Inherited house from late uncle with my cousins. Should we rent it out or sell it?

Crock Rock

My uncle sadly passed away recently to whom I was very close. He was unmarried and childless. He left my two cousins and me his house in the Dublin 15 area. It is a 3-bed house with a fron and rear garden and a driveway. The house is valued at €350,000.


The threshold for inheritence where the beneficiaries are nieces / nephews is €32,500. We have effectively received a windfall of €117,000 each, meaning there is a taxable amount of €85,000 (33% of this). So we have to pay €28,050 each. Not a lot, something a personal loan will sort out.


We are between two minds and I'd like to hear from experienced people on this. Should we just sell up, let the bidders clammer and we pay our tax put the money in the credit union for a rainy day and wash our hands?

OR

Should we take out a loan to pay the inheritance tax and put it on the rental market and have a nice steady guaranteed stream of income every month. The house is immaculate and in a liveable condition already. €1,500 per month of rent will be €500 per month each (€250 per month after tax each).



We are hoping to come to a unanimous decision on what to do. Would we be mad to rent it out? What would you do in our situation?


Thanks folks.

Oink

I have no experience, but the first thing that comes to mind is that you are considering entering a business venture with family members. I’m not saying you shouldn’t, but you need to seriously consider the implications if things get complicated. Nothing like money to tear a family apart. And who is going to be in charge ultimately? Are there 3 bosses in this business? What if you strongly disagree about something?

Anyway, that’s just food for thought. All the best!

Cazale

For the small amount you'll get each month after tax I would sell it in and take the money.

babi-hrse

I have no horse in these races but you wanna talk to some landlords many have horror stories about having a second property and some say it's a steep learning curve where you have to learn to treat it properly as a business with tenants in.
A landlords advice is what you need.

Crock Rock

Could any landlors here kindly chime in? Thanks.

Ste.phen

{edit: ha, i forgot you put the actual figures in the OP}

For that €117,000, let's forget about the taxes for a moment:

If you were given a €117k bonus today, and your plan for that money would be anything other than 'buy a house with my cousins and rent it out', you should sell the house.

Bandana boy

I am a accidental landlord

If you got it on your own I would say go ahead and rent it out
But with 2 other people causes problems , for a start one of you is going to have to do a bit of work managing the rental and the tenants .Eventually they are going to regret doing this work for free
The alternative is give to an agent but that is going to take cost ~ a months rent per year out of the equation .
I would also recommend taking another month out a year as dead rent between rentals and upkeep.

In reality that means after tax ~46 euro a week .

In that case its 30+ years to make back your 90k you could take right now by selling.

That 90 k would do far better towards a deposit for your own house one day or you wil probably find investments that are less hassle , less likely to cause a fall out with your cousins.

Alkers

Unless it maybe suits one of you to live in I would sell it and take the money

Crock Rock

I might go down the selling route and maybe the others might opt for that too. Thanks all. A lump sum in the credit union sounds tempting too.

killanena

If you sell, easiest money you'll ever make. Nothing like a cushion to sit on. Letting out means it would take roughly 7 and a half years to make that money back, that's if the property always has a tenant, repairs etc.

Personally I would let because I'm quite young and would make a profit long term and put it directly into a pension and retire earlier then what's common.

Lucky there is 3 of ye, I'd put it to a vote if everyone was in agreement that the result was final.

Bandana boy

killanena wrote: »

If you sell, easiest money you'll ever make. Nothing like a cushion to sit on. Letting out means it would take roughly 7 and a half years to make that money back, that's if the property always has a tenant, repairs etc.

Personally I would let because I'm quite young and would make a profit long term and put it directly into a pension and retire earlier then what's common.

Lucky there is 3 of ye, I'd put it to a vote if everyone was in agreement that the result was final.

your maths are very very wrong on 7 and a half years it will take 9 just to pay back the loan for the tax man without interest

Tiddlypeeps

I'd say renting it in this scenario is pretty much never a good idea. Money is the fastest way to causes resentment between family and friends. If you are close with these family members then strongly consider that something may happen along the way that causes you to fall out with them forever. If you are not that close then that is also an issue because you won't know if they will be difficult to work with.

