Property Market 2017

TiNcAn

Thanks for the advice thus far. Concerning the tax, this is actually something that would be in my advantage because my income abroad would not be counted so the tax would be in the lower bracket of 20%. I am obliged to inform the tenant that they need to withhold the 'taxable' part of the rent, unless I have some sort of management agent then it would be business as usual. So I have considered this already in my calculations.

Problems such as bad tenants are really my main concern. Bad tenants are very difficult to deal with but they are only a small population of the rental market, but it is still correct that there will always be that uncertainty. Despite this I believe that I should be able to most things from abroad that I could do back home. And my family have offered there support if there is any thing that needs to be done "hands-on". But again, its a risk but I don't know how big of a risk.

What are the advantages of not buying now rather than when I get back? One obvious one that comes to mind is the continuing increase in house prices. Granted, this is a double edge sword and very hard predict which way things will go. But my feeling is that the prices may rise a bit more in the next 1-2 years, then flatten out once the interest rates rise and some more supply comes on line with the net result that the house prices will be approximately the same in 3-4 years time. I could be 100% wrong here but that's just my opinion.

Samuel T. Cogley

OwlsZat wrote: »

My landlord told us he's selling our apt (3 bed apt sold in last 6 months for 400, and 425k) because his accountant told him too. Reckons he's getting 700k from some lads who are going to Airbnb it. When will the revenue end the tax free rent scam. Either way he's surely still well wide of the mark.

AirBnB let's are taxable.

myshirt

You have it completely wrong. Completely wrong. The tenant will withold at 20%, but 20% is absolutely not your bill.

dubrov

myshirt wrote:

You have it completely wrong. Completely wrong. The tenant will withold at 20%, but 20% is absolutely not your bill.

I assume you mean it will be less than 20% as expenses will be deducted before tax is applied

The_Conductor

Keep in mind- your Irish rental income- is taxable income in the country in which you are tax resident- if the country has reciprochal tax arrangements with Ireland (and there are very few countries that we don't have reciprochal arrangements with these days).

I.e. after you pay your Irish tax- you have to declare the rental income in (lets say Germany for arguments sake)- and it is taxed at whatever the appropriate rate is for the country in which you are tax resident- with the Irish portion of the tax you have already paid, offset against the tax due on the rental income in the country in which you are currently resident............

Once you have settled the Irish leg of your taxes- you still have to sort taxes on your Irish rental income- in the country in which you're currently resident.

TiNcAn

@Conductor: Is this actually the case? I am in fact living in Germany and from what I have read I would only pay taxes on the rental income in Ireland and would not have an effect on my income in Germany. This would amount surely to double taxation?

Do you have any sources where I could refer to?

Baby01032012

dubrov wrote: »

I assume you mean it will be less than 20% as expenses will be deducted before tax is applied

He means tenants withholds 20% for Irish revenue. Your effective tax rate will depend on country you love the tax rate there your other income as It would be the same where ever you're resident you will be liable to income tax in your world wide income. On assumption that country has a tax treaty with Ireland you'll get a tax credit for the withholding tax you've paid in Ireland.

The_Conductor

TiNcAn wrote: »

@Conductor: Is this actually the case? I am in fact living in Germany and from what I have read I would only pay taxes on the rental income in Ireland and would not have an effect on my income in Germany. This would amount surely to double taxation?

Do you have any sources where I could refer to?

I only took a wild guess it was Germany- sorry, not stalking you........
Toytown and a few other websites have reasonable discussions and good worked examples you can draw on- however, you have to keep in mind the 2010-2012 EU cases against Germany and its manner of taxing rental income in other EU countries (which even now continue to rumble in the undergrowth).

An example of a reasonable thread to read to get an idea of the situation is here: https://www.toytowngermany.com/forum/topic/195455-rental-income-loss-from-property-outside-germany/

(ignore the fact that its harping on about losses- look at the manner in which the income itself is accounted for).

Your German income tax due on your Irish rental income- is reduced by whatever Irish income tax you pay on your Irish rental income.

The_Conductor

Baby01032012 wrote: »

He means tenants withholds 20% for Irish revenue. Your effective tax rate will depend on country you love the tax rate there your other income as It would be the same where ever you're resident you will be liable to income tax in your world wide income. On assumption that country has a tax treaty with Ireland you'll get a tax credit for the withholding tax you've paid in Ireland.

Note- the poster may have further tax due in Ireland- other than the 20% witholding tax the tenants pay- i.e. you cannot say that their tax in Ireland on their rental income is 20%. The entire sum paid though- can be offset against their tax on rental income in Germany (not just the Irish rental income- any rental income from anywhere in Europe- note- not from outside the EU).

If the Irish tax paid is higher than the German tax owed on the rental income- you do not get a credit on your German tax bill to reflect the lower tax due on the income in Germany- than actually paid in Ireland- you can, however, offset the additional tax paid on the Irish income- against tax due on other rental income (only rental income) on your German tax return.

