Left a House...What to do?

Bingo481

Looking for some much need advice please. I was recently left a house by a family member who passed away much to my surprise. The house is located in Dublin 8, Ideally located to the city centre etc.

My problem is, the house needs some work before I can do anything with it and I personally do not have the immediate capital to renovate. I would need say €8000-10,000 euro to bring it up to speed in my own estimation. The biggest exspense being central heating mainly the rest is just the usual kitchen units lick paint new front door. It was valued for the will at €250,000 approx but I was told it is worth far more so I dont think it wise to sell now...due to the current climate.

So my problem is do I leave it sitting there as it does not cost me anything currently...or get it working for me. Either by renting private, or maybe renting it to the council or something. Ideally I would rent for 2-3yrs then sell if the market picks up and the rent would pay my current (HIGH MORTGAGE).

Any suggestions would really really help, as I dont really know what to do...:(

coolabula

renting it will cost you money initially, if the heating needs fixing, that will have to be done before you get a tenant.
so either way you will have to spend some money, but why not rent it out and let it help you pay your mortgage.

RedXIV

Is there NO WAY you can get a few of the jobs done? In particular the heating? Its a good investment to spend 10K on a house now and get a few years rent on it.

dMaN24

This might sound like a weird proposition, but...

Rent it out to someone with the skills to sort this stuff out, for a reduced rent?
"-Paint the kitchen doors, and get one weeks rent off" or similar?

But then again, having someone completely ripping up piping and then go "naah.. I don't like this place.." might backfire.

cml387

Please be aware of any inheritance tax implications.

am i bovvered

Good problem to have

Its hard to know what to do, it does not look likely that house prices will see an upward trend for a long time.... IMO.

I would not dismiss the idea of a sale.

If after looking at that option you still believe that holding onto it is the right move then start thinking long term.

Would making this house your family home be an option, you could then claim 75% of the interest on your sizeable mortgage as an allowable expense. (althought this allowance may change in the future)

Anyhow, if you don't have the cash get a loan against the property to bring it up to standard and then let it out.
You will need ...

Firstly be profesional
Energy rating cert.
Pay NNPR
Register with PRTB
Send in a tax return.
Hold landlords insurance.
If renting under the RAS Scheme (which I think sounds like a good option for you) get a tax clearance cert.

There is tons of info online to help you.

Milo Minderbinder

Go to your bank; explain the situation; borrow the money necessary over a few years and rent it out.
The more you spend on renovating it the more you will get in rent.
Try not to mortagge it to the ban ; just get a term loan, less messing and fees that way.
What about inheritance tax? has the solicitor mentioned it? As far as I know you will be liable for it so you may have to get a loan to cover this anyway.

Bingo481

Firstly, thank you so much for the posts. I would not have even begun to think about some of the things you have mentioned, maybe I should go to my current bank and get some "feedback" on getting a small loan against the property. Since I got the house I have been looking at it as a hassle not as "a good problem to have" as one poster has rightly put it. I would be able to do the little things painting etc but not Anything major. All this BER Certs etc is all new to me so thank you so so much for all your posts. I will troll the Internet tonite for some options RAS SCHEME might be a very good route. As for inheritance tax...i will look it...I wounded if I will get taxed on the whole sale or just excess of original valuation??? Once again thank you all

3DataModem

am i bovvered wrote: »

I would not dismiss the idea of a sale.

Exactly.

If you wouldn't buy it, then why keep it? Lets say you could sell for €150k today after costs. If someone gave you that cash would you buy the house with that cash? No? Then why keep it.

Sell. Pay the money off your mortgage. Happy days.

Condolences on your loss, congratulations on your windfall.

Blackjack

Bingo481 wrote: »

Looking for some much need advice please. I was recently left a house by a family member who passed away much to my surprise. The house is located in Dublin 8, Ideally located to the city centre etc.

