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buying second property for investment purposes

  • 23-12-2022 12:51am
    Registered Users Posts: 948 ✭✭✭suave.4u

    Hi Guys,

    So we bought our first home (mid terrace), all mortgage paid up now.

    We have been saving for a bigger house, but whatever we see is either not worth it or is just too costly. Looks like we will have to wait for couple more months atleast. We have around 200K saving. Thinking of buying a second hand property (worth Eur 350K) and give it for rent. Planning to put the minimum 20% deposit and rest would be the mortgage amount.

    The other house search continues and if we find something, we sell the present house (or take over another mortgage).

    Is this a good idea?




  • Registered Users Posts: 3,232 ✭✭✭Ginger83

    So you want to buy a property for 350k and hand it to someone with a contract that is effectively worthless

    Have a read of this

  • Registered Users Posts: 6,196 ✭✭✭SteM

    Doesn't it have to be their primary residence to avail of the rent a room scheme though?

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  • Moderators, Society & Culture Moderators Posts: 36,342 Mod ✭✭✭✭Gumbo

    BTL requires 30% deposit.

    you pay your legal fees and the legal fees of the lending bank too. Don’t forget to factor this in.

  • Registered Users Posts: 9,633 ✭✭✭antoinolachtnai

    How would there be no tax in no locations if you kept the money in Spain?

  • Registered Users Posts: 667 ✭✭✭you2008

  • Registered Users Posts: 17,803 ✭✭✭✭Donald Trump

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  • Registered Users Posts: 536 ✭✭✭Q&A

    You've a sizable deposit sitting there. One advantage of such a deposit might be you can buy without having to sell. That will make you an attractive proposition to anyone selling. It might actually save you money as some vendors may be willing to accept a lower bid to avoid the hassle of relying on bidders having to sell their house.

  • Registered Users Posts: 13,505 ✭✭✭✭Mad_maxx

    If it were me I’d invest in an ETF that tracks the S+P 500 , it’s down almost a third from its all time high, could fall a good bit further but “it’s time in the market not timing the market “

    buy to let market is far too much at the mercy of the government trying to appease leftists

  • Registered Users Posts: 536 ✭✭✭Q&A

    Now if you're really want a bigger house is is a good idea to tie some or all of that money up in an illiquid asset. A deposit on a BTL worth 350k would be €105k. That half of your current savings. Forgetting about the state of the Irish rental market the transactions costs alone will be a factor. Stamp duty, solicitor x2 (buying and selling investment property), estate agent fees etc. If you're primary aim is not too be a long term landlord these costs may make a short term rental loss making.

    That's before you factor ongoing cost of maintenance. Will you manage the property yourself or will you pay someone else. So you want the hassle of a tenant phoning you about a burst pipe at 2am (.... Or worse the 4am call to ask you to change a lightbulb)

    You also say you don't think there is no value in the segment of the market you're looking at. There is no guarantee that at the €350k mark it will be any better.

  • Registered Users Posts: 1,983 ✭✭✭JoChervil

    And if we keep the money in Spain there are no tax implications for us.

    It's only for people, who have Spanish domicile

  • Registered Users Posts: 800 ✭✭✭Fred Cryton

    If you go down this route buy apartment in city centre and only rent to professionals. Try to get 2400 at least as once SF get in you won't be getting anymore, but inflation will hit you on the cost side.

    Tbh though if you put all that money into the stock market now, given how much valuations have fallen in the past year, you could be looking at €50k profit 12 months from now.

  • Registered Users Posts: 308 ✭✭DFB-D

    Yikes, a lot of negative comment here!

    But my experience on this:

    Investment property is a very good idea, nearly guaranteed to be the best return for risk available to you over 10-20 years.

    But some risks involved as well, especially in the short term, there is a strong risk that house prices will reduce next year, some projections of between 5 to 10%.

    As regards mortgages, BTL is not easy to obtain at the moment, you will easily get a residential mortgage. Some mortgage lenders will not lend to you if you have a mortgage already (mainstream), so having a BTL mortgage could effect your ability to get a residential mortgage. In theory you could get the residential mortgage from a mainstream lender and then take a second mortgage if possible from other lenders. But the other lenders are not lending at present.

    I think take your time, talk to an advisor and consider your options carefully. Using the 200k to finance your next PPR would save 3-4% mortgage interest, which is not a bad return either...

  • Registered Users Posts: 948 ✭✭✭suave.4u

    Thank you guys.

    -> I am married with 2 kids

    -> I understand that if the rent is equivalent to the mortgage, then I would not be gaining much. If I put in 70K initial deposit, the repayments work out to around Eur 1400. I should be able to get a rent of around Eur 2200 in our locality.

    -> Do I have to apply as BTL? Can't I just apply as a home owner and later decide to live in the existing place? As a married person , can't one person (say my wife) keep one bedroom and we rent the rest of it to avail the rent a room relief.

