About to become a first time landlord [Tips and advise please]

Your Airbag

Hi folks

I am going to become landlord soon due to moving cities for a new job. My mortgage is about 40% paid so any rent income I get I plan to use simply to pay my monthly cost and not to make a profit. In fact its €720 a month and I plan to charge €700 for the house per month.

I have a guy I know reasonably well with a family interested in taking the house. I am getting a BER assesment done today and will register with the PRTB when the time comes to hand over the keys. I'm also going to repair some minor wear and tear issues on the house (small things like replacing the shower head, boiler servicing & a lick of paint).

I have been reading many official guides of what to do on site such as lawyer.ie etc but its always good to get some real world example from people who have been through the process.

I plan to supply a rent book etc. I'm an easy going guy and plan to be a fair and supportive landlord. I will do the usual 12 month contract and all that.

As I plan to make zero profit on the rental income, actually a €20 loss, will this work for my benefit regards tax on the rent paid to me?

When drawing up a contact for the tenant what should I include besides the obvious 12month lease stuff?

In regards collecting rent what are your guys experience? I will be in another city so is direct debit the best means or do I need to organise a family member to collect it each month?

Paying the annual refuse cost to have my bins emptied for the house, is the onus on me or the tenant?

Sorry if anything I have asked is silly, I've done some research but the unknown problems you guys can help me with is new to me as is the whole process.

Thank you.

sunnysoutheast

Your Airbag wrote: »

Hi folks

I am going to become landlord soon due to moving cities for a new job. My mortgage is about 40% paid so any rent income I get I plan to use simply to pay my monthly cost and not to make a profit. In fact its €720 a month and I plan to charge €700 for the house per month.

I have a guy I know reasonably well with a family interested in taking the house. I am getting a BER assesment done today and will register with the PRTB when the time comes to hand over the keys. I'm also going to repair some minor wear and tear issues on the house (small things like replacing the shower head, boiler servicing & a lick of paint).

I have been reading many official guides of what to do on site such as lawyer.ie etc but its always good to get some real world example from people who have been through the process.

I plan to supply a rent book etc. I'm an easy going guy and plan to be a fair and supportive landlord. I will do the usual 12 month contract and all that.

As I plan to make zero profit on the rental income, actually a €20 loss, will this work for my benefit regards tax on the rent paid to me?

When drawing up a contact for the tenant what should I include besides the obvious 12month lease stuff?

In regards collecting rent what are your guys experience? I will be in another city so is direct debit the best means or do I need to organise a family member to collect it each month?

Paying the annual refuse cost to have my bins emptied for the house, is the onus on me or the tenant?

Sorry if anything I have asked is silly, I've done some research but the unknown problems you guys can help me with is new to me as is the whole process.

Thank you.

You can only claim 75% of the mortgage interest as an expense. You can't just net off against the mortgage payment as you describe.

Mrs OBumble

You probably don't have the right banking set up for direct-debit (it requires you to initiate each payment). Instead, ask the tenant to set up a standing order. Don't even think of having someone else call to collect the cash each month.

Make sure you have told your insurance company that the property will be rented, and upgraded your policy to a LL one.

Have a clear understanding with the tenant about how you want repairs handled (typically they should call you first). Consider giving them the name of a trusted plumber and electrician who they can call direct in emergencies only. Be very clear about the latter, and only do it if you can trust that the plumber and electrician won't take the proverbial.

Personally I would cancel the bins contract, and let the tenant get their own with their provider of choice.

Don't forget to tell Irish Water when you move out, along with you electricity and telephone companies.

pwurple

You're not making a loss. You're making 700 euro profit. Your mortgage is your own business, you can only write off some of the interest on it.

You will owe tax on 700euro, less interest, at whatever tax band you're in.
Plus USC, plus PRSI etc. You'll have a nice bill at the end of the year to the tax man. Anything up to 4k.

Register with PRTB, get your BER, pay your property tax. Look at your insurance policies and mortgage contract to make sure all is above board there with renting out.


Bins, you can do either. I personally arrange it, and build it into the rent, as I've had issues with tenants chucking material into other people's bins instead of organising it themselves.

foggy_lad

Also I would charge the full market rate or just below it as you will be responsible for all maintenance and other costs during the tenancy.

Your Airbag

Okay so 75% of 720 is 540

720-540 = 180

Based on that I used the rental tax calculator over at Irishlandlord.ie

I did a basic estimation seen in link below

http://i.imgur.com/vvTQEVV.png

i got the result

Estimated Income Tax & Levies

(assuming a 41% tax rate + 5% PRSI & levies)**:


3624.8 €

Does that seem correct?

