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Renting Out a Former Home

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  • 21-03-2019 2:29pm
    #1
    SozBbz
    Registered Users Posts: 1,889 ✭✭✭


    Hi all,

    I currently live in my property (which I own in my own name) but myself and my partner were thinking of perhaps buying together.

    I'd always assumed I would sell to help fund the next purchase, but I'm now thinking that perhaps that would be the wrong call.

    I have about €180k of a motgage remaining against a rough valuation of €450k. Obviously its a mortgage based on me as an owner occupier, which would no longer be the case. I'd say €2k per month should be achievable, as its in a good area with transport links and close to a lot of large employers in South County Dublin. My mortgage is about €900 per month and my maintenance charge is circa €1400 (which i believe is tax deductible)

    I want to understand how my current borrowings impact on my ability to borrow again for a new house with my partner (he is a FTB, but I know my status would cancel that out if we bought together.)

    Am I best off getting a broker? Also, if I were to become a landlord, should I get an accountant or is it easy enough to deal with the revenue? I'm a PAYE taxpayer currently.

    We have other savings etc which would be used as a deposit for a new place, 20% would not be a problem.

    I'd like to hear from others who have transitioned from owner occupiers to landlords on how easy/difficult it is and any pitfalls to avoid? Are there any particularly good online resources that cut to the chase?


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    #2
    JimmyMW
    Registered Users Posts: 695 ✭✭✭JimmyMW


    SozBbz wrote: »
    Hi all,

    I currently live in my property (which I own in my own name) but myself and my partner were thinking of perhaps buying together.

    I'd always assumed I would sell to help fund the next purchase, but I'm now thinking that perhaps that would be the wrong call.

    I have about €180k of a motgage remaining against a rough valuation of €450k. Obviously its a mortgage based on me as an owner occupier, which would no longer be the case. I'd say €2k per month should be achievable, as its in a good area with transport links and close to a lot of large employers in South County Dublin. My mortgage is about €900 per month and my maintenance charge is circa €1400 (which i believe is tax deductible)

    I want to understand how my current borrowings impact on my ability to borrow again for a new house with my partner (he is a FTB, but I know my status would cancel that out if we bought together.)

    Am I best off getting a broker? Also, if I were to become a landlord, should I get an accountant or is it easy enough to deal with the revenue? I'm a PAYE taxpayer currently.

    We have other savings etc which would be used as a deposit for a new place, 20% would not be a problem.

    I'd like to hear from others who have transitioned from owner occupiers to landlords on how easy/difficult it is and any pitfalls to avoid? Are there any particularly good online resources that cut to the chase?

    Firstly try any of the banks online approval in principle calculators to see if ye are eligible for the required mortgage of the new property given your current outgoings, ie the existing mortgage. As far as im aware you cannot count rental income as income or guaranteed income so leave out the rental income potential for the basis of your initial online approval. That should give you a good idea if you will be able to afford to keep your existing mortgage.


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    #3
    zreba
    Registered Users Posts: 170 ✭✭zreba


    €2k per month should be achievable

    Make your calculations first.

    property tax, interest rates, maintenance and the worst yet: income tax/prsi/usc, depending on your current salary may take 50% off the income.

    If you're on a standard tax then I'd say go for it, if you're on a high rate then it's probably not worth it.


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    #4
    Dav010
    Registered Users Posts: 14,084 ✭✭✭✭Dav010


    If u have not been a landlord before, think carefully about what you are letting yourself in for. Consider the impact on your finances if a tenant stops paying and the hassle associated with an errant tenant. If it was me, I’d sell and take the equity now at the top of the market.


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    #5
    3DataModem
    Registered Users Posts: 3,957 ✭✭✭3DataModem


    I want to understand how my current borrowings impact on my ability to borrow again for a new house with my partner (he is a FTB, but I know my status would cancel that out if we bought together.)

    > In most cases, it will massively impact it. Back in the old days this was not the case, but BTLs really really hurt your chance of a new mortgage.

    Am I best off getting a broker?

    > Yes.

    Also, if I were to become a landlord, should I get an accountant or is it easy enough to deal with the revenue?

    > It is easy to deal with the revenue, but I'd still get someone to do your taxes.

    I'd like to hear from others who have transitioned from owner occupiers to landlords on how easy/difficult it is and any pitfalls to avoid?

    > Get an agent to find tenants. Pick a local one who will drop by for inspections if needed, and can do viewings at short notice, and will be contactable.

    > Get an agent to maintain property (and I mean, really maintain it i.e. tenants don't have your phone number, ever). The agent who does the maintenance should collect rent, arrange for repairs, etc. They should have a panel of tradespeople. Pick one with a large stable of similar properties on their book.

