Thinking of buying 3 Apartments with inheritance

Alfaboard

Currently have about 650000k inheritance and don't know much about investing. Im wondering is it that simple to get buy say 3 small apartments for €180,000 and rent it out for say €1500 a month???(3375 euro a month combined) would also like to know if the rent i make from these apartments needs to be declared with the tax office and how much tax i would pay on 3375 a month providing i have tenants i would also like to know about setting up a bank account for these 3 apartments and what kind of bank account ex:deposit account etc or what is the best way to set this up with my bank.

TimeToShine

What are you going to do with the remaining 649 million euros?

Bigus

Alfaboard wrote: »

Currently have about 650000k inheritance and don't know much about investing. Im wondering is it that simple to get buy say 3 small apartments for ?180,000 and rent it out for say ?1500 a month???(3375 euro a month combined) would also like to know if the rent i make from these apartments needs to be declared with the tax office and how much tax i would pay on 3375 a month providing i have tenants i would also like to know about setting up a bank account for these 3 apartments and what kind of bank account ex:deposit account etc or what is the best way to set this up with my bank.

You kind of missed the boat regarding property values and the weight of new legislation and regulations, but if you're still insistent
Try only one at a time and wait at least 6 months before you buy another.

Alfaboard

Bigus wrote: »

You kind of missed the boat regarding property values and the weight of new legislation and regulations, but if you're still insistent
Try only one at a time and wait at least 6 months before you buy another.

right sounds like good advice

The_Conductor

Alfaboard wrote: »

Currently have about 650000k inheritance and don't know much about investing. Im wondering is it that simple to get buy say 3 small apartments for €180,000 and rent it out for say €1500 a month???(3375 euro a month combined) would also like to know if the rent i make from these apartments needs to be declared with the tax office and how much tax i would pay on 3375 a month providing i have tenants i would also like to know about setting up a bank account for these 3 apartments and what kind of bank account ex:deposit account etc or what is the best way to set this up with my bank.

Of course you have to declare the rental income to the tax office.
As you're buying these outright without a mortgage- potentially you could be paying up to 54% tax (its at your marginal rate- and you have to pay PRSI and USC on it). Potentially you could be handing over half the rental income to the tax man. You can have whatever kind of bank account you like to receive the rental income- and pay any outgoings from- its not specified.

You really need to sit down and have a chat with a few landlords- before you jump in- I sorry, but you don't really seem to have put any great thought into this........

Pawwed Rig

A REIT might be a better idea in your situation (and alot less hassle) but your whole situation needs to be considered here as it is a significant wad of cash

DubCount

I would certainly speak to a Financial Advisor about that kind of money. Putting some money into property may make sense, but maybe some diversity into some share based investments etc.. Even in terms of property, would you be better off investing some in residential and some in commercial? Sitting down with a professional may be the best money you ever spent.

Wheety

Of course Revenue will need to be informed of this income. You should have a good read on here at some of the threads on renting out apartments. An issue I've seen a few times is overholding. Where tenants stop paying rent and it can take over a year to have them removed. At least you wouldn't have a mortgage to cover is this happened.

You will also have to pay Local Property Tax on all 3 apartments, and Tax and PRSI on the rental income. I'm sure there's a few more things to consider which other posters will know more about.

Alfaboard

wow thanks for the replies is there a calc online that will calculate what i will be coming out with after tax , prsi

The_Conductor

Alfaboard wrote: »

wow thanks for the replies is there a calc online that will calculate what i will be coming out with after tax , prsi

No- because it depends on your other income- however, it is taxed at your marginal rate- and you *do* have to pay tax, prsi, usc etc- on your rental income (which really isn't fair- however, its the law).

You do have some allowable costs- for example- with apartments you'll have management charges- which are fully allowable- but the big cost that most landlords have to offset against rental income- is 75% of their mortgage interest- however, that doesn't count in your case if you're buying the property outright. It makes most sense to try and load up as much debt on the properties as possible- its entirely counterintuitive- not to mention ironic- but there is a disincentive to buy or own property outright (call it a perverse incentive to hold as much as debt as possible).

Property tax, RTB fees etc- are *not* allowable as costs.