The calculator is here for anyone else interested

http://www.irishlandlord.com/index.aspx?page=calculators_taxestimation

MarieOC

It's not 75% of your full repayment. Only 75% of the interest paid, the capital that's repaid every month cannot be deducted.

beatlesfan3333

That can't be right can it?

€3624.8 for tax seems very high for the rent you are charging. What does everyone else think? I have no idea how the tax works. I'm renting out my property myself and plan to just speak to an accountant when the time is right...I'm hoping it won't be too high for myself.

Approx 3k does seem very high though...

handlemaster

Dont rent to someone you know tears will follow. Best to advertise get references ...And check them. Ask for one month minimum deposit. Interview the couple twice. Have a good contract. If they start asking for stuff to be done move to next couple what ever you do will never be enough.

beatlesfan3333

Don't worry too much about a rent book. As far as I know, if the tenant pays directly from their bank account into your bank account each month, this can stand as a 'rent book' because it's a history of the transactions.

I'm sure in this day and age nobody actually uses a physical rent book. Sure that would mean the landlord visiting the tenant each week with the 'book', wouldn't it?

hanna200

'If they start asking for stuff to be done move to next couple what ever you do will never be enough.' - so true...

Regarding the Irish landlord website tax computation - this tax computation is based on higher rate of 41% of income tax. If your other income falls into the lower bracket then the final tax figure might be lesser or higher if it doesn't.

Next: check with your bank as some banks will charge you above 5% interest surcharge while you vacate your home (currently being an owner occupier) and this will leave you with a broken mortgage agreement subject to surcharge at a buy-to-let investment rate of 5% or higher. - you might lose tracker as well - check with your bank!

I noticed you entered 2,000.00 as an expense in year one of your income tax computation. just make sure you read Revenue's guideline as it may not be so easy to claim on some items.

sunnysoutheast

Your Airbag wrote: »

Okay so 75% of 720 is 540

720-540 = 180

Based on that I used the rental tax calculator over at Irishlandlord.ie

I did a basic estimation seen in link below

http://i.imgur.com/vvTQEVV.png

i got the result



Does that seem correct?

The calculator is here for anyone else interested

http://www.irishlandlord.com/index.aspx?page=calculators_taxestimation

You can claim 75% of the mortgage interest element, not 25% of the total payment. Also, you have put in a monthly amount for the interest not yearly.
Bear in mind you will lose TRS if applicable.

You can also claim insurance etc., suggest you go down the list - for example you can claim refuse charges.

LPT is not claimable, despite "hints" from the government.

With regards to capital allowances, assign a value to every fixture and fitting in the house you intend to leave. If it's not new then there is no hard and fast way of assigning a value, I was advised that Revenue would accept a start value equivalent to a reasonably estimated replacement value at the start of the tenancy. The definition of F&F is similarly fluid - if it can be removed and reused it is claimable. So carpet yes, tiles no. Light fitting yes, cable no.

You pay USC on (gross rental - expenses)
You pay Income Tax and PRSI on (gross rental - expenses - capital allowances).
All at your marginal rates.

If this is going to be a long-term arrangement then I would suggest an accountant for the first year.

Hope this helps.

Cuddlesworth

Children wreck houses, they destroy surfaces and materials with constant hitting and splilling, they hang out of kitchen presses, pull apart bathroom fittings and shove random objects into random things. Most people over the course of their child's life are not even aware of the extent of the damage their child does, since in most cases its their property and they repair it over the years. As a landlord I'd be expected a rather large deposit as insurance against this.

It also sounds like you haven't really checked what the market rent is in your area. Your now a business owner, I'd start thinking like one.

antoinolachtnai

Your tax bill is going to be north of 3000 per year by the looks of things. You need to get some advice and work this out properly or you will be in for a shock.

Your Airbag

Cuddlesworth wrote: »

Children wreck houses, they destroy surfaces and materials with constant hitting and splilling, they hang out of kitchen presses, pull apart bathroom fittings and shove random objects into random things. Most people over the course of their child's life are not even aware of the extent of the damage their child does, since in most cases its their property and they repair it over the years. As a landlord I'd be expected a rather large deposit as insurance against this.

It also sounds like you haven't really checked what the market rent is in your area. Your now a business owner, I'd start thinking like one.

I have, I'm charging the normal rate. I'm in negative equity hence the lower than repayment price.

filbert the fox

Your Airbag wrote: »

I have, I'm charging the normal rate. I'm in negative equity hence the lower than repayment price.

Fun isn't it ? All this rich landlord stuff.

