More landlords to sell up over taxes and cost of letting property

handlemaster

http://m.independent.ie/business/personal-finance/property-mortgages/1000-rental-homes-now-being-sold-each-month-34201627.html

Article in the indo saying only 18% of BTL sold were bought by investors meaning a drop in rental properties and increase in rental payments. While the public may complain of high cost in rent why is it that investors are rushing to get out ? It states that the high taxes are the main reason. For those who are thinking landlords are Rolling in the cash now is the time to put your money where your month is and buy.

gaius c

It's silly scaremongering because if the houses are not being sold to other investors, they will be used as PPR's, I.e. It's a zero sum transaction that doesn't add or subtract from the national housing stock.

Atlantic Dawn

Good news for the economy.

riclad

There are many investors who bought between 2000 and 2007,
at a high price ,
The rental income hardly covers the mortgage and they have to pay taxes and property tax.
The profit they make is small or they make no profit .
They will sell up as soon as they can ,when the bank allows them to.
Government policy seems to be to increase costs on landlord,s .
Even as the shortage of rental property is increasing rents ,
and making ireland a bad place for companys to invest in.
Governments seem to see landlords as just another easy target to collect extra taxes, from.

4ensic15

gaius c wrote: »

It's silly scaremongering because if the houses are not being sold to other investors, they will be used as PPR's, I.e. It's a zero sum transaction that doesn't add or subtract from the national housing stock.

No it isn't. There are numerous houses in flats on sale in DAFT. Most will be converted to single dwellings. In many cases it will be 20 tenants out, family of 4 in. Many FTBs will live in a 1 bed apt and buy a 3 bed house. The former residents of the 3 bed house need 2 1 bed apts in lieu.
Landlords exiting lowers supply.

handlemaster

gaius c wrote: »

It's silly scaremongering because if the houses are not being sold to other investors, they will be used as PPR's, I.e. It's a zero sum transaction that doesn't add or subtract from the national housing stock.

Ok so a family buy a house that was formally in flats. Thats X amount of flats off the market.

gaius c

gaius c wrote: »

It's silly scaremongering because if the houses are not being sold to other investors, they will be used as PPR's, I.e. It's a zero sum transaction that doesn't add or subtract from the national housing stock.

A good percentage of the houses will also be houseshares. So a 3 bedroom house with 3 people is bought by a person who intends to live a alone (2 less bed spaces) or a couple so one less bed space or a 4bdrm house bought by a couple so 2 people living in the house rather than 4 etc.

gaius c

4ensic15 wrote: »

No it isn't. There are numerous houses in flats on sale in DAFT. Most will be converted to single dwellings. In many cases it will be 20 tenants out, family of 4 in. Many FTBs will live in a 1 bed apt and buy a 3 bed house. The former residents of the 3 bed house need 2 1 bed apts in lieu.
Landlords exiting lowers supply.

A house suitable for a family of 4 houses 20???

Have you any more makey uppy anecdotes that actually weaken the argument you are trying to make?

gaius c

Magnolia Enough Typographer wrote: »

A good percentage of the houses will also be houseshares. So a 3 bedroom house with 3 people is bought by a person who intends to live a alone (2 less bed spaces) or a couple so one less bed space or a 4bdrm house bought by a couple so 2 people living in the house rather than 4 etc.

There's a nuance that Marian Finnegan didn't bother trying to make. Her tone appears to imply that the housing units vanish. It's scaremongering and deserves to be called as such.

The opposite could also be the case. 2 bed property occupied by two adults is sold to a family of 4. And I can verify that one because I'm the landlord who sold it.

Also a mate of mine living in Kimmage has finally moved out of the suburban house he occupied all by himself (he was on good money and couldn't be bothered replacing housemates who left and the landlord never stuck up the rent). Now that is up for sale and will almost certainly have higher occupancy once it's sold.

listermint

4ensic15 wrote: »

No it isn't. There are numerous houses in flats on sale in DAFT. Most will be converted to single dwellings. In many cases it will be 20 tenants out, family of 4 in. Many FTBs will live in a 1 bed apt and buy a 3 bed house. The former residents of the 3 bed house need 2 1 bed apts in lieu.
Landlords exiting lowers supply.

I mean, Where did you even come up with this nonsense ??


