Buy to let when living outside the country

I am hoping to work overseas for 12 or 18 months from next year. Having recently sold my home, I now have enough cash to buy a modest 2 bed apartment or house in Dublin, without a mortgage.
I'm thinking of doing this now, and renting the place out while I'm away. I would rent to a family member.
I would plan to sell up again when I return home and buy a home for myself.
So, this sounds like a good idea to me!
Is there anything I'm not thinking about? What are the downsides to this plan?

Harvey Normal

bubblypop wrote: »

I am hoping to work overseas for 12 or 18 months from next year. Having recently sold my home, I now have enough cash to buy a modest 2 bed apartment or house in Dublin, without a mortgage.
I'm thinking of doing this now, and renting the place out while I'm away. I would rent to a family member.
I would plan to sell up again when I return home and buy a home for myself.
So, this sounds like a good idea to me!
Is there anything I'm not thinking about? What are the downsides to this plan?

Nothing much. You would have to pay 20% to revenue. I'm not sure if you have to declare the income in the new country.

bubblypop

bubblypop wrote: »

I am hoping to work overseas for 12 or 18 months from next year........................
I would plan to sell up again when I return home and buy a home for myself.
.......................What are the downsides to this plan?

The major downside is that your plan is a short term property investment, there is a significant risk that you might not sell the property for a price that would facilitate profit.

In saying that, 80% of the rental income less normal expenses going into your pocket for 12/18 months would be significant at current rates (certainly in excess of €20K).

As a concept property isn't a liquid asset so for short term investments it's not at all ideal, in fact short term & investment is a seeming contradiction, anything short term is a gamble imo, not an investment.

You've benefitted from the recent rise in property prices by selling your home, I wouldn't be overly keen on getting back into the market now with the view to sell in 18/24 months.

If you aren't going to buy your future home now and rent it out I wouldn't be buying anything else tbh.

Michael D Not Higgins

For the below example, I've taken a 200k property. All figures are rough guide.

1. You'll incur legal fees when buying and selling (3k) and stamp duty when you buy (2k).
2. The ROI could be around 10%. So let's say 20k for the year.
3. You'll be taxed on the full amount of the rent. This will depend on the taxation agreement with the country you're going to but could be as high as 56% (10k).
4. You'll need to register with the RTB, get insurance, pay management fees, etc. (1k).
5. You will be left with a net of 6k plus any inflation on house prices for your 200k investment. A financial advisor may be able to get you a better return for lower risk and less hassle.
6. You're mixing business and family, not always a good combination.

SarahMollie

Michael D Not Higgins wrote: »

For the below example, I've taken a 200k property. All figures are rough guide.

1. You'll incur legal fees when buying and selling (3k) and stamp duty when you buy (2k).
2. The ROI could be around 10%. So let's say 20k for the year.
3. You'll be taxed on the full amount of the rent. This will depend on the taxation agreement with the country you're going to but could be as high as 56% (10k).
4. You'll need to register with the RTB, get insurance, pay management fees, etc. (1k).
5. You will be left with a net of 6k plus any inflation on house prices for your 200k investment. A financial advisor may be able to get you a better return for lower risk and less hassle.
6. You're mixing business and family, not always a good combination.

All of this is very valid but I'd just like to add that 18months is an extremely short time to flip a property. IMO, I wouldnt buy unless I was planning to hang on to it for 5 years. You need to consider that you'll likely also pay estate agents fees when you come to sell. Thats a lot of buying/selling costs to incur over a short period of time.

Harvey Normal

Michael D Not Higgins wrote: »

For the below example, I've taken a 200k property. All figures are rough guide.

1. You'll incur legal fees when buying and selling (3k) and stamp duty when you buy (2k).
2. The ROI could be around 10%. So let's say 20k for the year.
3. You'll be taxed on the full amount of the rent. This will depend on the taxation agreement with the country you're going to but could be as high as 56% (10k).
4. You'll need to register with the RTB, get insurance, pay management fees, etc. (1k).
5. You will be left with a net of 6k plus any inflation on house prices for your 200k investment. A financial advisor may be able to get you a better return for lower risk and less hassle.
6. You're mixing business and family, not always a good combination.

6) is a valid issue.

Where did you get 56% from?

Michael D Not Higgins

Harvey Normal wrote: »

6) is a valid issue.

Where did you get 56% from?

