Renting a newly purchased house

downtheroad

Hi,

I am considering buying a house that I would not intend to move into myself for at least a year. My idea is to buy now and rent the house for the next and then move in. I know I will have to register with PRTB etc. The house was previously rented but that tenant has left and it is now empty. I am wondering would the rent by subject to the 4% increase under the RPZ rules, or can I set a new rent amount as I would be a new owner of the house.

Also is there anything else that I should take into consideration for this idea?

amcalester

If the property is in a RPZ then you will be bound by the 4% increase.

The biggest thing to consider is what you will do if the tenant decides to overhold in 12 months.

downtheroad

Thanks Amcalester

Is it the PRTB who would monitor the price I would set the rent at? I understand that the previous tenant had a very favourable rent, well below market value, as they had been in the property for several years and had a good relationship with the person that is selling the house.

I would have any tenant sign a 12 month lease. Is it possible that they can just not leave the property once the lease expires?

amcalester

downtheroad wrote: »

Thanks Amcalester

Is it the PRTB who would monitor the price I would set the rent at? I understand that the previous tenant had a very favourable rent, well below market value, as they had been in the property for several years and had a good relationship with the person that is selling the house.

I would have any tenant sign a 12 month lease. Is it possible that they can just not leave the property once the lease expires?

I don't think anyone is actually monitoring the previous rental price, but regardless you are bound by it.

Rent arrears/Rent arrears and overholding was the top dispute at the RTB in 2016 so take from that what you want.

Graham

downtheroad wrote: »

I would have any tenant sign a 12 month lease. Is it possible that they can just not leave the property once the lease expires?

Tenants acquire part 4 rights after 6 months which your lease cannot override. Once this happens you can only end the tenancy under very specific circumstances.

It's worth spending some time familiarising yourself with all of the information on the RTB website from both a landlord and tenant perspective. To do otherwise could see you make a very costly mistake.

It's also worth pointing out that although rent arrears/overholding may be the main RTB disputes, it is a relatively small number of tenancies that results in either.

Del2005

Once they are resident for 6 months they get Part 4 tenancy which allows them 6 years. You can reject their Part 4 but if they don't move it'll be a year at least before you get your property back and there is no realistic way to get the back rent or any damage from the tenants.

Mike3549

But if landlord wants to move into property himself, its one of allowed reasons to terminate the lease early. Also dont forget that taxman will take half of the rent money received

Giblet

If the property has been off the rental market for 2 years (ie: without a sitting tenant), you can ignore the 4% RPZ restriction.

pilly

downtheroad wrote: »

Thanks Amcalester

Is it the PRTB who would monitor the price I would set the rent at? I understand that the previous tenant had a very favourable rent, well below market value, as they had been in the property for several years and had a good relationship with the person that is selling the house.

I would have any tenant sign a 12 month lease. Is it possible that they can just not leave the property once the lease expires?

It's very possible so it's a risk to consider. Just be very very careful in picking the tenants and make sure they know that's it's only for a year and no more. Or you could consider doing 2 six month leases but not to the same person.

If I'm honest I wouldn't do it for the return you'd get it's not worth the hassle or worry imo.

For what reason would you not be moving in yourself, may I ask?

Claw Hammer

Tenants are like rats. They will kiss your ass to get into the property and then act the maggot. They will call in the RTB, the Local Authority, the Revenue, solicitors an d sundry others and abuse you and the property. When they have you turned into a nervous wreck they will then try and buy the property on the cheap. Have nothing to do with them.

downtheroad

pilly wrote: »

It's very possible so it's a risk to consider. Just be very very careful in picking the tenants and make sure they know that's it's only for a year and no more. Or you could consider doing 2 six month leases but not to the same person.

If I'm honest I wouldn't do it for the return you'd get it's not worth the hassle or worry imo.

For what reason would you not be moving in yourself, may I ask?

I'm not currently living in Ireland but plan to move home in a year, or possibly longer, and have an opportunity now to buy a house that I like and don't want to miss the opportunity to buy it. Rather than leaving it idle for the next year I thought it would make more sense to rent it to help pay the mortgage for the time that I am not living in it.

pilly

downtheroad wrote: »

I'm not currently living in Ireland but plan to move home in a year, or possibly longer, and have an opportunity now to buy a house that I like and don't want to miss the opportunity to buy it. Rather than leaving it idle for the next year I thought it would make more sense to rent it to help pay the mortgage for the time that I am not living in it.

Hmm, that makes it even more difficult to be honest in that you'd have to manage it from abroad. You could employ an agent to do it but just take account of all the risks everyone has mentioned.

downtheroad

Thanks everyone so far for the advice. I should have said that 1 year is the minimum time I would be renting it for, there is a possibility that I could stay living abroad for 2 or 3 years, and the way property in the area is rising I don't think I could afford to buy a similar house 3 years from now, that's why I am looking at this option.

