Inherited a house.

danotroy

Hello all. I have come here for advice, I hope this is the right forum. A family member has passed and has left me a house. The house is in Ballincollig (10 km west of Cork city) and valued at €160,000, no mortgage outstanding. I have also a cash lump sum of €40,000. I am 24, live in London and have a permanent job in the public sector. I don't see myself returning to Ireland at all (my family weren't Irish). I have no other remaining family members; no siblings, parents, aunts, uncles, cousins that I can ask for advice).

I'm thinking of renting the house out. I would go with a letting agent to manage the letting and the rent (i've been told) would be about €700-800 a month.

I could also sell the property and invest it in something like property in London. I know I wont get much for €200,000 or so in London but it would be a good chunk of a deposit. Property prices in London are on the rise and see no signs of stopping. Rising population -V- lack of housing seems like a good investment to me.

What are the pitfalls I need to be aware of? What are the taxes like for landlord? what would I make into my account every month if rent was €800? could I keep the property in Ireland and use it as equity to buy a property in London?

Should I sell up and try to buy a 3/4 bed property in London on a buy to let mortgage and rent out the rooms?

Thanks for reading. Help is very much appreciated.

athtrasna

I would sell up and take advice on investing in the UK from someone over there. Rental tax is significant here and without a mortgage you lose one of your biggest income tax reliefs (75% of mortgage interest is deductible).

As well as income tax here you would be liable for property tax, Universal Social Charge, PRTB registration, letting expenses, repairs and maintenance. To say nothing of the risk of non paying or overholding tenants or significant property damage, or even empty periods.

As a former landlord here, in your position I would sell up and take the money. Getting out of the game was the best thing we ever did.

danotroy

Hello Athrasna,

Thanks for your advice. Some friends back home have given me anecdotal advice that has been passed down from their parents about renting. They echoed your sentiments. Whilst there is a massive lack of rental properties in the Cork area there is no incentive to become a landlord they said.


Cheers

beauf

If you have no intention of ever returning, or using it as a holiday home. I would just sell and invest in the UK.

Delphinium

Don't forget you will have to pay capital aquisition tax or inheritance tax. Not sure if you pay here but allowances here are very low.

danotroy

Delphinium wrote: »

Don't forget you will have to pay capital aquisition tax or inheritance tax. Not sure if you pay here but allowances here are very low.

Won't apply as im under the threshold. €220,000 i think. Property is only worth €160,000. €40,000 is my own due to sheer luck in another case. thanks

athtrasna

danotroy wrote: »

Won't apply as im under the threshold. €220,000 i think. Property is only worth €160,000. €40,000 is my own due to sheer luck in another case. thanks

Depends on your relationship with the deceased.

danotroy

athtrasna wrote: »

Depends on your relationship with the deceased.

Oh right, not sure of the specifics however my solicitor has confirmed no tax is payable due to relationship with deceased and value of asset.

Pawwed Rig

You will only pay tax at 20% on your rental income in Ireland assuming you have no other Irish income but may be hit with UK tax on the same income.
Being a landlord however is not a good way to make money though. Far better idea to pump money into a pension scheme.

bonzos

Pawwed Rig wrote: »

You will only pay tax at 20% on your rental income in Ireland assuming you have no other Irish income but may be hit with UK tax on the same income.
Being a landlord however is not a good way to make money though. Far better idea to pump money into a pension scheme.

Quick question guys,if you inherit a house and dont have the money to pay the inheritance tax will a bank lend you the money if it could provide rental income to pay back the loan?

Pawwed Rig

Oh and bear in mind that the exchange rate between uk and EURO is rubbish at the moment and probably going to get worse in the short term at least.

The only investment advice I will give you is not to buy dracmas

Pawwed Rig

bonzos wrote: »

Quick question guys,if you inherit a house and dont have the money to pay the inheritance tax will a bank lend you the money if it could provide rental income to pay back the loan?

Impossible to say as it will depend on your circumstances. You would be assessed the same as any other customer. They would certainly take the value of equity into account.

ted1

With the current exchange rates you would be absolutely mad to change a large sum of euro into sterling. Rent it out and sell it in a few years when the rates become more favourable

Mrs OBumble

ted1 wrote: »

With the current exchange rates you would be absolutely mad to change a large sum of euro into sterling. Rent it out and sell it in a few years when the rates become more favourable

Or invest here, but not in property.

njs030

danotroy wrote: »

Won't apply as im under the threshold. €220,000 i think. Property is only worth €160,000. €40,000 is my own due to sheer luck in another case. thanks

Is it an inheritance from your parents or child? That's the only way it can be a threshold of €225,000.

If you inherited from a parent you're ok. If not the threshold is €33,500 and you pay 33% on the excess, so you are looking at a CAT liability of approx €42,000.

Pawwed Rig

[Deleted User] wrote: »

If you inherited from a parent you're ok. If not the threshold is €33,500 and you pay 33% on the excess, so you are looking at a CAT liability of approx €42,000.