How many 10-20 dwelling apartments have been converted into single family housing!?

How many 3-4 apartments have been converted into single family housing.


Just made up!

listermint

Magnolia Enough Typographer wrote: »

A good percentage of the houses will also be houseshares. So a 3 bedroom house with 3 people is bought by a person who intends to live a alone (2 less bed spaces) or a couple so one less bed space or a 4bdrm house bought by a couple so 2 people living in the house rather than 4 etc.

or a family of 4 rather than 4 individuals ...

lima

4ensic15 wrote: »

No it isn't. There are numerous houses in flats on sale in DAFT. Most will be converted to single dwellings. In many cases it will be 20 tenants out, family of 4 in. Many FTBs will live in a 1 bed apt and buy a 3 bed house. The former residents of the 3 bed house need 2 1 bed apts in lieu.
Landlords exiting lowers supply.

That's a super-weak argument with complete speculation.

I moved out of a rented 1br apt and into a purchased 2br apt. I bought off a bust landlord, so took that off the rental market but gave my rental back to the rental market. Now there's one less landlord and one more FTB owner. Proper order.

handlemaster

listermint wrote: »

I mean, Where did you even come up with this nonsense ??


How many 10-20 dwelling apartments have been converted into single family housing!?

How many 3-4 apartments have been converted into single family housing.


Just made up!

Good article in the times today it might just help you understand. But it doesn't really matter if you believe or not its happening and the rental prices are proof it.

http://www.irishtimes.com/news/social-affairs/rental-crisis-why-landlords-are-struggling-to-make-money-1.2430983

gaius c

handlemaster wrote: »

Good article in the times today it might just help you understand. But it doesn't really matter if you believe or not its happening and the rental prices are proof it.

http://www.irishtimes.com/news/social-affairs/rental-crisis-why-landlords-are-struggling-to-make-money-1.2430983

Which is a serious goalpost shift from the scaremongering link you posted in the OP.

vandriver

handlemaster wrote: »

Good article in the times today it might just help you understand. But it doesn't really matter if you believe or not its happening and the rental prices are proof it.

http://www.irishtimes.com/news/social-affairs/rental-crisis-why-landlords-are-struggling-to-make-money-1.2430983

Its a self serving and deliberately selective article which the journalist seems to have regurgitated word for word from the Landlord's Associations Fintan McNamara.
It confuses cash flow with profit.(Hint :you pay tax on the profit).
Also,the tax figure quoted seems too high.

handlemaster

gaius c wrote: »

Which is a serious goalpost shift from the scaremongering link you posted in the OP.

Same point in both articles

handlemaster

vandriver wrote: »

Its a self serving and deliberately selective article which the journalist seems to have regurgitated word for word from the Landlord's Associations Fintan McNamara.
It confuses cash flow with profit.(Hint :you pay tax on the profit).
Also,the tax figure quoted seems too high.

If it were only true. Landlord doesnt have to make a profit to pay tax.

vandriver

handlemaster wrote: »

If it were only true. Landlord doesnt have to make a profit to pay tax.

An actual loss,as opposed to negative cash flow?

handlemaster

vandriver wrote: »

An actual loss,as opposed to negative cash flow?

Tax is due on rent received regardless if you are making a profit or not

vandriver

handlemaster wrote: »

Tax is due on rent received regardless if you are making a profit or not

How are you defining 'making a profit'?

lima

vandriver wrote: »

Its a self serving and deliberately selective article which the journalist seems to have regurgitated word for word from the Landlord's Associations Fintan McNamara.
It confuses cash flow with profit.(Hint :you pay tax on the profit).
Also,the tax figure quoted seems too high.

It also doesn't mention tax relief for expenses and mortgage interest.

Seriously, the whole media appears as a completely vested interest!

vandriver

vandriver wrote: »

How are you defining 'making a profit'?

I don't think the term making a profit is open to interpretation. It's a pretty straight forward concept.

If after paying the mortgage and all other costs associated with the rental property including tax on the rent and he has made money then he is making a profit.

A LL should really only be paying tax on the actual profit if there is any. So rent minus 100% of the yearly mortgage (interest and capital) along with all other expenses.

Gumbo

Magnolia Enough Typographer wrote: »

A LL should really only be paying tax on the actual profit if there is any. So rent minus 100% of the yearly mortgage (interest and capital) along with all other expenses.

