Buying a house to rent it out

Kirby42

Perhaps this is all nonsense but I have an idea in my head and I want to know if it's realistic or simply foolish. I know little about how property works.

In the next decade, I hope to have earned enough money to buy a house in my home town with no mortgage or loans. Maybe a decent place with about 2-3 bedrooms at around 100-150k. I would then like to rent this house out as I live abroad anyways. I'll always have that place to come back to when I'm fed up with living abroad too.

I know that it can't be that simple but on a brass tacks level, how realistic is this?

antoinolachtnai

You need to get some professional advice about the tax or else do the research yourself. Basically, the tax makes it a very low-profit activity, after all the other expenses are paid. It could be a lot of hassle when you are so far away. You would probably be bettter off buying in the place where you live if you really wanted to own rental property. You would be better buying when you do actually move back.

Pawwed Rig

Not necessarily. Being non resident will mean that you will be most likely limited to the standard tax rate on the net rental income. You can also claim a portion of tax credits. It is not an unreasonable plan if you can get a good tenant (which is the main problem).
With proper tax planning you should only pay a fairly low amount of tax (if any).

newacc2015

I personally wouldnt buy in anywhere other than Dublin. Town and glorified towns aka cities are too vulnerable to economic shocks when a large American US MNC closes. Look at the state of Limerick when Dell closed. There are so many towns and glorified towns in Ireland that would be pretty screwed if the major american firm closed tomorrow

But if Google or Facebook left Dublin tomorrow. Which is about 9k jobs, they would have a minimal impact on the city as the rest of the 500k workers in the city would take up the former workers housing.

Have you considered REIT stocks? They pay out around 80% of the rental income they take in. They are considered more tax efficent than owning a property by some and they diversify the risk of owning property. Ie they are mixture of commerical and residential.

Graham

newacc2015 wrote: »

I personally wouldnt buy in anywhere other than Dublin. Town and glorified towns aka cities are too vulnerable to economic shocks when a large American US MNC closes. Look at the state of Limerick when Dell closed. There are so many towns and glorified towns in Ireland that would be pretty screwed if the major american firm closed tomorrow

Localised economic adjustments work the other way too and either way they usually level over time.

antoinolachtnai

Pawwed Rig wrote: »

Not necessarily. Being non resident will mean that you will be most likely limited to the standard tax rate on the net rental income. You can also claim a portion of tax credits. It is not an unreasonable plan if you can get a good tenant (which is the main problem).
With proper tax planning you should only pay a fairly low amount of tax (if any).

A non resident won't get tax credits, will they? And is there not a likelihood there will there be tax to be paid in the OP's country of residence?

A great tenant would solve a lot of problems, sure.

Pawwed Rig

antoinolachtnai wrote: »

A non resident won't get tax credits, will they? And is there not a likelihood there will there be tax to be paid in the OP's country of residence?

A great tenant would solve a lot of problems, sure.

They would get a portion of their credits. They may or may not have to pay tax in their country of residence. Depends on whether the country in question operates the remittance basis of taxation for non domiciled individuals. That is an easy question for a local advisor.

Villa05

newacc2015 wrote:

I personally wouldnt buy in anywhere other than Dublin. Town and glorified towns aka cities are too vulnerable to economic shocks when a large American US MNC closes. Look at the state of Limerick when Dell closed. There are so many towns and glorified towns in Ireland that would be pretty screwed if the major american firm closed tomorrow

A rule of thumb that has always paid off for me when it comes to investing is:

Never follow the crowd and keep an eye on what the crowd have walked away from.

Limerick is a perfect example. Everybody remembers the Dell pull out. Few have paid attention to what has been happening since

newacc2015

Villa05 wrote: »

A rule of thumb that has always paid off for me when it comes to investing is:

Never follow the crowd and keep an eye on what the crowd have walked away from.

Limerick is a perfect example. Everybody remembers the Dell pull out. Few have paid attention to what has been happening since

True, but rule no 2 is invest, dont speculate. A lot of this country has been in a non-stop recession since 2003 and a lot of economists will back this up. Hoping after 13 years of nothing but decline a lot of towns will have another boom is nothing but speculation IMO. A lot of towns outside of Dublin have no future, thinking otherwise is naive. Other have looked away as a lot of places in Ireland are going nowhere.

Where as Dublin has recovered remarkably from the great recession and is a highly diversified economy. No other part of Ireland is diversified as Dublin. The fact no REITs have invested outside of Dublin really shows that most of Ireland is not a wise place for having an investment property. The fact a lot of investor never really brought in these places to begin with shows a lot

Graham

newacc2015 wrote: »

The fact no REITs have invested outside of Dublin really shows that most of Ireland is not a wise place for having an investment property.

It's more likely that nowhere outside of Dublin offers opportunities of the scale a REIT would be seeking.

I don't for a second believe the 'everything outside the M50 is bo****ed' line.

Villa05

newacc2015 wrote:

True, but rule no 2 is invest, dont speculate. A lot of this country has been in a non-stop recession since 2003 and a lot of economists will back this up. Hoping after 13 years of nothing but decline a lot of towns will have another boom is nothing but speculation IMO. A lot of towns outside of Dublin have no future, thinking otherwise is naive. Other have looked away as a lot of places in Ireland are going nowhere.

You might find that Limerick has gone from being heavily dependent on one low skilled employer to now having a highly diversified multiple employers in high skilled areas
You may also note the high level of investment in Limericks third level institutions from private enterprise a sure sign of their confidence in these institutions providing top candidates and results in research and development

Limerick also has property prices that are sustainable. Can the same be said about Dublin. I'm not so sure therefore for me Dublin is speculative while other areas may be a better investment

You live abroad. There may be better investments available to you there, than tying up your money in property in ireland. Check out the tax situation for investment income and capital gains tax there. I'm thinking of shares in particular, which long term are the best investment and also are much more liquid than housing.