Not necessarily true.

loyatemu

Pawwed Rig wrote: »

Not necessarily true.

you can't just say "Not necessarily true" without providing some information to back it up - the IT thresholds are here and the current non-parent/child limits are only €30,150 & €15,075

Pawwed Rig

loyatemu wrote: »

you can't just say "Not necessarily true" without providing some information to back it up - the IT thresholds are here and the current non-parent/child limits are only €30,150 & €15,075

I can and I will. The OP has not asked about inheritance tax as he has already gotten legal advice on it so I am not going to second guess a solicitor who has more information than is available to us here. Giving tax advice on the Internet is a dangerous thing to do as everyone has different circumstances. To write about every situation regarding group thresholds would take half the day and consist of alot more text than anyone would be willing to read.

enda1

ted1 wrote: »

With the current exchange rates you would be absolutely mad to change a large sum of euro into sterling. Rent it out and sell it in a few years when the rates become more favourable

Could you also give me next Saturday's lotto numbers while you're at it?

loyatemu

loyatemu wrote: »

you can't just say "Not necessarily true" without providing some information to back it up - the IT thresholds are here and the current non-parent/child limits are only €30,150 & €15,075

Well as an example there is a relief know as favorite nephew/niece which if meeting the criteria can mean a group A threshold between a uncle/aunt and their niece/nephew. I'm not saying this is the case but just an example of one exception to the standard rules.

The fact the OP mentions having few if any living relatives means their may well be some relief or exception at play in his situation.

As a rule of thumb, you will be left with about half the gross rent after paying expenses, repairs, agents costs and tax... so around 400EUR a month.
You will also have an asset that is illiquid, difficult to cash and located in another country.
Personally, I would sell it and invest the proceeds in a basket of bluechip shares in the UK; BP, BT and suchlike. This will give you a divident paying asset with good prospects of capital gains and which, if needed, can be converted into cash in a matter of days.

loyatemu

Baylee Drab Shipyard wrote: »

Well as an example there is a relief know as favorite nephew/niece which if meeting the criteria can mean a group A threshold between a uncle/aunt and their niece nephew. I'm not saying this is the case but just an example of one exception to the standard rules.

The fact the OP mentions having few if any living relatives means their may well be some relief or exception at play in his situation.

cheers - somewhat more helpful answer there...

handlemaster

OP . In your shoes I would sell and invest in thé UK market maybe not even london but a city location none the less .

Johngoose

You are in a very enviable position. I'd love to have your problem. I'd sell if I was you. Use the money to travel, pay your rent in London and generally enjoy life. At 24, the world is your oyster.

danotroy

Johngoose wrote: »

You are in a very enviable position. I'd love to have your problem. I'd sell if I was you. Use the money to travel, pay your rent in London and generally enjoy life. At 24, the world is your oyster.

I realise I am very lucky, and eternally grateful. your advice is probably the worst advise i've been given from making the most of my luck in the long term.

I could easily blow that amount of money in 2 years if I took your advice. for instance a one bed room flat near where I currently live (in a share house) can go for 1,600 pounds. I wouldn't be long pissing all my money down the drain if I did that.

enda1

I'd keep my money in EUR initially by selling the asset and feeding the cash into a trading account buying a diverse range of ETFs such as TD International based in LUX.
Then drip feed it back to the UK every year in March, maximising your ISA so that you have tax free investment for life.
Some of that can you put into REITs if you're determined on investing in property, but I would avoid buying a permanent home myself at such a young age and presumably without a life partner.

pwurple

Sorry for your loss.

If I were you I would approach a UK bank/estate agent and see what you can get with a chunky deposit over there. Then see what you could buy there, live in that property, possibly with a lodger to reduce the rent even further.

The irish govt has done a lot to weaken landlords here, financially, and in terms of protecting the asset. Every other day I hear politicians and the public calling for rental caps and limits. It is financially tricky to remain as a landlord here unless you have a larger set of properties which can absorb the losses you can easily incur in one or two.

On the other hand, you have no other income here, so I don't know what tax you would have to pay. You may well come in under the higher income thresholds... And not do too badly. Maybe earn 6-7k net per year? You could sit on it and rent it out for a few years, see how things go and then reconsider your options. One of the very few ways it is possible to evict is if you are selling.

Johngoose

Johngoose wrote: »

You are in a very enviable position. I'd love to have your problem. I'd sell if I was you. Use the money to travel, pay your rent in London and generally enjoy life. At 24, the world is your oyster.

Not good advise, throwing it away on travel or high rent etc is a poor use of money that could be used for making your life in the future much more comfortable. Even if it was just left sitting in an account waiting to be used for a house deposit it wound be better than spending a chunk of it on nothing.

pwurple

pwurple wrote: »

On the other hand, you have no other income here, so I don't know what tax you would have to pay.

You will have to pay income tax, prsi and social charge to the irish authorities and also declare it to the Uk authorities who might charge you extra income tax as they will be considering your total income.
You will also be liable for Irish capital gains tax when you sell (assuming it gains something). This, I think, is 30% and there is no adjustment for inflation allowed any more.

The_Conductor

Pawwed Rig wrote: »

You will only pay tax at 20% on your rental income in Ireland assuming you have no other Irish income but may be hit with UK tax on the same income.
Being a landlord however is not a good way to make money though. Far better idea to pump money into a pension scheme.

You would offset your UK tax against the Irish tax paid- we have reciprochal tax arrangements (as we have with all EU countries- and numerous other countries). So- its not a double tax- you'd simple pay the same amount gross- that you'd have done in the first instance, were the tax earned in the country of tax residence.