Should, but that's not the case in reality. You pay tax on all rent received (less relief and expenses).

So while you may on paper be getting in more than the outgoing a, you will still pay above and beyond on tax.

With regards to the 3-4 flat structures being converted to single dwellings, very popular in Dublin city now with buildings that cannot meet the housing standards and regulations for fire safety. We have seen a lot of planning and commencement notices for these types of works.

dubrov

The normal definition of profit normally includes capital gains.
Otherwise a landlord could divert all taxable income to capital re-payments and completely avoid tax.

vandriver

Magnolia Enough Typographer wrote: »

I don't think the term making a profit is open to interpretation. It's a pretty straight forward concept.

If after paying the mortgage and all other costs associated with the rental property including tax on the rent and he has made money then he is making a profit.

A LL should really only be paying tax on the actual profit if there is any. So rent minus 100% of the yearly mortgage (interest and capital) along with all other expenses.

Obviously its not as straightforward as you seem to think!
Only the interest element of the mortgage is a cost.

khamilto

Magnolia Enough Typographer wrote: »

I don't think the term making a profit is open to interpretation. It's a pretty straight forward concept.

If after paying the mortgage and all other costs associated with the rental property including tax on the rent and he has made money then he is making a profit.

A LL should really only be paying tax on the actual profit if there is any. So rent minus 100% of the yearly mortgage (interest and capital) along with all other expenses.

It's ironic that you stay it isn't open to interpretation and is pretty straight forward, and then show that you have no idea what profit actually means and how it's generally construed and constructed in business.

It also isn't a pretty straight forward concept, there has long been a movement arguing that asset appreciation should be taxed when it occurs, not when the appreciation is realised via disposal of it. Almost every other form of income is taxed immediately.

Gumbo

vandriver wrote: »

Obviously its not as straightforward as you seem to think!
Only the interest element of the mortgage is a cost.

Only 75% of the interest portion is an allowable cost

vandriver

kceire wrote: »

Only 75% of the interest portion is an allowable cost

Which is why I didn't mention allowable. Mine was a more general comment on how to arrive at a profit figure.

wenbo

Change "If after paying the mortgage" to "If after paying the mortgage INTEREST"

Magnolia Enough Typographer wrote: »

I don't think the term making a profit is open to interpretation. It's a pretty straight forward concept.

If after paying the mortgage and all other costs associated with the rental property including tax on the rent and he has made money then he is making a profit.

A LL should really only be paying tax on the actual profit if there is any. So rent minus 100% of the yearly mortgage (interest and capital) along with all other expenses.

kceire

kceire wrote: »

Should, but that's not the case in reality. You pay tax on all rent received (less relief and expenses).

So while you may on paper be getting in more than the outgoing a, you will still pay above and beyond on tax.

With regards to the 3-4 flat structures being converted to single dwellings, very popular in Dublin city now with buildings that cannot meet the housing standards and regulations for fire safety. We have seen a lot of planning and commencement notices for these types of works.

vandriver wrote: »

Obviously its not as straightforward as you seem to think!
Only the interest element of the mortgage is a cost.

wenbo wrote: »

Change "If after paying the mortgage" to "If after paying the mortgage INTEREST"

I think you have all misunderstood the point I was making

I know only 75% of mortgage interest is allowed as an expense. The point I was making that in order to make the system fair a LL should be allowed to deduct his entire mortgage payment from the rent (along with other allowed expenses) in order to arrive at his taxable rental income.

You should only be paying tax on profit, gross rental income less a few small expenses is not profit as there is a mortgage being paid also.

vandriver wrote: »

Which is why I didn't mention allowable. Mine was a more general comment on how to arrive at a profit figure.

If you are making more money from renting you house than its costing you to rent it then you are making a profit and tax should (in a fair system) only be paid on the actual profit. i.e. the money the LL is actually earning and is put away in a savings account not paid out on a mortgage or other expenses.

gaius c

Magnolia Enough Typographer wrote: »

I know only 75% of mortgage interest is allowed as an expense. The point I was making that in order to make the system fair a LL should be allowed to deduct his entire mortgage payment from the rent (along with other allowed expenses) in order to arrive at his taxable rental income.