What happens once things start needing to be replaced/upgraded. In an ideal word all 3 will chip in equally to pay. What happens if one refuses or can't?

What happens when one of you is constantly the person who has to actually deal with all of this stuff? Are you going to take it in turn? Give extra to one person to manage it all? This can very quickly lead to resentment and/or a fall out.

What happens if a tenant overholds? There is a lot of leg work involved in chasing that up, who will take this on? It takes a long time to kick the tenant out in this situation all the while you are no longer making money off of it. Again this can very quickly lead to resentment and fall out.

What happens if after a time one person (or you) decide you want out?

The personal return of 500 p/m (potentially 200-300 after tax/expenses) is not worth the potential effort and heart ache imo. Better to take the lump sum and possibly find something else to invest in if that is what you're after.

Bruthal

Bandana boy wrote: »

your maths are very very wrong on 7 and a half years it will take 9 just to pay back the loan for the tax man without interest

Yes, poster took a year as having 52 months I suspect.

Mrs OBumble

Bandana boy wrote: »

I am a accidental landlord

If you got it on your own I would say go ahead and rent it out.

I'm a deliberate LL and agree totally.

Multiple ownership of land always causes hassles. Having to get all three to agree / contribute to substantial repairs would be a PITA. Eg if the boiler needs replacing soon, but one cannot afford it.

KevinCavan

I’d say put up the for sale sign too. Less stress and instant gratification.

C3PO

I would run a mile from being a landlord in the current environment - sell it!

KevinCavan

Dealing with your cousins will wreck your head.

The_Conductor

The current regulatory regime is completely and utterly lopsided in favour of tenants. Even if the tenant stops paying rent in its entirety- it could still cost you tens of thousands to legally evict them, and upwards of two years in which you'd not be getting any income- and this is before you factor the fun and games of several owners of the one property. Honestly- its a recipe for a head wreck. Run-run-run.

Eric Cartman

and what would happen when one of the cousins cant get a 28k loan, who is going to look after things that need fixing in the property, who's going to manage the rental income. It usually ends up one person being burdened and the others kicking up if for any reason they don't get 100% of their share every month on time with no exceptions.

Its a recipie for disaster and you might get a few hundred a month while the economy is good. Houses are at their peak at the moment , sell it up, bank the cash, maybe all go on a nice big holiday.

skooterblue2

KevinCavan wrote: »

Dealing with your cousins will wreck your head.

When it comes down to it, it will be two against one. Part fast and on good terms and remain friends

skooterblue2

Eric Cartman wrote: »

and what would happen when one of the cousins cant get a 28k loan, who is going to look after things that need fixing in the property, who's going to manage the rental income. It usually ends up one person being burdened and the others kicking up if for any reason they don't get 100% of their share every month on time with no exceptions.

Its a recipie for disaster and you might get a few hundred a month while the economy is good. Houses are at their peak at the moment , sell it up, bank the cash, maybe all go on a nice big holiday.

Best advice. Either one of ye buys the other two out or ye all sell up. I knew a guy who was a cowboy land lord and he was always looking for tenants, dealing with grievances, cleaning up after a move out. It cost him more than one promotion at work. Still stuck at a desk in the civil service grade 3 and will be there for life.

Get out fast before the recession. Have cash in hand to invest during the recession and remain friends with the cousins.

Heres Johnny

Few points

Being a landlord is a demanding business at times. Not just passive income. It's work.

The income is taxed so you won't get 500 each for a 1500 rental into your hand.

You stand to pocket 82000. Sizeable sum. Nice cushion under you. If you're not paying into a pension I'd strongly consider maxing out your pension contributions from your income and use the 82000 as spending money to make up any shortfall in cash flow. You will get 40% tax relief on this which way outperforms any investment out there.

Food for thought.

ceekay74

The maths says sell it.
The potential for falling out with family says sell it.
The potential for hassle and stress from tenants says sell it.

I can't think of a reason to keep it.

