1st time buyer to rent considerations

In the wind

We are in the market for a buy to rent & I have the following expenses in my mind - Am i missing anything here:

Outgoing:
Purchase price
Stamp duty
Lawyers fee (considering using)
Registration of Ownership
Engineers survey fee
Landlords registration annual fee??
Annual property tax
Tax on rental income minus deductibles
Management Agent annual fee (includes insurance)
Annual allowance for repairs & maintenance

Incoming:
annual rent


I am in a position to make a full cash purchase. Would this be a mistake - broad strokes I know but I'm interested in hearing opinions...


thanks all.

D3PO

there is no annual landlords registration fee. The fee is the PRTB fee which is per tenancy registered so may or may not be once a year.

re buying for cash or not. You need to do the maths.

Currently 75% of mortgage interest can be written off against your tax liability although that could well change in any budget however, if you can hold or reinvest the cash elsewhere the return on it may be more advantageous as well as possibly providing you with a more liquid position with your assets.

Ultimately you need to do your sums to see what is best and if you can find a property to purchase that has a decent ROI. Being a LL isnt easy so make sure your fully aware of all your obligations and rights and those equally of tenants before you take the plunge.

eyescreamcone

A good time to buy at the moment as the market is picking up.
Money on deposit is getting a very poor return at the moment.
Capital gains on property should beat interest gains over the next few years.
Also, no capital gains tax if you buy this year and hold for more than 7 years.

Letting can prove to be a headache though. It's not for everyone.

Eldarion

Sounds like you're quite bullish on the Irish property market and are looking to make an investment.

Would you not consider investing in an Irish REIT rather than investing in a BTL?

In the wind

Thanks for the feedback folks. Most helpful.

I don't own property & am looking to have a place when I get back home some time in future.
75% write off on interest is very attractive however the interest rates on the remaining 25% are quite high in my opinion. I just exited a mortgage paying 1.025% so Irish rates feel painful to me right now.

One of the units I am targeting is below the $/SQm in the locality so it feels like good value to me. I have no experience as a LL but I'm brushing up on my knowledge. here & on citizens information.

i am bullish on Irish, there is some good value out there outside Dublin for me, particularly on larger apartment units. I had not considered a REIT as I have exposure in managed products elsewhere & I want some tangible bricks & mortar.

D3PO

In the wind wrote: »

75% write off on interest is very attractive however the interest rates on the remaining 25% are quite high in my opinion. I just exited a mortgage paying 1.025% so Irish rates feel painful to me right now.

Its not about if that 25% of interest is quite high its can you beat the return regularly with the cash invested elsewhere with an approptiate level of risk that your willing to take.

i.e. lets say a BTL with 8% interest on the mortgage. 75% of this can be written off your tax bill. Leaving you with an effective mortgage rate of 2%

Can you invest the cash you still have at hand elsewhere to return better than the 2% after any deductions (DIRT, broker fees etc)

If so then the mortgage rate whilst in your mind is high versus the 1 odd percent you were paying until recently still has merit in leveraging off.

In the wind

D3PO wrote: »

Its not about if that 25% of interest is quite high its can you beat the return regularly with the cash invested elsewhere with an approptiate level of risk that your willing to take.

i.e. lets say a BTL with 8% interest on the mortgage. 75% of this can be written off your tax bill. Leaving you with an effective mortgage rate of 2%

Can you invest the cash you still have at hand elsewhere to return better than the 2% after any deductions (DIRT, broker fees etc)

If so then the mortgage rate whilst in your mind is high versus the 1 odd percent you were paying until recently still has merit in leveraging off.

Nice elegant explanation - thank you.

mdebets

You should add to the outgoings:
- contribution to a sinking fund for major renovations (might only come 20 years down the line, but it will come, so good to start saving early for this)
- contribution to a sinking fund for empty periods between tenants, loss of rent trough non paying tenants and damage by tenants
- I'm not sure if you mean the Management Company or the letting agency when you talk about Management Agent annual fee, but you need the missing one to the outgoings

Are you living in Ireland or abroad (you say you want the house when returning home). If you live abroad, you should deduct 20% from the income, as this is to be deducted for non-resident landlords for tax. This doesn't really impact your overall calculation, as it is offset against your tax liability, but it might cause you problems in the cash-flow, in case you rely on the incoming to pay the outgoings.

Cuddlesworth

Risk of problem tenants and the associated costs involved with eviction and property damages.