Buying house then renting out. Consequences?

Nicknamed

Hello
If I buy a house with mortgage from Bank and then for some reason I am unable to live in that e.g. job changing to a different city or to a different country. Can I rent out that property? What will be the consequences of that ? Would it be ok? As I would continue to pay the mortgage every month.
Thank you

Bubbaclaus

If you rent out your house within 2 years of purchasing it you have to go back and pay Stamp Duty of 2% (instead of the 1% that you paid when you purchased initially)

That's a tax implication you have to think about.

Thoie

There'd be tax on the rental income, you'd have to register as a landlord with the RTB, and as you're in a different city/country you'd probably need an agent to deal with the tenants and any problems that arose (e.g. getting a plumber in to fix something). If you're in a different country the tenants are supposed to withhold the tax portion of the rent.

It's not as simple as just saying "mortgage is €1,000 a month, throw some tenants in there for €1,000 a month".

At one point some banks had different (higher) mortgage interest rates for landlords, but I'm not sure if that still happens - you'd need to ask your solicitor to point out to you any caveats around switching from owner occupied when signing the mortgage papers.

NIMAN

You will have to change your house insurance to landlord insurance.
Register the tenancy with the PRTB.
Be liable for tax on your rental income.

www.irishlandlord.com is a good resource for 1st time landlords.

jjjd

You will have to register with Revenue and make annual Income Tax Returns, (which may include having to make a preliminary tax payment for the following year) whether you turn a profit or not. You may lose your entitlement to mortgage interest relief as you are now a landlord and not an owner occupier and you may have to pay a higher rate of interest on the mortgage.

Remember only a certain portion of interest can be written off as an expense against rental income, so say rental income is €1,000 per month, allowable interest is €50 and your mortgage payment is €1,100 you pay tax on €950 at your marginal rate (plus PRSI & USC), even though from a cashflow perspective it would appear you are making a loss. Note that the capital portion of the mortgage repayment is not part of the rental computation for tax purposes.

Also you may be liable for Capital Gains Tax in the future as it will be no longer your Principal Private Residence when it comes to selling it in the future. Others have mentioned the Stamp Duty implications.

Also having a mortgage in one part of the country may affect your ability to borrow and purchase a property in another part of the country, as now you have financial commitments that will be factored into the equation when applying for another mortgage particularly as rental income is rarely guaranteed.