And unless I'm mistaken, if any one of you wants to sell, then the property must be sold. Of course the share in the property could be bought out by the other/others.

Grumpypants

If it was left to just you i'd say keep it move in and rent two rooms. The income then is tax free.

But to be a landlord is a giant pain. Entering into a business with family is a nightmare. So combining both i cant see it ending well and to be honest it will take 12+ years to break even.

I'd sell it. Split the money and move on.

But inheritance tax is scummy. what a kick in the nuts to get left a house that your family paid for and have to pay pull together the bones of 100k to keep it.

boege

OP
I am one of those so called accidental landlords. The sale on our old home fell through over 23 years ago and we have been renting it since. Assuming you keep the house, some matters to consider.

- With three people involved I would recommend you have an agreement drafted up by a solicitor to deal with the various issues that arise in renting. Issues to address:
-who will deal with the estate agent in regard to the tenancy, assuming you use an estate agent
-who will take responsibility for ensuring the house complies with tenancy requirements,
-who will set up and manage an account for rent plus all rental costs.
-who will produce and annual statement of the account and paying out rental profit to the three co-owners
- who will look after PTRB, rent reviews, etc
-how will tax returns be handled.
-who will deal with tenant complaints
-who will deal with defaulting tenants.
- how will decisions about refurbishment be made - more than likely you will have to repaint the entire house after each tenancy.
-what if one co-owner wants to sell out - they may have rights in law that trump any agreement so take legal advice on this point.
.........
.....

My overarching advice is to take advice from experts, both legal and financial, and fully understand your obligations when renting. Treat renting as a part time job that involves x amount of hours effort each month. More importantly treat the venture between the three of you as a business proposition and agree everything in writing. Do not rely on goodwill or the fact that you are related.

Black_Knight

Crock Rock wrote: »

The threshold for inheritence where the beneficiaries are nieces / nephews is €32,500. We have effectively received a windfall of €117,000 each, meaning there is a taxable amount of €85,000 (33% of this). So we have to pay €28,050 each. Not a lot, something a personal loan will sort out.

So selling straight away means no loan to repay, no hassle with dealing with renters etc. And about 90k in your pocket after it's sold. Is the capital gains tax or anything on that? I assume not since the house hasn't gained value since it was transferred to you.

splinter65

Which of ye is going to answer the phone at midnight when the bathroom window won’t close properly?

Sleeper12

I don't think the issue is should you keep the house or sell it as far as an investment is concerned. Very few investments will give you a weekly return & increase so much in value over the next 20 or 30 years. You do hear horror stories about rented properties but there are plenty of landlords that have no horror stories too. The stories about good tenants aren't interesting. "I have a brilliant tenant for the last seven years. Great with paying rent and asks for nothing". A thread with that would hardly make a full page.

The real issue is the cousins. Getting three people to agree on everything all the time is a rare thing. One might want to get married in two years & announce next year that he wants to sell. Right after you've bought new furniture or something. If you have rows they will become family rows. I love making money but you need as little stress in your life as possible. Only you know your own family but from an outsider looking in I see arguments & stress down the road by keeping it.

circular flexing

I'm an accidental landlord and would advise you to sell it. Simply not worth the hassle to be a landlord these days even with a free house.

Sleeper12

splinter65 wrote:

Which of ye is going to answer the phone at midnight when the bathroom window won’t close properly?

My phone goes onto private mode at 7pm. It only makes a sound when family & friends ring or text. Anyone not on the list I don't hear. If they leave a voice message I'll ring them at 9am. If they don't leave a message I don't ring them back at all.

Mobile phones have given us the freedom to move around but you can't let them take over your life either.

splinter65

Sleeper12 wrote: »

My phone goes onto private mode at 7pm. It only makes a sound when family & friends ring or text. Anyone not on the list I don't hear. If they leave a voice message I'll ring them at 9am. If they don't leave a message I don't ring them back at all.

Mobile phones have given us the freedom to move around but you can't let them take over your life either.

So the tenant can’t contact you in an emergency?