No costs incurred in fitting out the properties prior to letting them (e.g. furnishing them) are allowable- its only subsequent replacement of furniture, fixtures and fittings that are.

In short- you really need to sit down with a tax accountant who is fully au fait with the Irish rental market- and have a prepared list of questions for them.

Pawwed Rig

The_Conductor wrote: »

Property tax, RTB fees etc- are *not* allowable as costs..

RTB fees? Really?

The_Conductor

Pawwed Rig wrote: »

RTB fees? Really?

They're not supposed to be- lol.......

Pawwed Rig

The_Conductor wrote: »

They're not supposed to be- lol.......

Source or GTFO

Been claiming them for years. Lets not talk about NPPR Bas****s

The_Conductor

Pawwed Rig wrote: »

Source or GTFO

Been claiming them for years. Lets not talk about NPPR Bas****s

LPT isn't allowable either (they were supposed to be introducing legislation for regulatory fees and LPT- and said they were- but never did it). NPPR- it appears- may have been allowable after all (you probably remember the case from January?)

myshirt

If you have that level of money, 3-5 grand in good professional advice would be a great investment.

Pawwed Rig

The_Conductor wrote: »

LPT isn't allowable either (they were supposed to be introducing legislation for regulatory fees and LPT- and said they were- but never did it). NPPR- it appears- may have been allowable after all (you probably remember the case from January?)

Yeah LPT is specifically disallowed and NPPR was disallowed by Revenue despite it being a rate and thereby clearly allowable by legislation but conveniently Revenue will disallow any amendments that take place greater than 4 years so only the very last year of NPPR can be claimed which in reality means that noone will claim it unless you happen to have multiple properties.

wordofwarning

I would go to a fee based financial advisor who will tell what is your best opinion. An low cost ETF like a Vanguard S&P500 index fund might be the best if you want to invest for 15-20 years.

Your time horizon will be the biggest factor to decide what to invest in

IMO if you have €650k and you want to buy property. A house full of pre-63s(complying with the new regs) will have the best yield. I know plenty of people who used inheritance, gifts from family etc to buy vanity apartments with a low yield, as they 'like the development'. Rather than buying in a bad area where the yield can be twice as high ie the rent from owning 2 bed in Sandymount is not a whole lot more than buying a 2 bed on Parnell St, despite the apartments likely costing twice the price

If you have no mortgage, a short term lets apartment ie corporate lets of a few months will yield more than a long term let. But they are a legal grey area.

DubCount

Alfaboard wrote: »

wow thanks for the replies is there a calc online that will calculate what i will be coming out with after tax , prsi

That is going to be dependent on your other income, are you married or single, are you going to hold the property directly or is there a way of putting it into a Pension Scheme. Are you going to be living in the property yourself.

It may sound like a simple matter of buying a property and collecting the rent, but there is more to being a landlord than most people think. Are you planning on managing the property yourself or have an agent do it for you?

There are a lot of moving parts to a decision like this and you need to talk to someone who can advice you based on your age, whether you have children and need to consider inheritance matters, what income/assets you currently hold and what your goal for the money is etc etc.

AmberGold

As a small time landlord my advice to the OP is forget about it, residential lets are a TOTAL nightmare, especially apartments. I say this with respect to every aspect, dealing with tenants, PTRB, revenue, re decorating, advertising, showings, repairs the lot. I know I sound like someone who maybe shouldn't be a landlord but I've had a fair few bad experiences for what is a meagre return.

If you have to invest in property go commercial with sitting tenants if possible.

At the end of the day the fact you have inherited the money should not affect how you view your investment. Factor in the cost of money and you will possibly see things differently.

Lumen

AmberGold wrote: »

As a small time landlord my advice to the OP is forget about it, residential lets are a TOTAL nightmare, especially apartments. I say this with respect to every aspect, dealing with tenants, PTRB, revenue, re decorating, advertising, showings, repairs the lot. I know I sound like someone who maybe shouldn't be a landlord but I've had a fair few bad experiences for what is a meagre return.

If you have to invest in property go commercial with sitting tenants if possible.