    You will pay about 6% per annum plus VAT for each of these services. Or sometimes the former will be a fixed cost per new tenancy.

    > Keep 3m costs in cash tucked away for a rainy day (i.e. in case tenant leaves at short notice, etc).

    > Pay your taxes, they're pretty OK in Ireland. Register with RTB, but know they are useless to you.

    > Treat all furniture you leave for the tenants as if you are putting it on a bonfire.

    > Consider renting to your local council (long term leases, no maintenance, no RTB, not far off market rates).

    Are there any particularly good online resources that cut to the chase?

    > No.


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    #6
    mrslancaster
    Registered Users Posts: 1,783 ✭✭✭mrslancaster


    If the OP leases to the council for 10 years is that not guaranteed rental income although only 85% of market rates.
    I'm not in the know about these things but would the bank not take that into consideration for a new mortgage as it is probably a very secure monthly amount on top of salary.


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    #7
    SozBbz
    Registered Users Posts: 1,889 ✭✭✭SozBbz


    Hi all,

    Thanks for your various input.

    I'm thinking a broker would be the way to go as I need to handle my existing mortgage provider but not necessarily use them agian for the 2nd mortgage.

    I should be able to borrow some money as my income is higher than what my current mortgage is based on.

    While I appreciate that being a landlord has risks, I do think some on Boards are overly pesemistic, surely some people still make money renting property and not every tennant are disasterous. Also, because the property hasnt been previously rented recently, I can go in at market rates.

    I also noticed when looking on Daft/MyHome, that some properties in my area are up for weekly rental, presumably targeting the corporate market given the proximity to big business in the area who relocate people to Dublin and therefore need short term rentals. Obviously this would have to be done through an agency for a higher fee, but could be a lucrative option as well as preventing long term tenants from accruing rights.

    We are both on the higher rate of tax, but so are a lot of people I know who have a 2nd property - I don't see how someone earning less than €35k could afford to do this anyway, so I'm not sure of the point of that comment.

    I'm not under the illusion that his will make me a huge amount of money after the mortgage, tax and other costs are factored in, however even if it nets me a few hundred euro most months, this should allow me to save up a buffer to cover when costs occour. Its more about about holding on to the asset for the longer term, letting the mortgage pay down and ultimately owning it outright.

    We both pay into pensions (private sector) but it seems sensible to me to have other assets and investments these days.


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    #8
    Graham
    Moderators, Society & Culture Moderators Posts: 17,642 Mod ✭✭✭✭Graham


    Mod Note

    Thread title updated to something meaningful.


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    #9
    Fol20
    Registered Users Posts: 3,624 ✭✭✭Fol20


    SozBbz wrote: »
    Hi all,

    Thanks for your various input.

    I'm thinking a broker would be the way to go as I need to handle my existing mortgage provider but not necessarily use them agian for the 2nd mortgage.

    I should be able to borrow some money as my income is higher than what my current mortgage is based on.

    While I appreciate that being a landlord has risks, I do think some on Boards are overly pesemistic, surely some people still make money renting property and not every tennant are disasterous. Also, because the property hasnt been previously rented recently, I can go in at market rates.

    I also noticed when looking on Daft/MyHome, that some properties in my area are up for weekly rental, presumably targeting the corporate market given the proximity to big business in the area who relocate people to Dublin and therefore need short term rentals. Obviously this would have to be done through an agency for a higher fee, but could be a lucrative option as well as preventing long term tenants from accruing rights.

    We are both on the higher rate of tax, but so are a lot of people I know who have a 2nd property - I don't see how someone earning less than €35k could afford to do this anyway, so I'm not sure of the point of that comment.

    I'm not under the illusion that his will make me a huge amount of money after the mortgage, tax and other costs are factored in, however even if it nets me a few hundred euro most months, this should allow me to save up a buffer to cover when costs occour. Its more about about holding on to the asset for the longer term, letting the mortgage pay down and ultimately owning it outright.

    We both pay into pensions (private sector) but it seems sensible to me to have other assets and investments these days.

    Speaking as a ll, i do make money with my rentals and it isnt all doom and gloom. It will be a slow burner where at times you may need to contribute some of your PAYE income to cashflow the property. There are risks especially when you have a concentrated asset and all i would say is have your eyes wide open when becoming a ll.

    Another aspect to consider is any capitals gains you might be liable for when you do sell. If you bought your property for 100k and its now worth 200. If it was your ppr during your entire ownership of the property, then you just have a net gain of 100k tax free. The moment you start letting it, its pro rata and depending on the gain you have, that can eat up a lot of money.


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