    -> I understand that I might get a similar rent if I buy a house for say E240K; but not many are there for that price range. Did not want to go the apartment route. The location of the intended purchase is in a good locality, lot of schools nearby.

    -> Not really looking at other locations like Spain. Also have some shares, so not looking at investing more there as well.

    -> We really need to trade up, but as I said the newer houses are costly and not worth it.

  • Registered Users Posts: 1,538 ✭✭✭Dante

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  • Registered Users Posts: 308 ✭✭DFB-D

    I assume they are on remittance basis tax.

    Or if not, don't know they need to pay tax in Ireland on Worldwide income.

  • Registered Users Posts: 1,039 ✭✭✭DubCount

    If you are tax resident in Ireland, you pay tax on your worldwide income. If you own an investment property in Spain, you will need to make a tax returns in Spain and Ireland. Any tax payable payable in Spain is allowable as a credit against your Irish Tax Liability.

  • Registered Users Posts: 9,881 ✭✭✭Caranica

    You cannot qualify for rent a room relief if you're not living there.

    You are also supposed to notify your bank (and insurance company) if you rent out your home.

  • Registered Users Posts: 308 ✭✭DFB-D

    If you are Irish resident, Ord resident and not Domiciled in Ireland, you are only charged income tax on foreign income remitted to the state.

    Honestly, look it up.

  • Registered Users Posts: 17,803 ✭✭✭✭Donald Trump

    I think you have that arseways. Domicile is relevant for tax purposes insofar that it allows the State to apply some tax to wealthy Irish people who deliberately move abroad to escape tax residency while really maintaining their long term base here.

    If you are tax resident then you will be tax resident and have to pay tax on your income. Your domicile won't matter.

    A person can, in theory, be ordinarily resident, stay here for more than 6 months in this year so that they are technically tax resident, but have split year treatment applied if they genuinely move abroad. If they were going permanently, they could change their domicile to the foreign country. But they'd still be subject to the split year treatment. So it would make no difference as regards tax. Unless they wanted to avoid the domicile levy after they went

  • Registered Users Posts: 1,039 ✭✭✭DubCount

    The chances of OP being Tax resident in Ireland but non-domiciled in Ireland is pretty slim. Domicile is a long term concept and to change your domicile of origin, you'd need to show a determination to live long term in another jurisdiction (having family and children living there and having a permanent job there etc.). Domicile also has implications outside of tax. Its not an easy tax dodge.

  • Registered Users Posts: 10,032 ✭✭✭✭Marcusm

    You have that wrong. Persons who are resident here but who have an Irish domicile may benefit from the remittance basis whereby their non-Irish sourced income is subject to Irish income tax only to the extent that it was remitted to or enjoyed in Ireland.

    The domicile levy was created as a result of an outcry that some very wealthy Irish domiciled but non-resident people paid little or no Irish tax despite having large amounts of income, significant Irish property etc. this was generally because they were non-resident while remaining Irish domiciled. Persons such as JP McManus, Dermot Desmond and Denis O’Brien were often cited although it was not expressly related to them.

    As the publican/hotelier Louis Fitzgerald has recently found, the domicile levy can also be applied to Irish resident persons. In his case his substantial income was sheltered from Irish income tax by capital allowances/tax depreciation but he paid USC. He has been forced also to pay the domicile levy despite being resident.

  • Registered Users Posts: 17,803 ✭✭✭✭Donald Trump

    Persons who are resident here but who have an Irish domicile

    What has your post got to do with the post I was replying to which implied that the OP could be tax resident, ordinarily tax resident, but non-domiciled.

    The OP will still be subject to tax somewhere on that income.

  • Registered Users Posts: 491 ✭✭SwimClub

    Hardly that slim, anyone who is a citizen of another country but resident in Ireland could claim non-dom status, you would just need to claim that you plan to move back to your own domicile ultimately (your domicile is sometimes associated with where you 'intend to die'). Non-dom originated as a tax break to encourage people to go abroad to the colonies for extended periods, their income being tax-free while out of the UK. In the UK they have levels of non-dom, where after 7 years you start paying huge amounts in charges to claim non-dom. But the fact you can claim it at all after 7 years shows that it isn't temporary. The Irish non-dom status is inherited from the British system.

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  • Registered Users Posts: 17,803 ✭✭✭✭Donald Trump

    I don't think we have the exact same loopholes here as the UK does

    Still, you can't just be living in Ireland your whole life, buy a property in Spain and say "I intend to move to Outer Mongolia" and therefore I don't have to pay any tax on any of the rental income anywhere in the world"

    There is a bit on it here though

    Remittance basis of assessment

    You may be Irish tax resident, but non-ordinarily resident and not domiciled in Ireland for a tax year. In this case you will pay Irish tax only on your:

    • Irish source income
    • foreign income to the extent that it is remitted into Ireland.

    This is called the remittance basis of assessment. Remittance means the funds you send to Ireland from abroad by:

    • wire
    • mail
    • online transfer.