At the end of the day the fact you have inherited the money should not affect how you view your investment. Factor in the cost of money and you will possibly see things differently.

The key is to understand that landlording requires the investment of capital and labour, like any other business. If you're not going to pay someone else for their labour, you're going to have to provide it yourself.

There are other types of investment that can offer effortless returns, like company shares, but the yield is generally lower than self-managed property lettings because you're paying other people to run those businesses.

You have 650 k. Put it in the bank and go and enjoy yourself.

Purple Mountain

You may need to factor in management fees too.
Some people seem blind to these when buying apartments to rent out.

Jaxton Yummy Strawberry

Jaxton Yummy Strawberry wrote: »

You have 650 k. Put it in the bank and go and enjoy yourself.

I think trying to turn that 650k into much more would be better move, don't you?

athtrasna

Marleigh Helpful Sonar wrote: »

I think trying to turn that 650k into much more would be better move, don't you?

And that's why there's an investment forum

Hollister11

Jaxton Yummy Strawberry wrote: »

You have 650 k. Put it in the bank and go and enjoy yourself.

Or possibly have a million in 5 - 10 years while still living a good lifestyle now.

Claw Hammer

wordofwarning wrote: »

IMO if you have €650k and you want to buy property. A house full of pre-63s(complying with the new regs) will have the best yield.l grey area.

Pre 63s have a higher yield but require much more attention. They are invariably in old buildings and need constant repair. They attract lower calibre tenants so there is also more damage and hassle. there are frequent call -outs for leaks, broken appliances, electrical faults and lost keys. Pre- 63 owners need to be fairly handy and also be capable of managing tradesmen. Bins have to be managed as well. the regulations change from time to time and what is adequate now may not be in a few years. Fire regulations are becoming more stringent as well as regulations about protected structures.

The o/p would be better advised to buy one unit and see how he gets on. He may discover, after a time that he does not like it one bit or he may wish to expand.

johnnyskeleton

Have you considered commercial property? Might get a better yield on a well located shop or industrial unit than you will get on apartments at the moment. I dont think there are many 10% yield apartments at the moment but you might meet that with a commercial tenant. Plus, probably less hassle etc

rsynnott

Marleigh Helpful Sonar wrote: »

I think trying to turn that 650k into much more would be better move, don't you?

Given the instability of the property market, the suggested course of action may be an ideal way to turn it into much less.

Ignoring all the usual cons with property as an investment, the recent CGT exemption thing that is now closed coupled with the increase in purchase prices I'd consider property a missed boat for the moment OP.

Look at what happened Irish property prices in 2007/2008 and where they are now. Than look at the FTSE100 and the S&P500 etc and where they are relative to pre 2007 and the crash etc.

That should answer the famous blocks v stocks question for you.

Alfaboard

AmberGold wrote: »

If you have to invest in property go commercial with sitting tenants if possible.

can you elaborate on this ??? daft?

The_Conductor

Mr.S wrote: »

Talk to a financial advisor :eek:

Big time- you need proper advice- not the musings of us here.

Alfaboard

ok thanks for the replys guys think the best to do is talk to a financial advisor

dashoonage

Buy a load of apartments down the med and get someone to airbnb them for 6 months a year......be grand hai!

The_Conductor

dashoonage wrote: »

Buy a load of apartments down the med and get someone to airbnb them for 6 months a year......be grand hai!

Haha- you've obviously not had to submit reciprochal tax returns in Spain or Portugal and here- to account for running a foreign business.

Don't do it. Its not worth the trouble.

AmberGold

Alfaboard wrote: »

can you elaborate on this ??? daft?

A year or so ago a friend picked up a small Commerical retail premises split into 4 units each circa 700/1000 sq ft, costing 650k or so it's generating 60k pa. This is the type of thing I'd be looking for. You may or not pick up this type of thing on Daft, personally I'd pick a location and go and speak with local agents.

The Allsop auctions were a great place to pick up a bargain, haven't looked at them in a while.

To be honest given the position you're in and the questions you're asking here it might be wise to sit on it for a while until you get a handle on what's involved.

Moonbeam

That would be my nightmare!
If you have a job then allow about 50% of your rental earnings as tax.
It isn't quite that bad but it will not be far off as you will have no mortgage relief to claim.

