Is the end of the road for landlords coming ?

Lumen

Ethan Rough Saber wrote: »

Tax should be on profit only imo after all expenses including mortgage repayment.

Capital repayment is not an expense, it's savings.

handlemaster

Lumen wrote: »

Capital repayment is not an expense, it's savings.

So this should be applied in all businesses then . Not just on the BTL sector

Lumen

Lumen wrote: »

Capital repayment is not an expense, it's savings.

Paying the mortgage should be considered an expense imo.

You can claim tax relief on capital expenditure in other area such as deprecation so you should be able to get tax relief on a full mortgage payment.

thierry14

handlemaster wrote: »

agreed with you a boiler would cost 2500 euro. Washing machine 400 etc . wouldnt be long eating into the 3k not to mention time spend on the property

Agree only works if you have 10 or more

Or you live abroad and don't pay tax, like a lot do

Lumen

handlemaster wrote: »

So this should be applied in all businesses then . Not just on the BTL sector

I believe it is already. Only the interest component is deductible.

Lumen

Ethan Rough Saber wrote: »

Paying the mortgage should be considered an expense imo.

You can claim tax relief on capital expenditure in other area such as deprecation so you should be able to get tax relief on a full mortgage payment.

You keep repeating this but it has no basis in tax law anywhere, AFAIK.

Just because something is paid doesn't make it a deductible expense for tax purposes.

FishOnABike

Ethan Rough Saber wrote: »

Paying the mortgage should be considered an expense imo.

You can claim tax relief on capital expenditure in other area such as deprecation so you should be able to get tax relief on a full mortgage payment.

I have to disagree with this.

Allowable capital expenses in other businesses are for depreciating assets which are written off over a relatively short expected lifespan.

My grandmother's house is almost 300 years old and better now than when it was originally built. It's worth more in both actual and relative terms than when it was when built. It is an appreciating asset. Why should the cost of acquiring an appreciating asset be gifted by the government?

I can see the sense in allowing ongoing or operating expenses incurred in letting a property (e.g. property tax, RTB registration, maintenance,...) or writing off losses in selling another property in negative equity against other rental income, but I can't see the sense in the government essentially gifting a valuable asset by paying for it in full in allowing the capital part of mortgage repayments as an expense.

pilly

My tenants lease is up in February and I'm definitely out. Too much stress month in month out. Bank may have it back and will probably leave it empty for years.

The_Conductor

Killergreene wrote: »

Mate has a gaf worth 100k in college area. Makes circa 10k in rent per year. If he makes 3k net after everything then he's still making 3% on investment which u don't make leaving money sitting in the bank

3k per annum net- for all the hassle of running a rental unit?
I'm sorry- the amount of work involved- if you're a reasonable landlord- mean this return is ludicrous. You *need* a minimum of 7% for the economics to work- preferably higher- but a minimum of 7%.

GGTrek

FishOnABike wrote: »

Ethan Rough Saber wrote: »

Paying the mortgage should be considered an expense imo.

You can claim tax relief on capital expenditure in other area such as deprecation so you should be able to get tax relief on a full mortgage payment.

I have to disagree with this.

Allowable capital expenses in other businesses are for depreciating assets which are written off over a relatively short expected lifespan.

My grandmother's house is almost 300 years old and better now than when it was originally built. It's worth more in both actual and relative terms than when it was when built. It is an appreciating asset. Why should the cost of acquiring an appreciating asset be gifted by the government?

I can see the sense in allowing ongoing or operating expenses incurred in letting a property (e.g. property tax, RTB registration, maintenance,...) or writing off losses in selling another property in negative equity against other rental income, but I can't see the sense in the government essentially gifting a valuable asset by paying for it in full in allowing the capital part of mortgage repayments as an expense.

I agree on your points as a landlord: capital repayments should not be discounted from income tax since they are not a cost of doing business like interest. However there is also an elephant in the room called USC that is practically charged on gross rent at the moment. It is the most unfair tax I have ever seen, since it is not charged on real profits, it is almost like a VAT on rental!