Big expense that you are allowed on your German rental tax return- but *not* Irish- is the property itself is depreciated @ 2% per annum as an allowable expense.

Yourself isit

Bob24 wrote: »

To make it clear maybe replace "investors" by "individual landlords".

Fully agree with what you said but governement policies do favour property price speculators, banks, and developers ... which can all to some extend be considered as investors in the property market (on top of REITs which as you mentioned are treated differently for individual landlord).

Corporations are alwats treated differently to individuals. You might as well complain about apples tax take relative to yours.

Yourself isit

The_Conductor wrote: »

Note- the poster may have further tax due in Ireland- other than the 20% witholding tax the tenants pay- i.e. you cannot say that their tax in Ireland on their rental income is 20%. The entire sum paid though- can be offset against their tax on rental income in Germany (not just the Irish rental income- any rental income from anywhere in Europe- note- not from outside the EU).

If the Irish tax paid is higher than the German tax owed on the rental income- you do not get a credit on your German tax bill to reflect the lower tax due on the income in Germany- than actually paid in Ireland- you can, however, offset the additional tax paid on the Irish income- against tax due on other rental income (only rental income) on your German tax return.

Big expense that you are allowed on your German rental tax return- but *not* Irish- is the property itself is depreciated @ 2% per annum as an allowable expense.

A German friend recently told me that. Property doesn't depreciate though.

The_Conductor

Yourself isit wrote: »

A German friend recently told me that. Property doesn't depreciate though.

No, of course it doesn't- they get you in the end though- if/when you dispose of the property- CAT/CAG can be quite onerous.

Its a generous cost though on the day to day cost of ownership- and a reflection that its not fair to treat rental income as 'unearned income'.

Bob24

Yourself isit wrote: »

Corporations are alwats treated differently to individuals. You might as well complain about apples tax take relative to yours.

Where did I say I have a problem with corporations being treated differently from individuals as such?

What I said is that governement policies favour institutional landlords much more than individual landlords.

Without requesting equal treatment people are free to agree with these policies or to think they are misguided.

Bob24

TiNcAn wrote: »

This seems like no better place than other on the internet to ask for advice about the decision I am faced with. So here goes.

I am living abroad for the last 5 years and I am in the position that I can afford a house in Dublin with a buy-to-let mortgage. My intention would be a some point in the medium term to come back to Ireland (although I can't say when) so I would like to have a place to come back to. So the idea would be to rent the house for a few years until I return. Over the past 4 months I have been doing my own research and reading into what is involved in being and landlord and have been trawling many forms for quite a while now.

So I think I have a fair idea what to expect on the financial side of things, but realize there is a lot more to it than that. And the only way to really know is to do it myself, and know that it could a quite a handful to say the least.

So I here I am wondering if this makes sense. Based on my figures the house would pay for itself even when I take some pretty conservative assumptions (e.g. interest rates, lost rate), but not much past that in the worst case. The upside is that I would be on the property ladder, peace of mind that I have a place to go back to.

What you would do if you were in my situation?

I am in the "opposite" situation living in Ireland and having a rental property abroad.

If you do it make sure you have someone in Ireland you trust and you don't mind calling for favours regularily. There are limits to what an estate agent will do for you and sometimes there will be situations where you need to sort things yourself (possibly requiring someone being physically present).

Also of course it depends on the national laws of the country where you reside and the country where you own property as well as tax agreements, but my impression is that in general if you manage your tax affairs by the books (which you should) you will get screwed to some extend (each country's tax system is often engineered so that through a combination of taxes and tax credits landlord end-up being ok, but when you are half in each country you will sometimes end-up being liable for some of the taxes but not for the tax credits aimed as rebalancing them, or paying more tax than resident landlords while not being able to vet higher rents.

Overall I don't think it's worth the trouble and I wouldn't do it again (I have actually put my property up for sale).

What I would say is to consider it only if your main reason is that you plan to come back to Ireland and you want to secure a property now as you are afraid price will rise and you won't be able to afford it in the future (I don't know if it's valid thinking, but that's a reason I could definitely understand).

If your main goal is to invest your money, I think you'd better find investsment products aimed at residents of Germany which will not involve havi to address issues in Ireland and will keep your tax affairs simpler. I am not familiar with Germany but I imagine you will find things which offer at least similar return to Irish property if you pick investment products with similar risk level.

TiNcAn

@Bob24: I presume you meant "I don't think it's worth the trouble..."

My main goal would be to have a place to move back with the security in case prices continue escalate. I looked into purchasing an apartment here but the sunk costs for purchasing property is quite substantial, typically in the range of 12% in a country where the rent is already quite low. There are also costs associated with selling a property that need to be taken into account. You could say Germany has a better functioning property market where the rents are lower and it is not geared towards buy/selling properties so readily (a 'home-for-life' you could say).