My problem is, the house needs some work before I can do anything with it and I personally do not have the immediate capital to renovate. I would need say €8000-10,000 euro to bring it up to speed in my own estimation. The biggest exspense being central heating mainly the rest is just the usual kitchen units lick paint new front door. It was valued for the will at €250,000 approx but I was told it is worth far more so I dont think it wise to sell now...due to the current climate.

So my problem is do I leave it sitting there as it does not cost me anything currently...or get it working for me. Either by renting private, or maybe renting it to the council or something. Ideally I would rent for 2-3yrs then sell if the market picks up and the rent would pay my current (HIGH MORTGAGE).

Any suggestions would really really help, as I dont really know what to do...:(

Where in Dublin 8 is the house located?. If its a 3 bedroom terrace or Semi D anywhere in Dublin 8 then 250 might be fair enough. Many are selling for less than this, those priced higher are not moving.
If it's a Redbrick on the Kilmainham end then perhaps it's worth a bit more.

Eglinton

As others have stated, you need to account for the inheritance tax.

You should talk to a tax consultant or specialist solicitor for your specific cicumstances but generally:

You have to pay 25% of the value of the property to the Revenue Commisioners within 12 months of inheriting the property. If as you say, this property is worth €250K, that means you will owe €62,000. That's a large sum of money! This has nothing to do with selling the property. You owe it regardless of selling the property. By the way, the capital gains tax is the same rate, so even if you sold it immediately, you pay the same. I'm not sure of the technicalities if you pay Inheritance Tax now and what you would owe in terms of CGT if you sold in the future.

If you accept this inheritance, make no mistake, you owe a lot of money.

fontanalis

Eglinton wrote: »

As others have stated, you need to account for the inheritance tax.

You should talk to a tax consultant or specialist solicitor for your specific cicumstances but generally:

You have to pay 25% of the value of the property to the Revenue Commisioners within 12 months of inheriting the property. If as you say, this property is worth €250K, that means you will owe €62,000. That's a large sum of money! This has nothing to do with selling the property. You owe it regardless of selling the property. By the way, the capital gains tax is the same rate, so even if you sold it immediately, you pay the same. I'm not sure of the technicalities if you pay Inheritance Tax now and what you would owe in terms of CGT if you sold in the future.

If you accept this inheritance, make no mistake, you owe a lot of money.

That depends on the relationship between the two people.
http://www.revenue.ie/en/tax/cat/thresholds.html

Bingo481

Father (passed away-RIP) to son so looking at the table, anything over €542,544 I will have to pay CGT ( I personally taught you were allowed a once of gift TBH) so I cant see myself getting that for a house in this climate or any other. I suppose 1st things 1st....I am getting some professionals in to price the absolute necessary work that I cant do myself. So I have a figure to present to a financial institutuion to raise capital against the property....maybe interest only???

Central Heating is a must.
En suite for the 2nd bedroom (maximise potential)
New Kitchen units.

Then all the little professional things like BER etc will be looked at.....so a plumber who can do a small partition is on the cards.....

Bingo481

Eglinton wrote: »

As others have stated, you need to account for the inheritance tax.

You should talk to a tax consultant or specialist solicitor for your specific cicumstances but generally:

You have to pay 25% of the value of the property to the Revenue Commisioners within 12 months of inheriting the property. If as you say, this property is worth €250K, that means you will owe €62,000. That's a large sum of money! This has nothing to do with selling the property. You owe it regardless of selling the property. By the way, the capital gains tax is the same rate, so even if you sold it immediately, you pay the same. I'm not sure of the technicalities if you pay Inheritance Tax now and what you would owe in terms of CGT if you sold in the future.

If you accept this inheritance, make no mistake, you owe a lot of money.

!!!!!!!!!! :eek:

Surely, I dont have to pay this without selling the property...

fontanalis

Bingo481 wrote: »

Father (passed away-RIP) to son so looking at the table, anything over €500,00 I will have to pay CGT ( I personally taught you were allowed a once of gift TBH)

Well, you used to be able to take the value of the house when bought or built and you apply an indexed amount (to take into account inflation) and you multiply it against that value, then you take it away form teh current value and that's what the tax is based on.