The_Conductor

Moonbeam wrote: »

That would be my nightmare!
If you have a job then allow about 50% of your rental earnings as tax.
It isn't quite that bad but it will not be far off as you will have no mortgage relief to claim.

If you're self employed- it could be up to 54%
Honestly- it never ceases to amaze me that tenants think they are paying over mad sums to landlords- the elephant in the corner who are getting away with murder- are the Revenue Commissioners..........

Lumen

The_Conductor wrote: »

If you're self employed- it could be up to 54%
Honestly- it never ceases to amaze me that tenants think they are paying over mad sums to landlords- the elephant in the corner who are getting away with murder- are the Revenue Commissioners..........

"Getting away with murder"?

It's the same for all declared sources of income, nothing specific to landlording.

Also, that's the marginal rate. Nobody pays that on all income. Which I suppose you implied by "up to".

Peregrinus

Lumen wrote: »

"Getting away with murder"?

It's the same for all declared sources of income, nothing specific to landlording.

Also, that's the marginal rate. Nobody pays that on all income. Which I suppose you implied by "up to".

This.

The OP has inherited money, and proposes to invest it. If he invests it so as to generate a return, that return will be taxable. To the extent that the return in is received in the form of income (rent, interest, dividends) it's subject to income tax. There isn't a specially punitive rate for landlords; they pay at the same rates as other investors.

As for landlords paying at 54% on the entire rental income, that could only happen if the landlord is paying no deductible expenses - he's paying nothing towards maintenance, nothing towards keeping the property up to scratch, he's not spending any money on furniture or fittings on which he can claim capital allowances, nothing. He's not even insuring the place. He's simply letting the flat and its contents deteriorate steadily.

Any landlord behaving in that fashion is ripping off his tenants.

The OP won't be able to claim an interest deduction because he's not borrowing to acquire assets in which to invest, but this is because he doesn't need to borrow; he has inherited the money he needs. In these circumstances having no interest deduction to claim represents good fortune, not bad. And he'll have no interest deduction regardless of whether he invests in property or in other assets.

Pawwed Rig

If I was the OP I would be leveraging the capital by combining it with debt so they should have some interest to deduct. It would be better to pay down your PPR and keep all debt on rental properties. But again we don't know enough about the OP to give decent advice here

The_Conductor

Peregrinus wrote: »

There isn't a specially punitive rate for landlords; they pay at the same rates as other investors.

No other investor, other than a landlord, has their cashflow assessed and PRSI/USC and other deductions- in the manner in which a landlord has.

Rental income- is treated in a punitive manner compared to any other investment type. This has been acknowledged by tax authorities- and there have been several write-ups on it- including in publications such as 'The Economist' who are gunning to have debt as an allowable cost wholly cast aside as an allowable expense (for all investors)- but they acknowledge, Ireland can't go it alone- it would put us at a competitive disadvantage to elsewhere.

I've argued here (and indeed, in correspondence to the Minister) for a flat-rate taxation of gross rental income- with no allowable expenses- specifically for the residential letting market- in order to level the playing field for all.

Lumen

The_Conductor wrote: »

No other investor, other than a landlord, has their cashflow assessed and PRSI/USC and other deductions- in the manner in which a landlord has.

Again, you're conflating pure investment and running a business.

My non-landlord business has its expenses tracked to incredible detail, checked by accountants and audited periodically from Revenue.

However, if I was merely being paid dividends from a shareholding in the business my personal expenses would be irrelevant, but the expenses of that business would still be assessed.

DubCount

Lumen wrote: »

"Getting away with murder"?

It's the same for all declared sources of income, nothing specific to landlording.

There are lots of ways the "Landlord Business" is treated differently to a regular business.

1) If I borrow money to set up an ice cream shop, I am allowed 100% of the interest on the loan as a deduction from my taxable profit. When I borrow money to become a landlord, I'm allowed deduct 80%.

2) If my ice cream shop has a bad year and I make a loss, I can offset that loss against any other income (including employment income). If I make a loss as a landlord, I can only offset the loss against future rental income.

