use that as a template going forwards (subject to ensuring you were compliant with any changes in tax regimes and implementations that occur in the intervening period of time).

DublinWriter

OP - is your solicitor charging a percentage of the estate for probate fees?

lcwill

There are a number of things that would make me think you should rent it out for a few years:

1) you can probably find a decent professional family to rent it who will stay at least a few years so not too much hassle is you also get a good agent to manage it. You will also get some experience of being a landlord and see if a buy to let in the UK would be a good investment for you in future

2) after expenses and taxes you should get around 500 euro a month in profit so better than nothing

3) Irish house prices are increasing from extreme lows so its likely you can sell for more in a few years

4) London house prices are at the top of a boom which has some chance of popping or at least limited potential to keep increasing in the next few years

5) stocks are pretty expensive with a lot of uncertainty around the world so not ideal time to invest a large lump sum.

6) the euro is very weak against sterling at the moment.

In sum: keep it and rent it out but the returns from this investment will come through relatively faster increases in Irish house prices than UK house prices, and the possibility to convert your Euros at a better rate in future to invest in sterling denominated assets after they have fallen from current peaks.

antoinolachtnai

If I were the OP, I would do something. The worst thing is to do nothing.

I mean I would either sell it or get it rented. Avoid leaving the property unoccupied for a long period if you can at all. Even if you make very little money there will at least be some cash to maintain things and the property will be watched and kept warm.

If you sell up I wouldn't completely discount the idea of spending some or even all of the money if there is something worthwhile and significant you want to do. I agree it is not a good idea to slowly fritter it away in dribs and drabs. That is the worst thing of all to do.

mad m

What about selling the property, and put it in Irish government saving scheme. For instance 120k (max) over 10years gets you 25% return so 30k return ain't bad....buy some prize bonds with rest. If you need money then there is no problem to get it.

http://www.statesavings.ie/products/Pages/NationalSolidarityBond.aspx

http://www.statesavings.ie/Pages/NoLimitonSavings.aspx

http://www.statesavings.ie/PrizeBonds/Pages/HowToPurchase.aspx

handlemaster

lcwill wrote: »

There are a number of things that would make me think you should rent it out for a few years:

1) you can probably find a decent professional family to rent it who will stay at least a few years so not too much hassle is you also get a good agent to manage it. You will also get some experience of being a landlord and see if a buy to let in the UK would be a good investment for you in future

2) after expenses and taxes you should get around 500 euro a month in profit so better than nothing

3) Irish house prices are increasing from extreme lows so its likely you can sell for more in a few years

4) London house prices are at the top of a boom which has some chance of popping or at least limited potential to keep increasing in the next few years

5) stocks are pretty expensive with a lot of uncertainty around the world so not ideal time to invest a large lump sum.

6) the euro is very weak against sterling at the moment.

In sum: keep it and rent it out but the returns from this investment will come through relatively faster increases in Irish house prices than UK house prices, and the possibility to convert your Euros at a better rate in future to invest in sterling denominated assets after they have fallen from current peaks.

The first point is telling. .. Probably find .... I tell you theres a gamble . You never really know what your going to get . The value of the property and the return via rental dont make it worth the risk.

imitation

I think you would be certifiable to try and rent it out, I think being a landlord is only worth it if you live near and are fond of DIY and live next door. If you are 24 and living in London the last thing you want to be doing is entertaining tenants complaints every evening, and then having to sort and pay for an electrician just to flick a circuit breaker, fighting about who pays irish water etc. Sure there are some excellent tenants who will take care of everything, but I think you would be lucky to get those. Then there is always the risk of getting really bad tenants who will wreck the place, and take 6 months rent free to get rid of.

Its a pity about the exchange rate - but the reality is that its gone back to what it was 10 years ago, and I think its likely it will stay that way for a good few years (although its a chance like everything). Getting on the property ladder in London is probably the best choice, anything else pretty much involves messing around with dodgy markets

dockleaf

Don't understand how someone living and working in London could qualify for dwellinghouse exemption or favourite nephew/niece relief? And the OP said their family were not irish, so presumably this is not an inheritance from a parent. Very strange how there is no CAT in the circumstances.

athtrasna

Please take the inheritance tax opinion and discussion to the taxation forum

Mod

daveville30

Keep it for a year or two till you have a plan.a good estate agent can look after everything for you.