Eglinton

Ah ok. Sorry to hear that. I had assumed it was a more distant relative like a great aunt. In this case, yes, the thresholds apply so you won't be liable for anything until you sell.

Note, the threshold is not for one off items. It's a cumulative account so also includes any other things which have been gifted to you by your parents but unless you were given another house I wouldn't worry about that.

Happyman42

Remember that an unoccupied, unheated house will deteriorate very quickly, especially in weather like this...it's also prone to mindless vandalism.
Just saying.

ricman

Take out house insurance, for say 150k, plus public liabilty insurance,you,ll get tax credits,for any work done,repairs, new boiler,if you have proper receipts ie the plumber must be registered for vat, registered with the tax office as a full time plumber.You,ll get tax credits over 5 years for work done,carpets,curtains ,materials bought.
if you put 3k in the credit union they,ll lend you 9 or ten k.Are you a credit union member.if not,join one.its quite possible prices for house could go down by another 30 per cent ,seeing as we are in the middle of a banking crisis.

Moonbeam

8-10k might be an optimistic view depending on the work done.
Does it need central heating put in or just fixed?

Bingo481

Unfortunately, it needs central heating installed.....my sister got CH installed and it cost €5k but the house was bigger then this one. I dont think many people would rent a house without CH nowadays, especially a family...so I personally think its a must.

I am a member of a credit union but I dont have much funds in it, nor am I a regular saver :rolleyes: but if I am only borrowing €8k secured against a house with no mortgage worth at the very minimum €200,000 for arguments sake....surely its a no brainer for a bank....even without the possibility of rental income??? Which I would be getting.

Another problem I have now is that I have been told I cannot insure the property without someone living there.....:mad: Or am I looking for the wrong type of insurance....I only rang one place as the exsisting policy is up in the new year. I really wish I was more clued into this sort of thing like some guys on here....

Once again, I am stunned by the level of help on here....many thanx to all the posters

CBYR1983

Bingo481 wrote: »

!!!!!!!!!! :eek:

Surely, I dont have to pay this without selling the property...

Yes you would. CAT is levied regardless of the property being sold. A deemed market value has been established. €250k - as per the will. Revenue could ask you to get another valuation. If it came from your father you will have no liability as you're within the threshold. But if the MV exceeded the threshold the tax would be levied on the excess. This could theoretically force a sale or borrowing to pay the tax - and does so particularly where large family homes are concerned. It's a transfer tax on the "asset rich".

I would be more concerned with CGT. By contrast, CGT is only levied where a sale is realised. Let's assume the property increases in value by 100k over 3 years - once you sell for say, €350k, you will be liable for CGT (25%) on the 100k "profit". This is taxed in full because it is not your "principal private residence". Contrast this with your own house - there would be no CGT on that, provided you occupied it throughout the term of ownership.

That is not to say you have a CGT problem - you will always get your €250k (or deemed value on inheritence) tax free if it was within the threshold. No stamp either on transfers upon death. But you will be taxed on any capital gain.

You also, as others have rightly pointed out - have an NPPR charge each year and potential marginal rate 52% income tax on any rental income (subject to any allowable deductions, e.g. capital allowances for renovations).

The decision is yours. The place might be worth even less than €250k now. There's a house on Suir Road in Dublin 8 on sale for €100k.

The real question is whether you think you can get a better tax adjusted return on your inheritance elsewhere, taking into account the hassle associated with renting a property. Yields on these properties are quite low. If you got a grand a month that's less than 5% pre-tax. Depending on the term you might get a better return for your effort by cashing in and putting the money in the bank.

Despite what we all seem to have thought in this country, property is not the only asset you should hold in any investment portfolio. Property does seem in a trough but really only by comparison with boom prices. If you believe in the NAMA concept of long term economic value - then keep the house!

