120k to invest in rental property ? Am i mad ?

The_Conductor

marsbar1 wrote: »

Heres another idea of what to do with your 120K. Buy outside Dublin in the commuter towns eg Longford. You could buy the house cash and still have change, no worry about mortage rates or interest. Get a lot more house for your money too!

Tax on rental income is structured in a manner that makes debt the important cost allowable before calculation of taxable income. If you buy in cash- you don't have associated debt against which to shelter your rental income- and you could potentially end up paying up to 54% tax and deductions on rental income.

I think its bizarre that anyone (not just landlords) is allowed shelter income by taking on debt- however, globally, thats the system we have to work with. A far fairer system in my eyes- would be paying tax as a set percentage of gross income- with no deductions for any company, entity or private individual- and no special treatment of any vested group.

Also- what the hell is the deal with Longford being considered a 'commuter town'? Are we really back at that nonsense again?

Lumen

The_Conductor wrote: »

Tax on rental income is structured in a manner that makes debt the important cost allowable before calculation of taxable income. If you buy in cash- you don't have associated debt against which to shelter your rental income- and you could potentially end up paying up to 54% tax and deductions on rental income.

I think its bizarre that anyone (not just landlords) is allowed shelter income by taking on debt- however, globally, thats the system we have to work with. A far fairer system in my eyes- would be paying tax as a set percentage of gross income- with no deductions for any company, entity or private individual- and no special treatment of any vested group.

It's only bizarre if you use the word "sheltering" and substitute "income" for "revenue".

As I understand it, "sheltering" is normally meant in tax terms to be where you take one income stream and stick it into another investment (e.g. film finance) to reduce the overall tax paid. That's not the case with interest on an investor mortgage.

Profit is income. If I buy a rental property with debt and the interest swallows the entire rent, then I haven't made any profit so there's no income to tax. The rent is just revenue, and we generally don't tax revenue (if we want to do that we should have VAT on rent). I've gained nothing except the possibility of future capital gains (if prices rise) or future income (if rents rise), but we don't tax possibility.

maryishere

marsbar1 wrote: »

Heres another idea of what to do with your 120K. Buy outside Dublin in the commuter towns eg Longford. You could buy the house cash and still have change, no worry about mortage rates or interest. Get a lot more house for your money too!

+1. You could buy 2 houses in parts of the midlands / west for 60k each, rent them out to young Gardai nurses etc ( people with secure income ), and be quite happy. Given construction costs, there is more scope for price appreciation in Longford, Leitrim etc than Dublin surely.

athtrasna

Mod note

Posters are asked to remain on topic. The OP has asked about buying in Dublin and following advice is considering the rent a room scheme.

Posts about Longford and 2006 are unhelpful.

benjamin d

athtrasna wrote: »

Mod note

Posters are asked to remain on topic. The OP has asked about buying in Dublin and following advice is considering the rent a room scheme.

Posts about Longford and 2006 are unhelpful.

He was asking for investment advice and people gave suggestions.

<mod snip: on thread discussion of moderation is a breach of forum rules>

marsbar1

The_Conductor wrote: »

Tax on rental income is structured in a manner that makes debt the important cost allowable before calculation of taxable income. If you buy in cash- you don't have associated debt against which to shelter your rental income- and you could potentially end up paying up to 54% tax and deductions on rental income.

I think its bizarre that anyone (not just landlords) is allowed shelter income by taking on debt- however, globally, thats the system we have to work with. A far fairer system in my eyes- would be paying tax as a set percentage of gross income- with no deductions for any company, entity or private individual- and no special treatment of any vested group.

Also- what the hell is the deal with Longford being considered a 'commuter town'? Are we really back at that nonsense again?

I don't see how that would happen unless you had an awful lot of properties and/or a high salary. Its 20% tax, thats it otherwise.

Many do commute to Dublin from places like Athlone, Kilkenny and Longford. Dublin is not where Ireland stops.

marsbar1

maryishere wrote: »

+1. You could buy 2 houses in parts of the midlands / west for 60k each, rent them out to young Gardai nurses etc ( people with secure income ), and be quite happy. Given construction costs, there is more scope for price appreciation in Longford, Leitrim etc than Dublin surely.

This is true. Dublin surely has peaked and if there is another housing crash you would have a lot to lose. Dublin has gone up an awful lot quite unrealistically, people have short memories and seem to have learnt nothing from the boom and bust.

Denny_Crane

marsbar1 wrote: »

I don't see how that would happen unless you had an awful lot of properties and/or a high salary. Its 20% tax, thats it otherwise.

Many do commute to Dublin from places like Athlone, Kilkenny and Longford. Dublin is not where Ireland stops.

You don't have to have a high household income to hit the higher tax band. In fact given the industrial average wage in Dublin it's unlikely you wouldn't hit the higher band with rental income.

I think what was being driven at is that a commute from Longford to Dublin is ridiculous. It goes on and people were forced into it, however the term nonsense when applied to it or indeed trying to suggest anyone should engage in it seems pretty apt.