Sleeper12

splinter65 wrote:

So the tenant can’t contact you in an emergency?

Of course they can. 9am to 7pm. If the building goes on fire I cannot put out the fire. Let them ring 999 like everyone else. I only have private mode around 5 years. Before that I never had a call that I felt I needed to rush out in the middle of the night.

What emergency are you thinking about that I should accept calls late at night?

mrslancaster

OP if you and your cousins can agree to lease the house to your local council for ten years it might be something to consider. No dealing directly with tenants as the council do all that, they find tenants and look after maintenance and repairs. They pay lower than market rent afaik and you would be tied in for the 10 year contract.

If you sell after the ten years and the value has increased you'd have to pay cgt. But what could happen to the property market in ten years is anyone's guess. Good luck

splinter65

Sleeper12 wrote: »

Of course they can. 9am to 7pm. If the building goes on fire I cannot put out the fire. Let them ring 999 like everyone else. I only have private mode around 5 years. Before that I never had a call that I felt I needed to rush out in the middle of the night.

What emergency are you thinking about that I should accept calls late at night?

The water is pouring through the ceiling, the fuse box has blown and now I’ve no electricity and my baby is hungry, the storm has blown a tree in the back garden through the kitchen window... these are not reasons to ring 999, they’re reasons to ring the landlord.

Sleeper12

splinter65 wrote:

The water is pouring through the ceiling, the fuse box has blown and now I’ve no electricity and my baby is hungry, the storm has blown a tree in the back garden through the kitchen window... these are not reasons to ring 999, they’re reasons to ring the landlord.

They are also not reasons to be ringing me after hours. They are as capable of phoning a 24 hour plumber as I am.

No landlord is supposed to be on call 24/7. A storm is an act of god. The law allows the landlord reasonable time to make repairs. I think everyone in the country has been without power at some point. It's not life of death. A hungry baby is not my responsibility. If my power goes in my own home and there's a hungry baby I have to figure it out myself. Tenants have to figure things out themselves too at times. A landlords job isn't to wipe their bum. There are times if life when there is no power. It's a fact of life

A landlord that makes themselves available 24/7 is asking for trouble imo.

wildwillow

Sell. Three owners spell disaster. Being a landlord is no fun. Use the money as a cushion for the future.

joeguevara

The housing market is good for sellers. As someone who is a landlord my advice is sell. Being in business with other people especially family never worls. Also the amount of work being a landlord can never be exaggerated. Tenants can hold youbti ransom and what you earn is never worth it. Sell at the height and get the money to work for you.

One bad tenant can literally cost you everything both financially and your sanity.

Mrs OBumble

Sleeper12 wrote: »

They are also not reasons to be ringing me after hours. They are as capable of phoning a 24 hour plumber as I am.

Capable, but not authorised.

If they make the call, who pays?

L'prof

Bandana boy wrote: »

I am a accidental landlord

If you got it on your own I would say go ahead and rent it out
But with 2 other people causes problems , for a start one of you is going to have to do a bit of work managing the rental and the tenants .Eventually they are going to regret doing this work for free
The alternative is give to an agent but that is going to take cost ~ a months rent per year out of the equation .
I would also recommend taking another month out a year as dead rent between rentals and upkeep.

In reality that means after tax ~46 euro a week .

In that case its 30+ years to make back your 90k you could take right now by selling.

That 90 k would do far better towards a deposit for your own house one day or you wil probably find investments that are less hassle , less likely to cause a fall out with your cousins.

Conversely, even if it only amounted to €46 a week, that’s €2400 a year. A 5 year loan of €28k would be covered in less than 14 years. It’s definitely worth considering. Leave it with an agent to look after and agree that if any of ye decide to sell then house either has to be sold or share bought out by remaining parties. Only problem is working with family could get messy but that’s why I’d go down the agent route

C3PO

Sleeper12 wrote:

They are also not reasons to be ringing me after hours. They are as capable of phoning a 24 hour plumber as I am.