The_Conductor

GGTrek wrote: »

I agree on your points as a landlord: capital repayments should not be discounted from income tax since they are not a cost of doing business like interest. However there is also an elephant in the room called USC that is practically charged on gross rent at the moment. It is the most unfair tax I have ever seen, since it is not charged on real profits, it is almost like a VAT on rental!

While I agree with your point- the gross unfairness of the larger landlords using charitable trusts- to avoid paying any tax (at all) while muggins has to pay up to 54%, inclusive of USC- you get the picture. The only conclusion any small scale landlord can come to- is that the government is actively doing it utmost to drive them from the sector.

The entire tax treatment and its obvious inequities- are staggering in nature- and if it was anyone other than landlords who were being discriminated against- there would be effigies of the relevant government minister being burn on Merrion Street...........

FishOnABike

I agree GGTrek + The_Conductor. The tax system regarding rental needs to be simplified and made more equitable if landlords are to see it as worth the effort to remain in the business.

Paying tax on gross rental income while a number of necessary costs are not allowable against expenses does seem totally unjust.

Part of solving the country's current housing crisis will have to include addressing how to convince existing landlords it is worthwhile to continue in business. Affordability is directly related to landlord's costs. Taxing gross rental income while not allowing all necessary expenses before tax does not help anybody - landlords or tennants.

antoinolachtnai

We desperately need to invest in homes, both upgrading what we have and building more. The government is going to have to incentivise this in some way. Capital allowances seem as good a way as any, and better than most to get regular people to invest.

newacc2015

The_Conductor wrote: »

While I agree with your point- the gross unfairness of the larger landlords using charitable trusts- to avoid paying any tax (at all) while muggins has to pay up to 54%, inclusive of USC- you get the picture. The only conclusion any small scale landlord can come to- is that the government is actively doing it utmost to drive them from the sector.

The entire tax treatment and its obvious inequities- are staggering in nature- and if it was anyone other than landlords who were being discriminated against- there would be effigies of the relevant government minister being burn on Merrion Street...........

The opinion of most is that the use of charitable trusts is not to driven out small landlords. It was to make NAMA a 'success'. If you can tell a dodgy American fund that you buy Irish housing tax free, they will pay a lot more for them than if they have to pay massive amounts of tax on rental income.

There was a massive fear that if the Government tightened up the rules on Section 110 companies that it would be more difficult and harder for banks to sell their loan books. Plus the value of the loan books would decline as you have to pay tax on your profits.

The use of charitable trusts to avoid tax is key to the success of NAMA. Plus who really cares about landlords in the Government. If you are a TD who inherit a few scraps of a bog from a forgotten cousin you are immediately a landlord in the eyes of the media and the general public. Therefore if you do anyting pro-landlord, you are immediately corrupt and lining your back pockets.

Browney7

Ethan Rough Saber wrote: »

I agree that it's very little to be making and the tax burden is way too much for a LL but I can't see the point in leaving it idle when you are making profit. Even 200'euro a month still will cover your petrol for the month maybe or a good chunk of your food shopping that will have to come from your wages now instead.

Not only that but it will cost you things like property tax anyway and you will have costs like heating and maintainence still.



Tax should be on profit only imo after all expenses including mortgage repayment.

And so disadvantage landlords that own properties with no borrowings?

cronos

Browney7 wrote: »

And so disadvantage landlords that own properties with no borrowings?

I say just tax landlords at 12.5 percent, same as with a company. Sounds fair to me.

johnnyskeleton

GGTrek wrote: »

I agree on your points as a landlord: capital repayments should not be discounted from income tax since they are not a cost of doing business like interest. However there is also an elephant in the room called USC that is practically charged on gross rent at the moment. It is the most unfair tax I have ever seen, since it is not charged on real profits, it is almost like a VAT on rental!

Is interest a cost of doing businsss? If i take out loan to buy shares can i write off the interest against the dividends?

As for paying tax, well you have to pay tax on most income anyway. You also pay tax on the return on an investment and on deposit interest. Why should being a landlord be any different?