I have to date put my savings into a different savings funds but with paltry returns of ~1.4%. So I wanted to do something more useful and buy something for the future. The advice so far has been very helpful and I have a lot of food for thought.

Bob24

TiNcAn wrote: »

@Bob24: I presume you meant "I don't think it's worth the trouble..."

Yes, sorry!

TiNcAn

@Bob24: Just for my own curiosity, did you buy for investment or personal reasons?

Bob24

TiNcAn wrote: »

@Bob24: Just for my own curiosity, did you buy for investment or personal reasons?

Investment. It's a fairly cheap property (small studio apartment worth around 50k in a medium sized European city not far from where my parents live) as I wanted to give it a try without taking too much risk and I knew there was someone nearby who could represent me if needed.

I don't need to get the money and would be in a position to easily buy another one, but 10 years down the road my personal experience tells me it is not worth it for me and I've put it up for sale planning to invest the money elsewher (but again it will depend on people's situations).

keane2097

TiNcAn wrote: »

@Bob24: I presume you meant "I don't think it's worth the trouble..."

My main goal would be to have a place to move back with the security in case prices continue escalate. I looked into purchasing an apartment here but the sunk costs for purchasing property is quite substantial, typically in the range of 12% in a country where the rent is already quite low. There are also costs associated with selling a property that need to be taken into account. You could say Germany has a better functioning property market where the rents are lower and it is not geared towards buy/selling properties so readily (a 'home-for-life' you could say).

I have to date put my savings into a different savings funds but with paltry returns of ~1.4%. So I wanted to do something more useful and buy something for the future. The advice so far has been very helpful and I have a lot of food for thought.

If I were you I'd be putting my money in index funds rather than trying to faff around with absentee landlording and the ball-breaking tax system that goes with it for the sake of an investment.

TiNcAn

@keane2097: What return would you expect with index funds as an idea? Just to compare with that from renting.

q85dw7osi4lebg

TiNcAn wrote: »

@keane2097: What return would you expect with index funds as an idea? Just to compare with that from renting.

You should be aiming for 9% annually over a very long period.

TiNcAn

As in 5, 10, 20 years?
Sorry to go so far off topic.

q85dw7osi4lebg

TiNcAn wrote: »

As in 5, 10, 20 years?
Sorry to go so far off topic.

20 +, the risk (as with property) is that you find yourself needing to liquidate in the middle of a terrible recession, at which point you may have even made a loss (although unlikely).

keane2097

Even if you just like the idea of property then buying equity in an Irish REIT seems like a million times less hassle than trying to look after a rental from abroad.

dubrov

keane2097 wrote:

Even if you just like the idea of property then buying equity in an Irish REIT seems like a million times less hassle than trying to look after a rental from abroad.

It is less hassle but there are considerable management fees. You need to decide how you value your time as a landlord.

keane2097

dubrov wrote: »

It is less hassle but there are considerable management fees. You need to decide how you value your time as a landlord.

Ah yeah if that's still a problem then don't bother with the Irish ones. I wouldn't bother with them in favour of indices myself full stop.

Just trying to suggest a food for thought alternative to putting all your eggs into the basket of a single property that you won't be anywhere near for the OP anyway if the main reason for doing so was to get a better return than a savings account.

If the OP is committed to the idea of buying a property then that's fair enough

Graham

If the purpose of the OPs purchase is to secure a property for an eventual return to Ireland, I struggle to think of any more secure approach than acquiring a property.

That's not to say acquiring a property and renting it in the meantime is a flawless plan but it's probably the only one that's pretty much guarantees a property at the end of it.

Bob24

Graham wrote: »

If the purpose of the OPs purchase is to secure a property for an eventual return to Ireland, I struggle to think of any more secure approach than acquiring a property.

That's not to say acquiring a property and renting it in the meantime is a flawless plan but it's probably the only one that's pretty much guarantees a property at the end of it.

Surely.

Having said that I think the OP is right in seeking advice and thinking carefully about the risks and new responsibilities associated to that approach. They need to make sure this is really what they want and they accept both potential positive and negative consequences (beyond landlord's responsabilities described above, presumably if it is a property they are planning to live in in the future it will be a large enough one hence a fairly big investment - if for any reason there is another property crash and they realise their life is not leading them back to Ireland anymore they could for exemple end-up being stuck with having to remotely manage that property here without having enough funds available to purchase one in the other country they are settling in).

LiamoSail

If the OP lives abroad, I believe his/her Irish rental income will only be taxed at the lower rate, assuming he/she has no other Irish income

q85dw7osi4lebg

LiamoSail wrote: »

If the OP lives abroad, I believe his/her Irish rental income will only be taxed at the lower rate, assuming he/she has no other Irish income

20% and can be taxed at source (agent). Banana republic