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Rental income question

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  • 30-06-2019 4:34pm
    #1
    dereks
    Registered Users Posts: 66 ✭✭


    Hi,

    Next year we are potentially looking to rent out our house and rent in a town closer to family, friends etc (selling might not be an option because of negative equity)

    Just looking at the practicalities and I want to make sure I have this right in my head.

    Say if we rent out our property for 1,000 (price for illustration only) a month and rent a property for 1,000 would we be financially worse off because the income earned from renting out our house is rental income?

    Our mortgage is roughly 12,000 a year, 7,000 is interest so if we rent it out for say 12,000 a year, (12000 - 7000 = 5000/2 =2500?). I'm on the higher rate of tax as paye worker so assuming I'd be paying 52%?


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    #2
    Gumbo
    Moderators, Society & Culture Moderators Posts: 38,518 Mod ✭✭✭✭Gumbo


    dereks wrote: »
    Hi,

    Next year we are potentially looking to rent out our house and rent in a town closer to family, friends etc (selling might not be an option because of negative equity)

    Just looking at the practicalities and I want to make sure I have this right in my head.

    Say if we rent out our property for 1,000 (price for illustration only) a month and rent a property for 1,000 would we be financially worse off because the income earned from renting out our house is rental income?

    Our mortgage is roughly 12,000 a year, 7,000 is interest so if we rent it out for say 12,000 a year, (12000 - 7000 = 5000/2 =2500?). I'm on the higher rate of tax as paye worker so assuming I'd be paying 52%?

    You will have to pay your rent obviously and the income tax on the rental income so you would be deffo worse off either way.

    You also have USC and you can only off set 100% of the interest of you have social tenants.


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    #3
    Fol20
    Registered Users Posts: 3,624 ✭✭✭Fol20


    Worse off is subjective depending on your financial goals. From a cash flow point of view, yes you will. You will pay tax on your profits from rental which will be circa 5k less maintenance. For simplicity let’s say you have maintenance and other costs of 2k. Leaving you with 3k profit. Assuming you are on the higher tax bracket. Your net income will be 1.5k.On top of this your mortgage principle payment is 5k so you will have to dip into your PAYE income of circa 3.5k(5k-1.5k).


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    #4
    4ensic15
    Banned (with Prison Access) Posts: 4,691 ✭✭✭4ensic15


    You would be better off paying down yoiur mortgage tha paying tax. Once out of negative equity you can sell.


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    #5
    jlm29
    Registered Users Posts: 3,818 ✭✭✭jlm29


    Will you still have the same interest rate if you let your house?


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