You should only be paying tax on profit, gross rental income less a few small expenses is not profit as there is a mortgage being paid also.

Are you having a laugh? Capital repayments should never be an allowable business expense.

You're confusing cash flow with profit while also ignoring that the landlord is increasing equity.

gaius c

gaius c wrote: »

Are you having a laugh? Capital repayments should never be an allowable business expense.

Why shouldn't they, they are an expense in other areas of business. It's called capital expenses and businesses have allowances when they buy or build a premises etc.

Equity should not come into it either. A LL is operating a business, buying the premises should be a deductible (in full) expense.

gaius c

Magnolia Enough Typographer wrote: »

Why shouldn't they, they are an expense and They are in other areas of business. It's call capital expenses and businesses have allowances when they buy or build a premises etc.

Think about what you are advocating. You want the tax on a share dividend to be offset by the cost of actually acquiring the shares.

So if you had shares yielding 5% before tax, you'd pay no tax whatsoever on dividends for approx 40 years!

Trying to have your cake and eat it too doesn't even begin to describe this.

khamilto

Magnolia Enough Typographer wrote: »

Why shouldn't they, they are an expense in other areas of business. It's call capital expenses and businesses have allowances when they buy or build a premises etc.

Equity should not come into it either. A LL is operating a business, buying the premises should be a deductible (in full) expense.

It is nowhere near as simple as you make out. Indeed, your post is essentially untrue. Please accept the information you were given - or at least, research it further to satisfy yourself as to how true or not it is.

johnnyskeleton

vandriver wrote: »

How are you defining 'making a profit'?

Rental Income - 12,000

Mortgage interest - 10,000
% mortgage interest that can be written off - 7,500
Managment and other expenses €3,000

Income - 12k, overall expenses 3k net loss 1k
On the tax side, income 12k allowable expenses 10.5k.

So you can make a loss of a grand per year on the income/expenditure front and still pay income tax on 1.5k.

Obviously investment in property is a long term matter and some level of capital appreciation, CGT is to be factored in as well.

aido79

Maybe the government should follow Australian model of allowing landlords to have the option of negatively gearing investment properties. It's not a perfect solution but it allows landlords to offset losses against their other incomes so might be what's needed to keep landlords leaving the market.

https://en.m.wikipedia.org/wiki/Negative_gearing

khamilto

johnnyskeleton wrote: »

Rental Income - 12,000

Mortgage interest - 10,000
% mortgage interest that can be written off - 7,500
Managment and other expenses €3,000

Income - 12k, overall expenses 3k net loss 1k
On the tax side, income 12k allowable expenses 10.5k.

So you can make a loss of a grand per year on the income/expenditure front and still pay income tax on 1.5k.

Obviously investment in property is a long term matter and some level of capital appreciation, CGT is to be factored in as well.

You're making the mistake of treating the landlord as if his only income was the rental property. Clearly, if the landlord had an overall negative income, he would not be liable for income taxes. Just as he can't offset all medical expenses against income, he can't offset all interest expenses.


Besides, you cherry picked an example.

Interest of €10,000 suggests a mortgage of somewhere between ~€320,000 - €420,000 depending on a 30 year mortgage under 10 years old.

Rent of €12,000 suggests a yield of 2.6% to 3.4%. 5% is generally considered a very minimum.

vandriver

khamilto wrote: »

You're making the mistake of treating the landlord as if his only income was the rental property. Clearly, if the landlord had an overall negative income, he would not be liable for income taxes. Just as he can't offset all medical expenses against income, he can't offset all interest expenses.


Besides, you cherry picked an example.

Interest of €10,000 suggests a mortgage of somewhere between ~€320,000 - €420,000 depending on a 30 year mortgage under 10 years old.

Rent of €12,000 suggests a yield of 2.6% to 3.4%. 5% is generally considered a very minimum.

The Irish Times example is of someone who bought a 350k apartment in '05.On a cheap tracker the interest on this mortgage would be 2-300 a month,while charging 1400 a month.This is a much more realistic scenario.

gaius c

gaius c wrote: »

Think about what you are advocating. You want the tax on a share dividend to be offset by the cost of actually acquiring the shares.

So if you had shares yielding 5% before tax, you'd pay no tax whatsoever on dividends for approx 40 years!

Trying to have your cake and eat it too doesn't even begin to describe this.