There are still properties today that have 8-10% rental yields. So if someone had the cash its like they are putting it into an investment account that is set to achieve that kind of return. Sure there are risks and expenses but theres always some risk at that level. They also have the opportunity for capital appreciation.

Add to that massive rents and cgt tax, and property can seem like a pretty good investment at the moment.

davindub

cronos wrote: »

I say just tax landlords at 12.5 percent, same as with a company. Sounds fair to me.

There is absolutely nothing stopping any LL from paying 12.5% on top of income tax of dividends/ salaries they receive from the company they have set up if they wish. Same as for all companies.

johnnyskeleton

cronos wrote: »

I say just tax landlords at 12.5 percent, same as with a company. Sounds fair to me.

Why not tax everyone at that rate then? Companies pay 12.5% but the people who get an income from the companies pay income tax on that income etc.

Lumen

davindub wrote: »

There is absolutely nothing stopping any LL from paying 12.5% on top of income tax of dividends/ salaries they receive from the company they have set up if they wish. Same as for all companies.

I've never seen a comparative analysis of the tax burden for "sole trader" landlords vs limited companies, but I assume that if it was advantageous to landlord through a company then accountants would be pushing it heavily (and I don't believe they are).

This leads me to conclude that landlords are getting a better deal than normal Irish resident limited companies (though worse than vultures) and should STFU moaning about their tax treatment.

I note few landlords and landlord-advocates suggesting that the vultures should be required to pay Irish taxes, instead they are asking for similar tax-free treatment. Don't ask don't get I suppose.

As several posters have pointed out, the idea of corporation tax is that it is applied before profits are taken by individuals (as salary or dividends) who are then additionally taxed on those at whatever rate they pay. The problem with this model is that in the past it's been too easy for the rich to avoid that second application of tax by sheltering profits in off-shore tax havens, and then illegally draw down that money without ever paying personal taxes on it. Given the amount of data sharing now possible (and assistance provided by the likes of the Panama files leak) you'd have to be pretty brave/stupid to try that now.

The problem of the State assisting vultures to dodge tax is more than irritating but we are all being robbed by that carry on. Stephen Donnelly has been fighting the good fight but he's being quite gentle in his criticism and I think that reveals his ambitions for a future finance position in FF/FG.

TheDoc

Point I've made consistently. The accidental/one property landlords were always just an enhanced fad after the boom.

That demographic will always be part of the market, but historically would always be a small portion. The boom changed this, not as large as people assume, but did change it. With the then recession it's normal to expect that to revert back to type.

Experienced, multi property landlords or property agencies have the skillsets, expertise and resources to manage multiple properties and all that contains with it. You only have to look at the landlords that post here and see the confusion about law, rights, best practice and the likes, or the conflict and different views that landlords take about the same situation.

It also shouldn't be underestimated about tenants, the market drivers, wanting more professional and secure relationships and contacts. The wild west market has thrown up some chronic issues, and with the rising cost of rent and the money being discussed, it wouldn't be unexpected for tenants to maybe start looking for more professional and established setups.

I've personally always gone with dealing with landlords directly, as I find that a better relationship for me and there is more wiggle room to be had. But I know people also who will only deal exclusively with an agent or property management company, as they don't feel comfortable dealing with landlords who might be totally inexperienced or ill equipped for this type of service agreement.

TheDoc

antoinolachtnai wrote: »

We desperately need to invest in homes, both upgrading what we have and building more. The government is going to have to incentivise this in some way. Capital allowances seem as good a way as any, and better than most to get regular people to invest.

Government doesn't want, and should not want, Joe Soap just strutting out and buying one property to let.

Government should be looking to insentience large experienced property management groups or consolidations into the market, and I believe that is what they are doing and always have been doing.

Why on earth would they want regular people to invest in property management? Surely if they are going to incentivise, it should be to get experienced, well resourced people in, who can manage multiple properties.

These groups are more receptive and experienced with regulation, standards, best practice and working collaboratively with legislators.

