Question on renting out house

AshMcTash

Hi all,

I have a couple of questions on house rental, and would really appreciate your feedback.

We need a bigger house, growing family etc etc.... and because of negative equity, we cant sell our house at the moment, so we have to rent a bigger place and rent out our own house.

We need to try and do these 2 moves as close as possible, so we are not left paying a mortgage and rent for too long !

My question is - we have been looking on Daft.ie for places to rent and a lot of them say they are available to let immediately. So if we were to decide to rent one of these places, we would then put our house up for rent on the same basis - to let immediately. Would there really be people available to move in immediately?

I guess my question is are there people out there that are able to move into a place the day they view it to rent?

Any other tips on this messy renty situation would be very much appreciated!!

Thanks
AshMcTash

djimi

Where is your house? If its in Dublin then Id say you would have little problem renting it within the week.

AshMcTash

It is in Naas, very busy rental market at the moment because of the Kerry Group moving there soon.

cerastes

why dont you advertise your house and see what the repsonse is

just before/while testing the waters yourself.
You will be liable for tax on the full portion of the rent which is seen as income, even if it doesnt cover the mortgage, you can only claim 75% relief against tax on the interest.

Unless the property is worth more in rental income than you pay in mortgage and taxes plus other costs, you will be very unlikely to break even, even if that isnt your plan there is time and costs in a rented property, assuming the best case scenarios.

AshMcTash

Yea I know that it will cost us to rent it out, we are factoring in that to our calculations.
We need to move though, we are bursting out of our house at the moment.

We are a bit scared of the possible tenants that move in though, we will be doing all possible screening on them.

TheDoc

In terms of "how quick " people will do it.

The apartment I'm currently in, I went to view last year. Liked it, misses liked it and I told the landlord if he was happy we would take it. I'd have the deposit with him the following day.

Met up next day he gave me keys, I gave him deposit and it was hours, within 24 hours of viewing.

We are house hunting at the moment and think we found something. Met estate agent yesterday, got all the documentation he needed, and told him to tell the landlord, if he goes with us, I'll can wire the deposit and rent to him immediately, that we are good to go whenever.

I still have some time in my current place, but will use that as a sort of "base" to move everything from which makes it handier.

murphaph

Can you extend your current house rather than seek somewhere else?

AshMcTash

Nah extending is not possible, its a mid terrace house, so not a lot of room to maneuver.
I wish we could do that, it would be the simplest.

homerno

AshMcTash wrote: »

Hi all,

I have a couple of questions on house rental, and would really appreciate your feedback.

We need a bigger house, growing family etc etc.... and because of negative equity, we cant sell our house at the moment, so we have to rent a bigger place and rent out our own house.

We need to try and do these 2 moves as close as possible, so we are not left paying a mortgage and rent for too long !

My question is - we have been looking on Daft.ie for places to rent and a lot of them say they are available to let immediately. So if we were to decide to rent one of these places, we would then put our house up for rent on the same basis - to let immediately. Would there really be people available to move in immediately?

I guess my question is are there people out there that are able to move into a place the day they view it to rent?

Any other tips on this messy renty situation would be very much appreciated!!

Thanks
AshMcTash

revenue will screw you over with all rent recieved from your own place, also because you lett it i think its no longer your principle residence so when you go to sell you will have to pay tax on any profits

The_Conductor

Ash- something to consider- you cannot offset income from letting a property, against the cost associated with renting a second property.

Unfortunately- the finances behind what you're suggesting are pretty horrendous- if its anyway feasible at all, you should try to renovate/convert your current home to make it better suit your purposes.

The massive issue with proposals such as yours- is the simple fact that you can't offset the rental income against rental outgoings. In all honesty- it is something that really needs to be revisited, as its massively unfair, particularly on those with young families.

AshMcTash

Morning all,

Thanks for all your advice.

I am aware that it will cost us to move, but we really have no choice, and we cannot renovate our current house at all.

Does anyone know where on the revenue website I can get all the info how much we have to pay on rental income etc?

Thanks
Ash

AshMcTash

Ah but the revenue wont be able to screw me on any profits, cause there wont be any profits. As soon as I'm out of negative equity, I will be selling the thing.

Mrs OBumble

The fact that it's rental income is irrelevant, it's just like income from any other business.

In rough terms, you pay 42% + PRSI + USC = roughly 50% if your other income is over 35k, but only on your income less deductable expenses. Or 20% + PRSC + USC if your income is under 35k.


Search the revenue site for specific re deductions. From the top of my head ... 75% of mortgage interest, maintenance after you've let it, rental expenses (advertising etc).

cerastes

homerno wrote: »

revenue will screw you over with all rent recieved from your own place, also because you lett it i think its no longer your principle residence so when you go to sell you will have to pay tax on any profits

capital gains

AshMcTash wrote: »

Ah but the revenue wont be able to screw me on any profits, cause there wont be any profits. As soon as I'm out of negative equity, I will be selling the thing.

you'd think

profit isnt whats left over after all deductions, profit is the gross rental income.
you will be charged a pro rata basis for capital gains too, not sure how they work that out,

maybe an attic conversion?

AshMcTash

I just found this bit on Moving.ie website

"When you sell an investment property, you are liable for CGT on the taxable proceeds at 20%. Example: If you buy a property costing €200,000 & later sell the property for €300,000, you are liable for tax on the ‘gain’ i.e. (sale price – original purchase price = ‘gain’). Therefore, in this example, you would pay CGT on your €100,000 gain at 20%, resulting in €20,000 tax"

And so when I eventually get around to selling this house, it will be well under the original price, so I don't think I would have to pay CGT on it.

sunnysoutheast

cerastes wrote: »

profit isnt whats left over after all deductions, profit is the gross rental income.
?

The amount chargeable to tax is the aggregation of all net profits and losses from letting activity carried out on an economic basis?

from memory:
IT and PRSI are levied on the amount gross rent-allowable expenses-capital allowances
USC is levied on the amount gross rent-allowable expenses

OP - have a read of the Revenue Guide IT70.

Bold Abdu

Ash, you are correct. If sold for less than the original price there is no CGT.

If sold for more, the calculation gets a little complicated.

cerastes

sunnysoutheast wrote: »

The amount chargeable to tax is the aggregation of all net profits and losses from letting activity carried out on an economic basis?

from memory:
IT and PRSI are levied on the amount gross rent-allowable expenses-capital allowances
USC is levied on the amount gross rent-allowable expenses

OP - have a read of the Revenue Guide IT70.

yes
but each is on the gross

some people might think its whats on anything left after costs/deductions.

AshMcTash

Phew, thanks for confirming that, well it definitely will not be sold for more than it was brought for, so no worries there.

I have done a few calculations on the rental income too, and estimate that I would have to pay somewhere in the region of €1000 after the allowable expenses and the mortgage interest.

So on a monthly basis, that's less than €100.... I think we can afford that for some well needed extra space!!

sunnysoutheast

cerastes wrote: »

yes
but each is on the gross

some people might think its whats on anything left after costs/deductions.

It is. The total amount chargeable to tax is the sum of all surpluses minus deficiencies (gross rent minus allowable expenses and allowances).

AshMcTash

Yep I agree, you take the gross rent and take away all the allowable expenses, including 75% (I think) of the mortgage interest.

Mrs OBumble

Ya, it's manageable all right.

If you're currently a PAYE worker, then Revenue can adjust your tax-credits so that you pay extra tax each pay period, and so don't have anything left to pay at the end of the year.

Or you can just make sure you budget/save to have that amount available for 31-October.

Unless your tax affairs are complicated already, you don't even need an accountant for this, the forms are tedious but manageable.