Pay off the mortgage or buy second property?

elperello · 01-10-2017 9:36am

The Student wrote: »

Can I suggest a slightly different slant on this. Buy a property with a garage, convert the garage to a self contained unit. Avail of the rent a room scheme you earn tax free income. Then either sell apartment, rent it to council under long term leasing.

Don't forget that the self contained unit must be attached to the house under current rules which are of course subject to change.

__..__ · 01-10-2017 10:09am

elperello wrote: »

Don't forget that the self contained unit must be attached to the house under current rules which are of course subject to change.

Stay in the garage yourself and rent out your rooms

Pawwed Rig · 01-10-2017 10:44am

David Bumpy Crayfish wrote: »

In any case the rent a room scheme is here for good. It would be a pointless exercise getting rid of it as people will still do it and just not declare the income (in fact many doing it now don't bother to declare it as it's all cash). The government brought in the scheme to try encourage people to declare the income but they know well if they got rid of the scheme people would still rent rooms and still pay no tax so it would be a waste of time.

It was brought in to increase the stock of rental units. Once there is adequate stock this relief will disappear like previous reliefs (section 23, CGT exemption, LOTS etc)

The_Honeybadger · 01-10-2017 10:58am

Sell up and buy a nice house for yourself. If you have spare cash to invest after that there are better places to put it than in to property.

Maybe visit a well regarded independent financial advisor before doing anything, could be money very well spent.

The Student · 01-10-2017 11:09am

Pawwed Rig wrote: »

It was brought in to increase the stock of rental units. Once there is adequate stock this relief will disappear like previous reliefs (section 23, CGT exemption, LOTS etc)

With the current crisis I am not sure the scheme will end within the next five yrs. The scheme was really designed for students (the old digs style). Because of the housing situation it is being used more and more. You could build a granny flat and it would be paid for in three yrs and completely tax free. At the same time you have increased the value and size of your home.

bilbot79 · 01-10-2017 11:11am

While interest rates are low you money goes a lot farther when paying down the mortgage as soon as possible. You will pay this off in the 2 years and then when you start saving the interest rate environment will be raising and you will get better value from your savings.

Think about that in terms of the interest rates differential. There is money to be made in this option as well as it being incredibly safe and making you look like a saint in front of the bank.

However if rates rise and you're in a ton of debt you'll be paying it off and getting nowhere. Now is the time to get rid off the mortgage!

elperello · 01-10-2017 11:11am

__..__ wrote: »

Stay in the garage yourself and rent out your rooms

You may have spotted a loophole there.
On the other hand maybe not.
Better to check it out and seek professional advice before making financial projections.
If revenue decide different after a few years you will end up with a bill and loss of income.

__..__ · 01-10-2017 12:11pm

elperello wrote: »

You may have spotted a loophole there.
On the other hand maybe not.
Better to check it out and seek professional advice before making financial projections.
If revenue decide different after a few years you will end up with a bill and loss of income.

I said that in jest, but I do know of a person who stuck a bed in their attic and claimed they were using the attic as their bedroom and rented out the rest of the rooms on rent a room. Most of the time he stayed in his girlfriends house though and only when they had a fight or he was too drunk to go to her house would he stay in his own attic .

evolving_doors · 01-10-2017 12:15pm

David Bumpy Crayfish wrote: »

Current trends would show it's far more likely to increase this amount than reduce or get rid of it.

In any case the rent a room scheme is here for good. It would be a pointless exercise getting rid of it as people will still do it and just not declare the income (in fact many doing it now don't bother to declare it as it's all cash). The government brought in the scheme to try encourage people to declare the income but they know well if they got rid of the scheme people would still rent rooms and still pay no tax so it would be a waste of time.

It also serves the TEFL industry very well in Ireland especially during the summers. Student digs. (Not much but the Bean an Tí gig in gaelteachts too).
It would be a big step to do away with it or start taxing it.

01-10-2017 12:59pm

Pawwed Rig wrote: »

It was brought in to increase the stock of rental units. Once there is adequate stock this relief will disappear like previous reliefs (section 23, CGT exemption, LOTS etc)

It's been discussed on here before and the reality is it was brought in to bring visibility to the money changing hands in room renting.

Room renting has gone on long before the rent a room scheme was introduced and there was never a cent of tax paid by anyone doing it. Getting rid of it will not stop people renting rooms nor will it make people pay tax on the income so it would be pointless to get rid of it as it would serve no purpose.

daheff · 01-10-2017 1:01pm

One other option you have is to sell the apartment and buy shares in the REITs. Effectively gives you exposure to property rental market while they do the landlord bit.