Given my time again I'd stay at home, build a granny flat annex and let it out TAX FREE up to €12,000 ffs under the Rent a Room scheme.

Landlords are victims of the system

Your Airbag

filbert the fox wrote: »

Fun isn't it ? All this rich landlord stuff.

Given my time again I'd stay at home, build a granny flat annex and let it out TAX FREE up to €12,000 ffs under the Rent a Room scheme.

Landlords are victims of the system

Tell me about it.

I'd never buy a place if I could do it all again.

hanna200

Your Airbag wrote: »

I have, I'm charging the normal rate. I'm in negative equity hence the lower than repayment price.

can I ask you what negative equity has to do with the monthly rental fee?

unless I read you incorrectly.

sunnysoutheast

hanna200 wrote: »

can I ask you what negative equity has to do with the monthly rental fee?

unless I read you incorrectly.

Might be an interest-only deal with the capital repayment element parked.

Actually better from a financial point of view re: renting, assuming the lender is OK with the property being rented out.

Your Airbag

hanna200 wrote: »

can I ask you what negative equity has to do with the monthly rental fee?

unless I read you incorrectly.

Its was in response to a previous posters comment that "it looks like you haven't really checked out the rental market prices in your area".

I was just saying I have checked out the prices and I'm charging the going rate which is slightly below my monthly repayments.

I would love to charge more but every house near by would be cheaper, as the were purchased post-boom for about 61% less than what I paid, so they rent at that price now-a-days for a good profit I would think.

Me charging more and making a profit would be great but it would basically make my house unrentable as everything close by is going to be cheaper.

foggy_lad

Just a few other bits, I would arrange the bins and pay for them and add the cost to the rent, usually €20-€25/month. You should also take meter readings when tenants move in and have the forms ready for them to fill out in front of you for the gas/esb/broadband and you should have a clause in the lease about keeping all utility bills paid up to date.

If tenants have issues paying bills they will soon have issues with the rent!

superleedsdub

As an accidental landlord for the past few years I would stongly advise having a letting agent manage the property for you. The monthly charge is tax deductable as it is an expense for letting out the property (at least I have been claiming this with no issues) The agent I used was very reliable and took a fair bit of the stress away from me.
They should perform regular inspections and will vet the possible tenants for you, they also receive the phonecalls when the washing machine breaks down etc.... The agent would inform me that a repair was needed and seek my permission for him to arrange this repair.

Also, you can claim the mileage for visits during the year to the property, I use the civil service mileage rates to calculate these.
http://www.revenue.ie/en/tax/it/leaflets/it51.html

As one other poster suggested, it really is worth employing an accountant for the first year as it could potentially save you alot of money.

The best piece of advise I can offer is that if it is possible, sell the property and don`t become a landlord! (I`m at sale agreed on my property and can feel a huge weight off my shoulders, fingers crossed the sale goes through)

highly1111

Take photos (dated) before the tenants move in. Ask them to sign an itinerary list with all the items listed (including brand etc) which are been left in the property. Definitely get a deposit and accept a standing order only. Get references if possible. Don't paint the place etc before you lease it. Or make any major changes / expense unless they ask (and its within reason). Get onto daft etc and make sure you're getting market rent. And then call a creative accountant who knows how to deduct everything from the tax bill from your new shower head to petrol costs for interviewing tenants etc etc. Make sure you have a clause on the lease that they absolutely cannot sublet. The amount of problems with people who don't actually don't know who lives in their property is unreal. Amazing but true.

Fol20

i dont think you have done enough research to fully understand your responsibilities and what this fully entails.. For the hassle involved and the fact you could be sued or loose out on so much money, i would allow a management agency manage it and just use an accountant to file your tax return. At least this way you have professionals doing everything for you and are all expendable.

Cuddlesworth

Fol20 wrote: »

i dont think you have done enough research to fully understand your responsibilities and what this fully entails.. For the hassle involved and the fact you could be sued or loose out on so much money, i would allow a management agency manage it and just use an accountant to file your tax return. At least this way you have professionals doing everything for you and are all expendable.

You haven't dealt with a lot of Irish property management agents then?

Fol20

Cuddlesworth wrote: »

You haven't dealt with a lot of Irish property management agents then?

I have.. They are all more or less the same, but a least they will take the hassle away from him when he doesnt know what to do.

foggy_lad

Fol20 wrote: »

I have.. They are all more or less the same, but a least they will take the hassle away from him when he doesnt know what to do.

they will most likely do nothing for several months when rent goes unpaid and only visit when a property needs to be re let and then they will break in while current tenants live there.

It would be rare to find one who does the job they are paid to do without breaking tenancy law.