Head_Hunter

athtrasna wrote: »

Rental tax is significant here and without a mortgage you lose one of your biggest income tax reliefs (75% of mortgage interest is deductible).

Is mortgage interest relief not gone since 2012?
http://www.citizensinformation.ie/en/housing/owning_a_home/buying_a_home/mortgage_interest_relief.html

Michael D Not Higgins

Head_Hunter wrote: »

Is mortgage interest relief not gone since 2012?
http://www.citizensinformation.ie/en/housing/owning_a_home/buying_a_home/mortgage_interest_relief.html

It's not mortgage interest relief, it's the tax deductible amount of the mortgage interest for BTL properties.

danotroy

Hello all,

Thanks for the advice to date. Let me first deal with the issue about inheritance tax - It was my father who passed therefore I had no inheritance tax to pay.

I spent the last week back home tying up loose ends with the solicitor and spent a few days clearing out the house. I have deicded that I am too attached to the property to sell it and I have been thinking of moving back in a few years anyway so I am putting some serious thought into becoming a landlord.

I have no mortgage on the property and I looked around when I was at home and houses of the same type in the same estate are now renting at 900-1000 making renting a more appealing prospect.

I have taken on board the comments on the gamble you take with tenants but I want to keep the property but I dont wan't it to be empty. I have spoken with my fathers bestfriend, who also happens to be my godfather and nearly next door neighbour to the property. He has offered to take care of maintenance/small requests by potential tenants, luckily he is a caretaker in a local school.

What I want to know from your collective extensive knowledge is what to do

Can I appoint an estate agent to manage the property? i.e if the tenant has a leak they ring the estate agent and the estate agent then rings my godfather to sort issue he sorts the issues.

How much does a letting management service with an estate agent cost? is this cost tax deductable?

What other taxes would I be liable for as I am a non resident living in the UK. i'm not after direct tax advice and wont rely on anything said in this thread without checking with my accountant, i just want to know the background before I approach one.

gaius c

If anybody was thinking of getting into letting, I'd advise them to either be near the property(ies) they are letting out or be prepared to spend a lot of time travelling to the property. Being an absentee landlord is asking for trouble.

It's either that or find a good agent and really if you want something done right, you need to do it yourself.

Evil-p

My last rental was managed by a property agent. I never saw or spoke to the landlord in the 3 years we lived there. If there was an issue the agent used their own contractors to fix it. As far as I know it was set fee from the LL to the agent per month from our rent. The agent also arranged the viewings when the house was vacant and checked our employments etc. I think it would be exact way to go if you are to continue living away.

Michael D Not Higgins

gaius c wrote: »

If anybody was thinking of getting into letting, I'd advise them to either be near the property(ies) they are letting out or be prepared to spend a lot of time travelling to the property. Being an absentee landlord is asking for trouble.

It's either that or find a good agent and really if you want something done right, you need to do it yourself.

Obviously the more you want the agent to do the more it'll cost you as well.

OP keep in mind that even though it's tax deductible, you're only saving the tax amount. Since you're abroad, your tax could be lower (not sure on the details, you'd need to speak to a tax accountant), maybe even around 25%.

Let's say the agent costs you 3k a year, you'll only save 750 of that from the tax deduction.

Spanish Eyes

Don't forget also, that a tenant in an absentee landlord situation is obliged under Revenue rules to deduct tax at source and pay Revenue. Extract from Revenue website under Rental Income here -

Additional Information

Rents outside the State - Rental income arising outside the State is chargeable to tax under Schedule D Case III.

Pre-letting Expenditure - No relief is due for pre-letting expenditure except for auctioneers letting fees, advertising fees and legal expenses incurred on first lettings.

Rent paid to non-resident landlord - If the rent is paid to an agent acting on behalf of a landlord, the agent is assessed on the rent.

C.G.T. - If let property is sold a liability to C.G.T may arise.

If however the rent is paid to a landlord abroad or to an account on their behalf, the tenant must deduct tax at the standard rate from the payments and remit that tax to Revenue.

Tax on the rental income will be payable in both jurisdictions, with a Double Tax credit applied by the country of residence of the landlord.

4ensic15

You are also a long way from the property. All maintenance will cost top dollar.
If you lived nearby you could deal with minor maintenance issues yourself. Also, many people have bad experiences with agents and tenants. In competent and dishonest agents are a curse as well as possible having to go to the PRTB. Sell up.