It's the maximum rate of tax that can be charged on income in Ireland for self employed people (52% for PAYE), at marginal rate plus USC and PRSI. I don't know where they're moving and the reciprocal tax deals etc. involved so just used worse case scenario. In reality it will be lower but it will depend on their circumstances.

Michael D Not Higgins

Michael D Not Higgins wrote: »

It's the maximum rate of tax that can be charged on income in Ireland for self employed people .............

56% ?
Seriously?

endacl

Also, your family member will have to act as an agent for revenue and withhold the tax from the rent on their behalf. Make sure they're happy to do this.

Harvey Normal

Michael D Not Higgins wrote: »

It's the maximum rate of tax that can be charged on income in Ireland for self employed people (52% for PAYE), at marginal rate plus USC and PRSI. I don't know where they're moving and the reciprocal tax deals etc. involved so just used worse case scenario. In reality it will be lower but it will depend on their circumstances.

Ireland doesn't tax your income in another country if you are non-resident nor add the rental income to your worldwide income for tax purposes unless that worldwide income is generated here. He's just going to pay 20%. Also no prsi. There's USC I think.

Michael D Not Higgins

Harvey Normal wrote: »

Ireland doesn't tax your income in another country if you are non-resident nor add the rental income to your worldwide income for tax purposes unless that worldwide income is generated here. He's just going to pay 20%. Also no prsi. There's USC I think.

But how much the other country will tax his rental income is also in question. This may or may not be applicable depending on the double taxation agreement with the country in question.

I used 56% as the worst case Irish position as I don't have these details. It may only be about 20-odd% and that does change the figures but this is a legitimate issue to consider.

Mrs OBumble

Augeo wrote: »

56% ?
Seriously?

If they were moving to certain Scandinavian countries, i suspect it could be higher.

It depends on their income over there, too.

Blazer

bubblypop wrote: »

I am hoping to work overseas for 12 or 18 months from next year. Having recently sold my home, I now have enough cash to buy a modest 2 bed apartment or house in Dublin, without a mortgage.
I'm thinking of doing this now, and renting the place out while I'm away. I would rent to a family member.
I would plan to sell up again when I return home and buy a home for myself.
So, this sounds like a good idea to me!
Is there anything I'm not thinking about? What are the downsides to this plan?

AS someone said..mixing family and business are a really bad idea.
The rental market is pretty desperate in Dublin and elsewhere. What happens when you come back in 18 months and your family member asks for extra time as they can't currently find an available house?
For this reason alone I'd say it's definitely a non-starter and that's before even taking in the other very valid comments.

Mrs OBumble

Michael D Not Higgins wrote: »

But how much the other country will tax his rental income is also in question. This may or may not be applicable depending on the double taxation agreement with the country in question.

I used 56% as the worst case Irish position as I don't have these details. It may only be about 20-odd% and that does change the figures but this is a legitimate issue to consider.

Exactly.

I own a property in another country, and pay tax the income from on it there.

I also have to declare that income here, and pay tax on it. All the double-taxation treaty does is give me a tax-credit here of them amount of tax I've already paid there - I still have to pay the difference, which amounts to about 40%.

Harvey Normal

Michael D Not Higgins wrote: »

But how much the other country will tax his rental income is also in question. This may or may not be applicable depending on the double taxation agreement with the country in question.

I used 56% as the worst case Irish position as I don't have these details. It may only be about 20-odd% and that does change the figures but this is a legitimate issue to consider.

We do have his Irish rental income figures. It's 20k. Thats the figure we used. You used. That's what he is taxed on here. Immovable property income (i.e. Income from land or rent) is taxed in the country where the immovable property is. Regardless of where you are. Otherwise we wouldn't be having this conversation and he'd pay the tax in his country of residence.

Ireland doesn't know your paye income when you are elsewhere. Only the us asks for that. So it taxes that rental income as your sole income. You don't get tax credits though.

Michael D Not Higgins

Harvey Normal wrote: »

We do have his Irish rental income figures. It's 20k. Thats the figure we used. You used. That's what he is taxed on here. Immovable property income (i.e. Income from land or rent) is taxed in the country where the immovable property is. Regardless of where you are. Otherwise we wouldn't be having this conversation and he'd pay the tax in his country of residence.

Ireland doesn't know your paye income when you are elsewhere. Only the us asks for that. So it taxes that rental income as your sole income. You don't get tax credits though.