How does the government at present even go about communicating with landlords? I have heard of some LL rep group, but like all rep groups, I'd imagine they don't have full respresntation and claim to represent all landlords, where there will be many who would refute that claim based on a dispute or disagreement with how the representation is done etc.

davindub

I would actually disagree with discouraging small landlords fromantic being in the market. Competition is what is needed and the property market is not subject to the same European protections in regards price signalling / etc.

But I think there are a lot of small Landlords who wI'll remain in the market; the returns overall are worth it. I can't see the supply issue being fixed with the current government system, so lls will continue to get better than inflation gains nearly risk free if you take a long term view of it.

beauf

TheDoc wrote: »

.... if they are going to incentivise, it should be to get experienced, well resourced people in, who can manage multiple properties.

These groups are more receptive and experienced with regulation, standards, best practice and working collaboratively with legislators....

Not sure thats really been the experience. You could argue larger LL's will also be solely fixated on profit to the detriment of the tenant. The same names (and agents) keep popping up with regard to taking advance deposits and retention of same. Not to mention, mass evictions. Sure, due to economy of scale a LL with multiple properties are less exposed to over-holding as losses can be spread over a number of properties.

Property is useful as second income or pension for many. I would agree that the Govt is making it less attractive for the smaller LL. At the same time the provision for social housing is at an all time low. Seems like the Govt are fueling the crisis sometimes. Future planning seems non existent.

Lux23

It doesn't strike me as a particularly profitable business for smaller landlords. I would rather put my money into the post office.

Claw Hammer

Lux23 wrote: »

It doesn't strike me as a particularly profitable business for smaller landlords. I would rather put my money into the post office.

I know a landlord who got a 108% loan to buy a S23 property in 1997. He got tax relief on his interest and got a capital allowance of about 2/3 of the price of the property saving him more than 1/3 of the price of the property in tax. He now pays €80 a month in interest and about €180 a month in service charges. He is charging €1600 per month in rent. The rent has always been enough to meet the repayments with the exception of a year or two during the recent recession. From putting Zero in he owns an asset worth currently about 220k and has a reasonable monthly income. How much would he have put in the post office every month from 1997 to have 220K on deposit how much would he have to have a deposit to make 1200-1300 a month in interest? Allow for taxes and so on if you have to but there is no reality to saying that he would have been better off putting €1250 a month into the post office for the last 19 years than buying the apartment.

CIARAN_BOYLE

Claw Hammer wrote: »

I know a landlord who got a 108% loan to buy a S23 property in 1997. He got tax relief on his interest and got a capital allowance of about 2/3 of the price of the property saving him more than 1/3 of the price of the property in tax. He now pays €80 a month in interest and about €180 a month in service charges. He is charging €1600 per month in rent. The rent has always been enough to meet the repayments with the exception of a year or two during the recent recession. From putting Zero in he owns an asset worth currently about 220k and has a reasonable monthly income. How much would he have put in the post office every month from 1997 to have 220K on deposit how much would he have to have a deposit to make 1200-1300 a month in interest? Allow for taxes and so on if you have to but there is no reality to saying that he would have been better off putting €1250 a month into the post office for the last 19 years than buying the apartment.

Section 23 properties are different though. If a scheme like that came up again we would all be bursting our guts to join.

Claw Hammer

CIARAN_BOYLE wrote: »

Section 23 properties are different though. If a scheme like that came up again we would all be bursting our guts to join.

Even without S23 he put zero in and now has an asset and income.

Rhinohippo

Reading some of the difficulties landlords face and the hassle, I'm beginning to see another side. I have always had sympathy for tenants and still do but it sounds like for many landlords it isn't all plain sailing either. I have no sympathy for landlords with multiple properties but for the person who might have one house, with all the costs, taxes and so on it doesn't seem like a great money spinner.

Baby01032012

CIARAN_BOYLE wrote: »

Section 23 properties are different though. If a scheme like that came up again we would all be bursting our guts to join.

3 bed semi detached houses in the middle of nowhere in Longford were being promoted with s23 relief attaching and being sold for €350k+ in 2005. My father was one of those who took the bait. While he did benefit from tax relief he was left with an asset worth currently circa €70k.

That's relief worked both ways and helped to over inflate the market particularly in non vialble areas.