No landlord is supposed to be on call 24/7. A storm is an act of god. The law allows the landlord reasonable time to make repairs. I think everyone in the country has been without power at some point. It's not life of death. A hungry baby is not my responsibility. If my power goes in my own home and there's a hungry baby I have to figure it out myself. Tenants have to figure things out themselves too at times. A landlords job isn't to wipe their bum. There are times if life when there is no power. It's a fact of life

A landlord that makes themselves available 24/7 is asking for trouble imo.

Please tell me you're not a landlord?

jucko

rent it to the council on repair and lease scheme. walk away. council repay loan for ye. forget about it for ten years. your circumstances may change, offer it to cousins .
best of luck, a lovely situation
in time you may have kids in college etc.

irish gent

SELL IT !!!!!

Sleeper12

C3PO wrote: »

Please tell me you're not a landlord?

You do know that not all letting agents have a 24 hour hotline to call right?



Why would you expect a landlord to be available longer hours that a letting agent.


I work with many foreign based landlords that have no letting agent here. Again these won't be available 24/7. Quite often the only way to contact them is email


You need to look for a hotel or hostel if you are looking for 24/7 contact

mikep

OP, I'd sell if i were you.
We were accidental landlords before the housing crisis and even then it wasn't worth the hassle. I recently had a conversation with another current accidental landlord who advised that things are getting worse...that's before you bring in the complications of a 3 way partnership with the cousins...

Tow

Basically as a landlord:

There are 3 of you = problems.
Someone has to do all the work, it will eventually cause more problems.
Your €500 a month will be taxed at your marginal rate, which is probably 41%.
You will have to do t tax returns each year, Revenue will want Form 11 as you income will be > 5K.
All it takes is one of the 3 owners wanting to cash out to force a sale. This has been fought out between family members in court multiple times.

seamus

Oh god, sell.

If you decide to hold on, at least one of you will be dragged into the arrangement because you didn't want to rock the boat.

This person will be the first one to start ignoring calls and emails about it, leaving the other two to shoulder all the work.

After a few months, maybe a year or two, one of the two that's left will have a change in circumstances - marriage, work, kids, whatever. They will suddenly have "no time" to deal with the house, leaving the entirety of the work on the shoulders of the last person who will be blue in the face trying to contact the other two absentee landlords for consensus on things and money for repairs.

Eventually you'll fall out with eachother, go to sell the property and the two individuals who didn't care less about the house will now be asking all sorts of questions and wondering why it's not worth as much as they thought it should be. And the person who did all the work will be to blame.

Family gatherings will be awkward affairs for 20-odd years.

If you want a rental property, buy the other two out and go solo.

If you don't, sell it.

Irish_peppa

I would echo the above re families, You think you know your family until money comes into it things can quickly become nasty. I know you probably think "but no not my family were tight". Proceed with caution if getting involved in a business style venture with them. I personally would cash in my chips and invest elsewhere even in your own house, Extension etc. In any event good luck Op:)

Exiled1

Perhaps one of your cousins or yourself would consider buying out the other interests...... agree a valuation, get each to sign off agreement and go for it. It will cost a bit extra on legal fees.
If not, sell, sell sell.
As a former landlord, I suggest you are getting into a serious bother if you are going into the rental business with a partner / relative. Bad enough to go into that godawful business on your own!!

antix80

Crock Rock wrote: »

Could any landlors here kindly chime in? Thanks.

You'd be in a category called "have a go landlord". That you're considering a business venture with 2 cousins (are they brothers?) means you're probably going to run into problems sooner rather than later.

JimmyMW

Avoid avoid avoid, DO NOT enter a business with family, I made this mistake relatively recently, when things were not going so well in the business my business partner just pulled out, leaving me to deal with our business obligations on my own. Furthermore, as we invested into starting the business together, the other party feels hard done by regarding the losses irrespective of the fact that I suffered the same losses. The two of us were very friendly for 20+years now we rarely see each other and most interactions at family events etc are strained at best. DEFO SELL

emeldc

Sell it OP and use the money to buy an investment property of your own. Send me a PM if you're interested in my 2 bed rental property that I can't wait to get shut of!