3) If I fail to sign up to the ice cream regulator, there is no tax implication. If I fail to register with the RTB, my mortgage interest expense becomes 100% non-deductable.

4) If some low-life decides he/she does not want to pay for ice cream, I can kick them out of my ice cream shop. If a tenant decides not to pay, he/she can stay on my premises for up to 2 years while I go through an expensive legal process to have them evicted.

5) I can charge whatever I like for my ice cream. If the consumer doesn't like it, they can go to a different ice cream shop. As a landlord, the amount I can charge for my service is restricted if I am unfortunate enough to live in a RPZ.

I would be delighted to see the landlord business treated as any other business. However, at a time when we don't have enough rental property in the market and we have significant price pressure on rents, Ireland Inc. will not even treat Landlords as the same way as other businesses.

Lumen

DubCount wrote: »

I would be delighted to see the landlord business treated as any other business.

It will be treated that way if you run it as as a limited company.

The differences in treatment of ice-cream customers and tenants is a consequence of housing being treated as a basic human need, that's got nothing to do with tax.

Some types of businesses are by their nature highly regulated. This isn't unique to landlording. Try fitting out and running a restaurant and see how you like the regulations involved there. Or maybe start manufacturing prescription pharmaceuticals in your kitchen and then go and moan about how unfair it is that you're victimised by oppressive rules and regulations.

This is all just special pleading. Nobody likes paying tax or being told what to do.

Keyman123

Just don't. Take it from someone who knows. Nightmare tennents, tax returns etc. Share the love and you may need it yourself in the future

Claw Hammer

The Revenue treat rental income as "unearned income" and therefore treated in the same manner as investment income such as dividends or the like. This does not mean that it is not business. It is a business taxation regime peculiar to itself. The O/P is enquiring about investing. It is a reasonable point to make that unlike investing another media he will be running a business under this particular taxation regime under a special regulatory regime. Whether or not that is a good plan depends on many factors. Some relate to the attractiveness generally property investment medium and some relate to theO/P's personality and experience. Many people have made a lot of money from property investment and many others have failed to do so and suffered much frustration in the process.

vandriver

"Im wondering is it that simple to get buy say 3 small apartments for €180,000 and rent it out for say €1500 a month???(3375 euro a month combined)"

Where does the €3375 come from.?

DubCount

Lumen wrote: »

It will be treated that way if you run it as as a limited company.

The differences in treatment of ice-cream customers and tenants is a consequence of housing being treated as a basic human need, that's got nothing to do with tax.

This is all just special pleading. Nobody likes paying tax or being told what to do.

I'm not asking for special treatment for landlords, just equality with other businesses that set up as sole traders.

The differences in treatment of ice cream customers is a way of transferring responsibility for housing away from government and onto landlords. In the UK, a landlord can apply to a county court for an eviction cheaply and quickly. After the eviction, the responsibility for housing rests with the local authority. The landlord can move on to the next tenant.

The OP is considering residential investment in Ireland (as an individual and not a company). I'm only highlighting differences between Landlord business and other businesses.

Bandana boy

Do you need the income from these investments to supplement your income now or is it investing for the future ?

If this is about planning for the future I would borrow and buy 6 apartments.
You should be able to structure the payments to clear the debt and your tax liabilities and in 20 years you have a nice ~9K a month income ,which is a very decent pension.

Mirror game

OP, If you check the Bord Pleanala website you'll see solar farm projects being approved all over the country. These are to be built on plots of land about 25 to 35 acres, the way it works is the farmers owns the land and have signed up for long term lease with solar companies. The leases are usually €1000/1100 per acre and are index linked and are for 25 or even 40 years the length of the lease doesn't really matter because the terms would have be renegotiated at the end of the lease.
If I were you I'd seek out those farmers get an advisor to look over the contracts and buy the land with the contracts on it. When the farmers hearabout your €650000 they'll listen to you alright.

Spark Plug

OP I'd go commercial think neighbourhood centre with a Spar/Londis and one or two other retail units already let. If the tenants are solvent and leases are fair long you may be able to gear up somewhat. But if you go down this route I would suggest you get good professional advice from an accountant and lawyer. Good luck