We built a new shed on the farm, we write off a considerable amount of the cost of building it every year against a combination of farm income and off-farm PAYE income. Over a number of years it will cost a fraction of the initial outlay due to the tax being written off, VAT we are allowed to reclaim on buildings (even when not VAT registered) etc.

khamilto wrote: »

It is nowhere near as simple as you make out. Indeed, your post is essentially untrue. Please accept the information you were given - or at least, research it further to satisfy yourself as to how true or not it is.

What have I said that's untrue.

riclad

I,M not a tax expert ,but i think your income as a landlord is treated separately from your income from say working in a factory,shop .
You are taxed on rental income minus all tax credits ,expense,s .
SO since they ignore capital repayments, and you can only claim for
75 per cent of interest on the loan ,its easy to end up paying tax even though you are not making any Real profit on the rental income.
Most landlords would need a full time job ,in order to get a mortgage to buy the rental property anyway.
IF the governmnet want more rental propertys on the market they will have to do something,
The logical thing to do is to provide more tax credits to attract potential investors
landlords into the rental market.
Many countrys provide extra tax credits in order to attract tech startups ,or
film makers .
There could be extra tax credits for landlords who rent to parents with 1 or more children .
Rather than familys living in hotels ,which is not an ideal situation .

khamilto

Magnolia Enough Typographer wrote: »

We built a new shed on the farm, we write off a considerable amount of the cost of building it every year against a combination of farm income and off-farm PAYE income. Over a number of years it will cost a fraction of the initial outlay due to the tax being written off, VAT we are allowed to reclaim on buildings (even when not VAT registered) etc.



What have I said that's untrue.

I don't think the term making a profit is open to interpretation.

It is open to interpretation and diverges widely depending individual characteristics.

If after paying the mortgage and all other costs associated with the rental property including tax on the rent and he has made money then he is making a profit.

Loan principal is not included in profit & loss account for businesses.

A LL should really only be paying tax on the actual profit if there is any.

There is no such thing as 'actual' profit and 'unactual' profit.

I know only 75% of mortgage interest is allowed as an expense. The point I was making that in order to make the system fair a LL should be allowed to deduct his entire mortgage payment from the rent (along with other allowed expenses) in order to arrive at his taxable rental income.

That is not how other income or businesses are treated.

the money the LL is actually earning and is put away in a savings account not paid out on a mortgage or other expenses.

The investment is the property & (if applicable) the net profit of renting out the property. Not just rent.

We built a new shed on the farm

Industrial property is treated differently. I suggest, yet again, that you consult google to verify this. Even better, research the content of your posts BEFORE posting them, not after.

Indeed, I'm unaware of a single thing you have posted about the tax treatment of landlords/businesses thus far that is actually correct.

khamilto

khamilto wrote: »

It is open to interpretation and diverges widely depending individual characteristics.


Loan principal is not included in profit & loss account for businesses.


There is no such thing as 'actual' profit and 'unactual' profit.


That is not how other income or businesses are treated.


The investment is the property & (if applicable) the net profit of renting out the property. Not just rent.


Industrial property is treated differently. I suggest, yet again, that you consult google to verify this. Even better, research the content of your posts BEFORE posting them, not after.

Indeed, I'm unaware of a single thing you have posted about the tax treatment of landlords/businesses thus far that is actually correct.

You appear to be having severe difficulty understanding what I am trying to say even though its fairly straight forward.

I know exactly how LLs are taxed and how it works, do you understand that? I am trying to suggest it should be changed to a fairer system.

khamilto wrote: »

Industrial property is treated differently. I suggest, yet again, that you consult google to verify this. Even better, research the content of your posts BEFORE posting them, not after.

You should probably learn how to read before posting bull about me needing to do research.

I was pointing out how in other areas of business that a large amount of captial outlay can be written off against tax and that it should be the same for LL.

I have said nothing wrong in my posts, you are unable to distinguish the parts of my post where I'm making suggestions of how it should work for LLs compared to how the system currently works.

khamilto

Magnolia Enough Typographer wrote: »

You appear to be having severe difficulty understanding what I am trying to say even though its fairly straight forward.

I know exactly how LLs are taxed and how it works, do you understand that? I am trying to suggest it should be changed to a fairer system.