Idbatterim

Bingo, in relation to the heating I would go for a combi gas condensing boiler (asuming you can connect to the gas network), no storage tank, no pump (if pressure in area is ok) unlimited hot water on demand, and only when you need it. No heating water and not using it, or heating and then running out. what kind of house, and what size?

ricman

GET radiators put in bedrooms, dining room,kitchen front room, ie no need to put rads in hall upstairs ,downstairs ,or bathroom if you are on a budget.
Make sure attic is properly insulated,you can buy rolls of insulation and put em in yourself,if you are careful.
You may want to get an electrician out just to test the electrical system, make sure its safe.look on daft ie what are similar house worth in the area, ie 3bed terrraced house.

Bingo481

I have an very good old friend coming to look at the house 1st week in the NEW YEAR, and is a qualified Electrician by trade and his son a qualified plumber. Also being a landlord himself he will tell me "straight up" if it is even worth letting, or the adjustments to make to maximise a possible sale.

With all the excellant opinions on here, maybe I would be just better off selling. All this tax talk is scaring the crap out of me :rolleyes: but I will not be in a worse off position what ever happens....

The house itself is a "BUNGALOW" with very large spacious rooms but only one "natural" bedroom. You could easily have 2-3 more bedrooms with a basic partition. Its very well kept but not the most modern if you get me, it has its own driveway for parking with secure gates and own entrance and is literally 10mins to city centre. So I personally think it is "GEM" of a property if given some TLC.

Thank you for the suggestion of the combi gas solution that could be a runner indeed.....again thank you so much for the input. Sorry I cannot give a thumbs up to your posts but I am not registered long enough.....:(

ricman

Some old houses are great ,thick,walls=good insulation ,high ceilings,= lot of space.I heard money doctor on pat kenny ,said if person inherits house ,act as executor, do not transfer into to your name,it saves on tax ,reduces tax bill, thats if you are selling.its something like sale of deceased property, i cant remember the word he used,
go to rte.ie http://www.rte.ie/radio/listing.html?channel=110 ,i think they repeat pat kenny after 2 oclock, each night.
YOU CAN call an estate , get a free valuation,get the wiring checked out.
LETS say you spend 2k, 3k on new central heating ,you get tax credit over 5 years 2,3k against taxable income.
IF YOU USE A PLUMBER whos registered for tax,vat, has a tax clearance cert and get full reciepts, including 21 per cent vat.
PAYing joe bloggs to do a nixer makes no sense.You need to hold onto receipts for 5 years ,ie you will be treated as a self employed landlord ,for tax purposes .Even if you also work full time as a mechanic.

Victor

Get your own solicitor, preferably one who is financially aware and does probate and conveyancing work and get proper advice. Don't rely on the opinions of family members or someone else's solicitor. The solicitor for the estate does not work for you. Once you have had an initial chat with the solicitor, get a surveyor to check the place out and put together a budget for what is necessary / desirable. Damp / rot, BER, insulation, heating, electrical are likely to be the priorities. You might want to talk to the solicitor again.

Bingo481 wrote: »

It was valued for the will at €250,000 approx but I was told it is worth far more

Look on daft.ie and see what people are asking for similar houses in the area. Consider getting a formal valuation by an estate agent (after you talk to your solicitor). Assuming no other major inheritances or gifts, it is to your advantage to maximise the valuation now, so the future capital gain (and CGT) is minimised.

Is there someone you can move in short term, to keep the place occupied, to prevent leaks, frozen pipes, damp, burglary, etc.? Snow expected this weekend.

so I dont think it wise to sell now...due to the current climate.

You have no idea what will happen in the future. Consider all options, but it might be useful to sell, pay off a chunk of your mortgage, reducing your monthly outgoings and keep some cash for potential rainy days (who knows what the future will bring).

So my problem is do I leave it sitting there as it does not cost me anything currently...or get it working for me.

Not nothing, you need to pay the NPPR tax, insurance, maintenance, etc.

Bingo481 wrote: »

Father (passed away-RIP) to son so looking at the table, anything over €542,544 I will have to pay CGT ( I personally taught you were allowed a once of gift TBH) so I cant see myself getting that for a house in this climate or any other.