Possibility of dividend and capital gains on this (but possibility of capital losses...just like selling an apartment in a downturn).

Pawwed Rig · 01-10-2017 1:07pm

David Bumpy Crayfish wrote: »

It's been discussed on here before and the reality is it was brought in to bring visibility to the money changing hands in room renting.

It was never going to do that as it relies on people without a tax liability to prepare an income tax return. There would be easier ways of getting visibility than the current system.
In my experiences people are usually eager to declare their incomes to Revenue where required if there is tax to be paid.

01-10-2017 1:37pm

Pawwed Rig wrote: »

In my experiences people are usually eager to declare their incomes to Revenue where required if there is tax to be paid.

You have experience of very different people to me, the exact opposite of the above would be my experience of people in general.

Pawwed Rig · 01-10-2017 2:00pm

David Bumpy Crayfish wrote: »

You have experience of very different people to me, the exact opposite of the above would be my experience of people in general.

Yes but you do realise that your experience cannnot possibly be the case. Otherwise the self assessment system would have collapsed a long time ago.

01-10-2017 2:08pm

Pawwed Rig wrote: »

Yes but you do realise that your experience cannnot possibly be the case. Otherwise the self assessment system would have collapsed a long time ago.

Oh people declare alright but you can be certain that a large majority of self assessed tax payers declare "enough to keep the tax man happy" rather than declare everything. You are very naive if you think otherwise. Like do you know a single trades person who doesn't do cash jobs for example, I've certainly never met one.

There is no chance in hell that people renting rooms for cash in their house prior to the rent a room scheme were declaring it nor would they if the exemption was removed hence there is no point in removing it.

Pawwed Rig · 01-10-2017 2:19pm

David Bumpy Crayfish wrote: »

Oh people declare alright but you can be certain that a large majority of self assessed tax payers declare "enough to keep the tax man happy" rather than declare everything. You are very naive if you think otherwise. Like do you know a single trades person who doesn't do cash jobs for example, I've certainly never met one.

Been working in tax for 7 years. People in general are honest. If a 'large majority' were fiddling the system then Revenue would not allow self assessment. For rental income it is often the case that people are too honest in that you have to harrass them to give you deductions against rental income. With the RTB, PPR, LPT etc there is little scope to be fiddling the books anymore.
If RAR tenants were required to be registered with the RTB to enable the LL avail of the relief then the issue would disappear overnight.

Arcade_Tryer · 01-10-2017 3:00pm

Pawwed Rig wrote: »

Been working in tax for 7 years. People in general are honest. If a 'large majority' were fiddling the system then Revenue would not allow self assessment. For rental income it is often the case that people are too honest in that you have to harrass them to give you deductions against rental income. With the RTB, PPR, LPT etc there is little scope to be fiddling the books anymore.
If RAR tenants were required to be registered with the RTB to enable the LL avail of the relief then the issue would disappear overnight.

People in general are only as honest as the level of honesty the regulatory system requires.

Lumen · 01-10-2017 3:13pm

Pawwed Rig wrote: »

Been working in tax for 7 years. People in general are honest.

People who employ accountants are generally honest, because they are spending money in order to be compliant!

I'm afraid you are suffering from selection bias. It's like someone who works in a gym disbelieving obesity stats.

evolving_doors · 01-10-2017 3:22pm

Ahhh sorry I suggested the rent a room scheme.

Anyhow there's no sign of it changing and it would certainly %%%% up a lot of people/voters if it did change. I think theyd rather not bother if filing returns came into play. Most I know do it do it because it's easy with little govt. interference.. as an extra income. And it serves an important function.
So maybe it's best assume tat it's not going away any time soon
If we're going to play that game then we need to assume every tax law or regulation could change and poor op wouldn't be going anywhere.

_Dara_ · 01-10-2017 3:49pm

David Bumpy Crayfish wrote: »

Oh people declare alright but you can be certain that a large majority of self assessed tax payers declare "enough to keep the tax man happy" rather than declare everything. You are very naive if you think otherwise. Like do you know a single trades person who doesn't do cash jobs for example, I've certainly never met one.

There is no chance in hell that people renting rooms for cash in their house prior to the rent a room scheme were declaring it nor would they if the exemption was removed hence there is no point in removing it.

My father is a tradesman and doesn’t do cash jobs. I think mainly he has little time for people who want work done on the cheap, they tend to be hassle. And if he is caught by Revenue, the person who got the cash job rate is nowhere to be seen. They don’t care, they got what they wanted. I bet so many tradesmen feel pressured into giving “mate’s rates”.

Pay off the mortgage or buy second property?

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