You should probably learn how to read before posting bull about me needing to do research.

I was pointing out how in other areas of business that a large amount of captial outlay can be written off against tax and that it should be the same for LL.

I have said nothing wrong in my posts, you are unable to distinguish the parts of my post where I'm making suggestions of how it should work for LLs compared to how the system currently works.

Head in the sand. If you have no interest in actual debate or being open to the potential of being wrong (which others as well as myself have clearly and categorically demonstrated), I don't understand why you are posting in a discussion forum.

Industrial property specifically is treated differently for tax purposes. You are using this as a carte blanche to show that LLs are being treated wrongly by not being allowed tax relief (or depreciation) on a residential investment property. Industrial property /=/ residential property. Industrial property /=/ commercial property. All have different tax regimes.

You claim that the concept of profit is simple, obvious and your definition.

You ignore that loan principal is never included in profit & loss accounts.

You ignore that property in and of itself is an asset.

You ignore anything that contravenes your previously help opinion.

earlytobed

I am selling my BTL next year. Yahoo!!
Bought in 2004
Rent doesn't come near the Mortgage payment.
Would have been better off putting the cash I put into it over the years in the credit union... Not looking for sympathy, investments can go either way.
No more tax returns, poor mouth tenants, LPT, PRTB.
Happy days:)

gizmo555

khamilto wrote: »

It also isn't a pretty straight forward concept, there has long been a movement arguing that asset appreciation should be taxed when it occurs, not when the appreciation is realised via disposal of it. Almost every other form of income is taxed immediately.

The reason for this is very simple. It's not an actual gain until it is realised.

khamilto

gizmo555 wrote: »

The reason for this is very simple. It's not an actual gain until it is realised.

I never stated otherwise.

However, some tax regimes do consider appreciation to be a taxable gain - and the OECD model allows for this (though it's flawed due to some broad language).
In the US, the Economic Recovery Tax Act of 1981 removed the realization requirement for commodities future contracts. It is argued by some academics that either a mark-to-market or disposition system of taxing capital appreciation would be fairer and more equitable.

Would you agree that losses are booked before they are realized, e.g. depreciation?

outsidein98

You can argue it any way like, score points and win the sophistry game all you like but in reality like most accidental landlords my wife and I lose money on the house we rent out. Like most people in the same boat we'll sell up as soon as the sale price can pay off the remaining mortgage. We will never make a profit. Yet we're hit at the highest rate of tax for the rental income. That's partly why there's a shortage of private rental property. Now the government is trying to make it harder for people like us.
That's the reality we face.

GUIGuy

khamilto wrote: »

You ignore that property in and of itself is an asset.

Sorry but he's not at all. You've referenced it a few times but didn't give any weight to the fact that the capital will also be taxed if the owner sells it and realises the cash value.
So the rent it's taxed as income and the capital under capital gains.

I guess what you're 'trying' to say is that if landlords were to be allowed offset 100% of their expenses (like most businesses can) then it would be unfairly lucrative. If that's it then I agree wholeheartedly.

However the current situation is obviously harsh enough that most want to leave and there must be farer ways of taxing this accumulated wealth rather treating it as income. Many landlords are making cash losses but its being treated as a taxable profit.

khamilto

GUIGuy wrote: »

Sorry but he's not at all. You've referenced it a few times but left out the fact that the capital will also be taxed if the owner sells it and realises the cash value.
So the rent it's taxed as income and the capital as capital gains.

He wanted the capital payments to be treated as an expense. You seem to have missed that. There is a reason most businesses rent rather than buy and why leasebacks are so popular (well, becoming such in Ireland).

handlemaster

earlytobed wrote: »

I am selling my BTL next year. Yahoo!!
Bought in 2004
Rent doesn't come near the Mortgage payment.
Would have been better off putting the cash I put into it over the years in the credit union... Not looking for sympathy, investments can go either way.
No more tax returns, poor mouth tenants, LPT, PRTB.
Happy days:)

There are some on here who cant quiet get their heads around that . The fact you dont actually end up with anything at the end of the year.

khamilto

khamilto wrote: »

He wanted the capital payments to be treated as an expense.

Which they are (to a certain degree anyway) in many areas of business as they can write off capital expenditure (a percentage of the capital payment for the asset) against their tax bill.