On the face of it, you don't owe any CAT for the inheritance.

En suite for the 2nd bedroom (maximise potential)

Be careful that you don't reduce the size of the room too much. Too many alterations may need planning permission and/or have building regulations issues.

New Kitchen units.

There is no urgency in this. If you are selling, the buyer might rip out your new kitchen because they want something different.

Milo Minderbinder wrote: »

The more you spend on renovating it the more you will get in rent.

There is a point at which expenditure no longer makes any sense. Spending a million on it is unlikely to get any more benefit than spending 100k.

fontanalis wrote: »

Well, you used to be able to take the value of the house when bought or built and you apply an indexed amount (to take into account inflation) and you multiply it against that value, then you take it away form teh current value and that's what the tax is based on.

Indexation only applies before 2002(?).

ricman wrote: »

Take out house insurance, for say 150k, plus public liabilty insurance

That value needs to be calculated properly.

ricman wrote: »

GET radiators put in bedrooms, dining room,kitchen front room, ie no need to put rads in hall upstairs ,downstairs ,or bathroom if you are on a budget.

Having a warm (or at least de-frosted) bathroom when having a shower is nice.

Make sure attic is properly insulated,you can buy rolls of insulation and put em in yourself,if you are careful.

Be very careful on this. Doing it wrong can result in damp and rot, destroying any timber in the house.

Bingo481 wrote: »

I have an very good old friend coming to look at the house 1st week in the NEW YEAR, and is a qualified Electrician by trade and his son a qualified plumber. Also being a landlord himself he will tell me "straight up" if it is even worth letting, or the adjustments to make to maximise a possible sale.

Be careful of mixing friends and "business".

With all the excellant opinions on here, maybe I would be just better off selling. All this tax talk is scaring the crap out of me :rolleyes: but I will not be in a worse off position what ever happens....

You will only pay tax if you make a profit (except NPPR). So no need to worry.

The house itself is a "BUNGALOW" with very large spacious rooms but only one "natural" bedroom. You could easily have 2-3 more bedrooms with a basic partition. Its very well kept but not the most modern if you get me, it has its own driveway for parking with secure gates and own entrance and is literally 10mins to city centre. So I personally think it is "GEM" of a property if given some TLC.

Would you consider living there and selling your own house?

ricman

Nppr tax is 200 euro per year ,to be paid if you are not living there.IF you are selling.or renting the house get a radiator installed in the bathroom.IF you live there,you can rent out rooms,rental income up to ten k is not taxed, under rent a room scheme.

Bingo481

I tell you I am taking so much of this on board....its amazing. Any work done will be absolute minimal. To either maximise selling potential or get it rented...simple. I will not be putting a marble kitchen worktop in if MDF will do, if you get me.

As for the friend coming to look at the house...it will not be business just advice, so it is very welcome. Just like the very good advice on here.

Victor, thank you so much for the extended effort in your post it is very much appreciated...as are all the posts.

borderlinemeath

I personally wouldn't sell in the current market, buyers are few and far between and you won't get anything near what you think it's worth or even what an estate agent will tell you it's worth.

Either way you will have to renovate to rent or sell.

If you are putting in insulation and heating you should be entitled to a grant from:

http://www.seai.ie/Grants/Home_Energy_Saving_Scheme/

Bingo481

^^^^^This is the kinda line I am thinking of to be honest....I will have to put at least a few quid :rolleyes: into the house to maximise the potential.

I know the housing market will never be the bubble it was, but I do expect it to level out or rise slightly for a decent property in the right location;)

Heres to a NEW YEAR and positive outlook.....have a great xmas all and a peacefull new year.

Thanx again for all the help.

Victor

borderlinemeath wrote: »

Either way you will have to renovate to rent or sell.

If selling to a trade buyer (admittedly few and far between, but then again, so are other buyers), spending money on it, other that the minimum to keep it safe / secure is possibly a waste of money.