Owner Occupier renting out rooms

Maz2016

I am looking at getting a mortgage for an apartment in Limerick. If I get the apartment (3 Bed) , I was thinking of renting out one or 2 of the rooms for a year or two to help me with initial costs such as buying new TVs, furnishings, redecorating etc. Has anyone else done this and if so can you offer any advice?

Kristopherus

Have a look at the Revenue website for the tax implications. Do a search for "Rent-a-room" on it.

redbel05

In the situation that you describe, the people renting out rooms from you are called licensees, and they don't have the same rights that a tenant would have under the Residential tenancies act. Pro's: You don't have to register with RTB, no minimum standards of accommodation, and a lot easier to get troublesome renters out.
Cons: The lack of tenancy rights and the fear that an owner occupier would create a more restrictive living environment makes this kind of accommodation less desirable to potential tenants/licensees. If its a very popular area though, I wouldn't be too worried about this.

The other plus is that you would be eligible for the rent-a-room tax relief which basically lets you earn up to €14,000 per year tax free. It should be noted though that its only for longer term licenses (eg. Students), and if they are giving you money for electricity/ heating/ cleaner bills etc that are in your name, this would also go towards the €14,000. Once you go over that amount, the full amount less expenses is treated like normal income for tax purposes.

Maz2016

redbel05 wrote: »

In the situation that you describe, the people renting out rooms from you are called licensees, and they don't have the same rights that a tenant would have under the Residential tenancies act. Pro's: You don't have to register with RTB, no minimum standards of accommodation, and a lot easier to get troublesome renters out.
Cons: The lack of tenancy rights and the fear that an owner occupier would create a more restrictive living environment makes this kind of accommodation less desirable to potential tenants/licensees. If its a very popular area though, I wouldn't be too worried about this.

The other plus is that you would be eligible for the rent-a-room tax relief which basically lets you earn up to €14,000 per year tax free. It should be noted though that its only for longer term licenses (eg. Students), and if they are giving you money for electricity/ heating/ cleaner bills etc that are in your name, this would also go towards the €14,000. Once you go over that amount, the full amount less expenses is treated like normal income for tax purposes.

Extremely helpful, thank you. Yes it's a very popular area, walking distance to hospital, schools, offices, shopping centre bus stops etc. It's even difficult to find rooms to rent in the area at times so I should be ok. Appreciate you taking the time to write that

The_Conductor

The Rent-a-room scheme is very worthwhile- however, one little point you have to be aware of- while you can earn 14,000 per annum tax free on the scheme- once you go a single penny over the 14,000, the entire sum becomes taxable. Also- the 14k is the entire income- not earnings under the scheme- so if you take a contribution towards bills (TV, electricity, gas, internet- whatever)- the amount you collect towards the bills- also counts towards the 14k...........

Anyhow- what you're suggesting is very worthwhile.

Maz2016

The_Conductor wrote: »

The Rent-a-room scheme is very worthwhile- however, one little point you have to be aware of- while you can earn 14,000 per annum tax free on the scheme- once you go a single penny over the 14,000, the entire sum becomes taxable. Also- the 14k is the entire income- not earnings under the scheme- so if you take a contribution towards bills (TV, electricity, gas, internet- whatever)- the amount you collect towards the bills- also counts towards the 14k...........

Anyhow- what you're suggesting is very worthwhile.

Thanks for the info it is really helpful. It's made things a lot clearer for me. It's an option I am now seriously considering. It'll give me the best possible start. I took a quick look around and there's often doctors/ hospital staff looking for 6 month rents. Think that'd be ideal

Samuel T. Cogley

In a 3 bed take on one person, not two IMHO. You'll feel like a guest in your own home otherwise. The golden rule applies, treat others how you'd like to be treated when letting, I've seen far too many people rent because they had too, and it shows in how they treated the tenant.

Spend the money on tangibles and don't let it become day-to-day income: This was by far the best piece of advice I was given and I like to pass it on. It's alot easier to share your space when you knew it bought you that TV, or that Oven or the price of a painter and decorator. It's looks like you're doing that anyway.

RAR (Rent a Room) is a great scheme but bear in mind RAR income won't be considered for a mortgage (it used to) and that although it's tax free it still has to be declared.

Best of luck!

myshirt

The only point to mention is that the bank will not take this income into account when assessing if you can afford the Mortgage.

Other than that, go for it. As others have said, charge a plain vanilla flat rent with bills included.

Samuel T. Cogley

On bills I prefer to include all except Gas/Electric as I feel it keeps people honest about heating etc. Factor in Sky Multiscreen or similar and put a TV in the room being rented so you can keep control of the TV in the livingroom. I've never had a tenant come and sit with us in the livingroom, they'd be more than welcome, but you never know and if they have a TV and yours is in the livingroom - you get to pick :pac:

Maz2016

Samuel T. Cogley wrote: »

On bills I prefer to include all except Gas/Electric as I feel it keeps people honest about heating etc. Factor in Sky Multiscreen or similar and put a TV in the room being rented so you can keep control of the TV in the livingroom. I've never had a tenant come and sit with us in the livingroom, they'd be more than welcome, but you never know and if they have a TV and yours is in the livingroom - you get to pick :pac:

Good advice 😄 And thankfully I have 2 32inch tv's