fair deal question

kelcol

Looking for a bit of information. My mom is in a nursing home this past year. We are doing the fair deal scheme. So she has to pay 80% of her pension. Her home has been lying idle the past year we live away from home. I do what I can with it when I'm down but it is starting to look neglected. If I rent the house I have to pay 80% of the rent onto the fair deal and I'm ok with that. I'm also liable for tax on the whole rent I believe not just the 20% that's left? Also if I need to carry out any necessary repairs on the house this has to come out of my pocket and not from the rent? Also I would have to hire a property manager as I don't live near home. So with all this i reckon we would be operating at a loss. So what do people do with the house??

The_Conductor

kelcol wrote: »

Looking for a bit of information. My mom is in a nursing home this past year. We are doing the fair deal scheme. So she has to pay 80% of her pension. Her home has been lying idle the past year we live away from home. I do what I can with it when I'm down but it is starting to look neglected. If I rent the house I have to pay 80% of the rent onto the fair deal and I'm ok with that. I'm also liable for tax on the whole rent I believe not just the 20% that's left? Also if I need to carry out any necessary repairs on the house this has to come out of my pocket and not from the rent? Also I would have to hire a property manager as I don't live near home. So with all this i reckon we would be operating at a loss. So what do people do with the house??

The rent accrues to the legal owner of the property- in this instance, your mother. She is entitled to a personal tax credit towards the rent- but must declare the rental income. Some of the costs associated with the rental are wholly deductible from the gross rental income, some are partially deductible- and some (such as LPT and RTB fees) are not deductible at all.

Your Mom makes a return to Revenue detailing the rental income- and is assessed for tax on the rental (and any other) income. She has a net income determined after tax and any other levies (you have to pay PRSI and USC on rental income!!!). From this net after tax income- 80% is due to the nursing home.

In addition- the 7.5% rule applies for the first three years of nursing home care- i.e. 22.5% of the value of the PPR goes to the scheme- with deferred payment (subject to a few caveats- such as no dependent children living at home, the spouse not living in the PPR etc etc- all pretty common sense).

You're not going to make a loss if you let the property- a significant chunk of the rental income may accrue to the Revenue Commissioners- however, the 80% payment your Mom makes- is from the net aftertax and levies income- not the gross income.

Please note- letting a property- esp. if you're already noticing some delapidation and ongoing work that needs to be done- could very well be quite time consuming- and when determining your taxable rental income, you are currently not allowed to enumerate any work you yourself put into the property (you can account for materials used, by means of vouched receipts from suppliers etc).

Just be aware- there could be a lot more work involved in letting out the property than you imagine- and becoming a landlord really is not for the faint hearted (particularly in the current regulatory environment).

niallb

You might try contacting your Local Authority about making the house available for social housing.
They'll take care of maintenance and finding tenants, and they pay monthly regardless.
It's a fixed term contract for 10 years as far as I know, and they will guarantee you 80-85% of the market rate rent.
They also undertake to return the house to you in good condition at the end of the term.
You also have no responsibility as a landlord for the longest term options, and communicate only with the Authority.
Depending on where the house is, there may be shorter schemes available with different terms.

Here's the link to the Dublin options: http://www.dublincity.ie/dublinlandlords/rentaloptions

The_Conductor

niallb wrote: »

You might try contacting your Local Authority about making the house available for social housing.
They'll take care of maintenance and finding tenants, and they pay monthly regardless.
It's a fixed term contract for 10 years as far as I know, and they will guarantee you 80-85% of the market rate rent.
They also undertake to return the house to you in good condition at the end of the term.
You also have no responsibility as a landlord for the longest term options, and communicate only with the Authority.
Depending on where the house is, there may be shorter schemes available with different terms.

Here's the link to the Dublin options: http://www.dublincity.ie/dublinlandlords/rentaloptions

The property would have to be brought fully up to spec first- which is probably the issue for the OP......... Also- I'm not sure whether a PPR from the Fair Deal scheme is allowable- the argument being the landlord is making a deliberate decision to rent at below the open market rent for the property- and thus they would be expected to top it up to market rates- before determination of the 80% contribution to the nursing home..........

Its not nearly as straight forward- once the Fair Deal scheme is involved.

niallb

My thinking on it is it prevents a total loss of the potential income,
and keeps the house in good condition. It is also a means to not having to be a hands on landlord as the OP doesn't live nearby.

A friend of ours whose parent had taken the fair deal was shocked at the state their home was let get into over the four years involved with nobody living in it.
In that situation they were living abroad, so also unable to do very much.
In the end the house sold for a fraction of what it would have brought in if the property were in good repair.

The_Conductor

niallb wrote: »

My thinking on it is it prevents a total loss of the potential income,
and keeps the house in good condition. It is also a means to not having to be a hands on landlord as the OP doesn't live nearby.

A friend of ours whose parent had taken the fair deal was shocked at the state their home was let get into over the four years involved with nobody living in it.
In that situation they were living abroad, so also unable to do very much.
In the end the house sold for a fraction of what it would have brought in if the property were in good repair.

I honestly think you've an unrealistically rosy picture of the social housing schemes- which depending on the local authority- do not necessarily abdicate all responsibility to the council to perform the duties you're suggesting- and in addition- the property has to be to a certain standard before they'd even consider it.

The OP has stated their mother's property looks neglected/delapidated- and while they have listed the exact condition of the property- they did specifically mention repairs. I'm not sure if you're aware of the standard of social housing- however, let me assure you- its significantly higher than the standards demanded of property in the regular rented sector (local authorities don't want to be run ragged fixing silly issues either).

In addition- there is the whole issue of the Fair Deal scheme- and the prospective top-up the OP would need to make to bring it up to market value- i.e. it could actually end up costing them.

In any event the OP has a few things to think about- and needs to contact people to find out what precisely their obligations are- however, I'd be very hesitant to tie up a property, such as you're suggesting, for a 10 year period- just for the sake of keeping someone in it- esp. if there are other siblings involved- it sounds like a perfect recipe for a dispute..........

OP- have you considered selling the property? 22.5% of the value of the property is due to be handed over anyhow- this would formalise things ahead rather than in retrospect- and insulate you from having to worry about the upkeep of the property, tenants, dealing with a local authority etc etc.

BabySlam

The_Conductor wrote: »

OP- have you considered selling the property? 22.5% of the value of the property is due to be handed over anyhow- this would formalise things ahead rather than in retrospect- and insulate you from having to worry about the upkeep of the property, tenants, dealing with a local authority etc etc.

I think the financial cost of the extra 7.5% per annum on the sold price (the cap of 3 years on the house if held being no longer relevant) may in fact be cheaper than the costs of either leaving it empty or renting it out, and essentially, a lot easier. So the Conductor's suggestion is a good one.