20k was a figure I picked as an example. The double taxation in force in the country the OP will be working in is an appropriate measure to consider as part of the net return on investment.

Harvey Normal

Mrs OBumble wrote: »

Exactly.

I own a property in another country, and pay tax the income from on it there.

I also have to declare that income here, and pay tax on it. All the double-taxation treaty does is give me a tax-credit here of them amount of tax I've already paid there - I still have to pay the difference, which amounts to about 40%.

You must be untaxed in the other country.

The figures won't add up in this case to 56% on 20k even if you declare the Irish rental income abroad. Because that's the Irish rate, and marginal rate at that.

Harvey Normal

Michael D Not Higgins wrote: »

20k was a figure I picked as an example. The double taxation in force in the country the OP will be working in is an appropriate measure to consider as part of the net return on investment.

Look. Here is no way he will be taxed 56% by revenue here on 20k earned in rent here.

You didn't consider the other country at all.

Michael D Not Higgins

Harvey Normal wrote: »

Look. Here is no way he will be taxed 56% by revenue here on 20k earned in rent here.

You didn't consider the other country at all.

My first post references the taxation agreement with the other country. I never said Revenue in Ireland would take 56%. It was a 'rough guide' as I mentioned in the post. I never claimed it as gospel.

Mrs OBumble

Harvey Normal wrote: »

You must be untaxed in the other country.

The figures won't add up in this case to 56% on 20k even if you declare the Irish rental income abroad. Because that's the Irish rate, and marginal rate at that.

No I pay low tax in the other country (10%) because they think I have a low income. But Ireland knows my true income, so they charge me the difference, IE 50% - the 10% I've already paid.

In the OP's case, how much tax s/he pays will depend on income and marginal tax rates in the country where s/he is tax resident.

Thanks for replies so far.
It's not that I am trying to make a profit while I'm away. It's more the fact that I have ( let's say 200k ) sitting making nothing.
I would be buying somewhere that I would live in myself, it just wouldn't be my 'dream' home.
I currently sublet to this family member & I would be moving back in with them on my return.

Harvey Normal

Michael D Not Higgins wrote: »

My first post references the taxation agreement with the other country. I never said Revenue in Ireland would take 56%. It was a 'rough guide' as I mentioned in the post. I never claimed it as gospel.

It's a pretty exact figure for a rough guide and coincidently exactly equal to the marginal Irish tax rate and thus totally misleading. In short you didn't understand how tax is applied here on rental income earned here when abroad. You clearly assumed that the Irish revenue would be taxed on top of worldwide income. Thus 56%.


The op could be going to Dubai for all we know so the only tax due is Irish rental tax. We need him to come back and specify.

Michael D Not Higgins

Harvey Normal wrote: »

It's a pretty exact figure for a rough guide and coincidently exactly equal to the marginal Irish tax rate and thus totally misleading. In short you didn't understand how tax is applied here on rental income earned here when abroad. You clearly assumed that the Irish revenue would be taxed on top of worldwide income. Thus 56%.


The op could be going to Dubai for all we know so the only tax due is Irish rental tax. We need him to come back and specify.

I don't know why you're arguing with me when I already explained where I took figures from and how they were only as a guide. In the interests of keeping the thread from being derailed, I'll ask you to take it to PM with me if you want to continue.

mille100piedi

why don't you just rent a room? it is under the rent a room scheme. I am abroad during the winter and I rent one room of my house to a couple, since is under 12000 a year I don't pay any taxes

JustAThought

It sounds like a disasterous plan fraught with big issues and wirrying things that probably will go wrong and cause huge huge polems for you that will keep
You awake at night & mad with stress.

Not to mention the elephan in the room - both calital gains tax when you sell after the year AND the additional second time buyer rax you WILL pay when you buy both this imaginary house for a year for your relation to live in, AND when you sell that house and want a real one for yourself a few years later - either here or in the country you are moving to.

Tbh it sounds like so badly thought through its extremely worrying.
Just say no to your relative with their disney approach to flatletting & enjoy your year working abroad with no stress, no bi-location house worries, no family letting or maintenance issues and don't be handing tens of thousands in tax,stamp duty and fees to the goernment when you can sit rasy with no pressures & enjoy a no pressure calm quiet life & put the money into bonds/the bank.