Of course property could fall in value in the area in that time also, but I just don't see it happening. This house is in Dublin not far from the city centre.

I did see on the Citizens Information website that The landlord can end a Part 4 tenancy if the landlord needs the property for their own use or for an immediate family member (this only applies to private landlords) - this sounds like it applies to my example. I would definitely use an agent to manage the letting.

pilly

downtheroad wrote: »

Thanks everyone so far for the advice. I should have said that 1 year is the minimum time I would be renting it for, there is a possibility that I could stay living abroad for 2 or 3 years, and the way property in the area is rising I don't think I could afford to buy a similar house 3 years from now, that's why I am looking at this option.

Of course property could fall in value in the area in that time also, but I just don't see it happening. This house is in Dublin not far from the city centre.

I did see on the Citizens Information website that The landlord can end a Part 4 tenancy if the landlord needs the property for their own use or for an immediate family member (this only applies to private landlords) - this sounds like it applies to my example. I would definitely use an agent to manage the letting.

Yes that's correct but if a tenant decides they don't want to move either way that's when you have your problem.

You also may have trouble getting a mortgage when you're not living here.

dancingqueen

You can use a fixed term lease. When that ends, you can either renew it with another, or move in yourself. I am on a 12 month fixed term lease now, and have been in the past also. It isn't ideal as a tenant but as a landlord it means you have greater control over the length of time your tenants can stay in the property.

https://www.rtb.ie/dispute-resolution/dispute-resolution/terminating-a-fixed-term-tenancy

Caliden

Don't rent out the entire house.

Rent rooms so it's a licencee agreement.

pilly

dancingqueen wrote:

You can use a fixed term lease. When that ends, you can either renew it with another, or move in yourself. I am on a 12 month fixed term lease now, and have been in the past also. It isn't ideal as a tenant but as a landlord it means you have greater control over the length of time your tenants can stay in the property.

Part 4 trumps a fixed term lease, doesn't matter.

downtheroad

Thanks everybody, giving me plenty to think about here on what is the best way to proceed.

Another option I had considered was renting the property directly to the likes of google, as I would expect them to be law abiding when it comes to me requiring the property back for myself. Does anybody have any experience with this, how to go about it?

Cina

Just to chirp in, as someone who just purchased an apartment and has aspirations/delusions of maybe living abroad for a while at some point, or maybe somewhere else - it sounds like renting the apartment out to tenants would be a potential nightmare?

pilly

Cina wrote: »

Just to chirp in, as someone who just purchased an apartment and has aspirations/delusions of maybe living abroad for a while at some point, or maybe somewhere else - it sounds like renting the apartment out to tenants would be a potential nightmare?

Potential I suppose is the operative word. You could get great tenants, you could get nightmares. It's a lottery.

My advice would be only do it if you can afford not to have the rent coming in.

The_Conductor

Only let out a property- if you can afford not to get paid for a protracted period of time.
Fixed term leases- mean absolutely nothing- a Part IV provision under the Residential Tenancies Act- trumps any fixed term provisions- once the tenant has been in situ for 6 months.
You can end a tenancy if you intend to move in yourself- however, it can still take you 2 years + to get the property back (during which time you are expected to maintain the property- regardless of whether the tenant is paying rent, or not). The Residents Tenancy Board- guarantee you a hearing within 12 weeks- however, this is simply the first step in the process of getting your property back- and the tenant is entitled to appeal every single step- all the way- allowing for deadlines- this can take up to 28 months (if the tenant simply keeps with deadlines).

As for a mortgage to buy such a property- as a non-resident- you will find it incredibly difficult to get a mortgage (unless you get a mortgage before you leave the country of course)- or you have the means to pay for the unit in cash.

Finally- agents for managing tenancies- are falling by the wayside- several of the larger property managment agencies are not taking on new clients- as even with higher fees- its simply implausible to operate in the current regulatory regime. Some national agencies toyed with upping management fees to 20%- but simply decided to get out of the business altogether- as it became impossible to chase moving targets- in the current environment.

In short- and this is a personal opinion- you'd be nuts to even consider what you're proposing. The cards are stacked firmly against you- in the eyes of the law- you have few if any rights, regardless of whether, or not, the tenant decides to pay their rent- and if they don't- it can still take over 2 years to get your property back.

The only way this makes sense is if you can afford to carry a tenant and live somewhere else- even after you come back- the presumption that you can simply ask for your property back to live in- and the tenant will meekly leave- letting you live happily ever after- is naive in the extreme.

pansophelia

I've been a tenant for years and have just bought my first property.
Hundreds of thousands of people in this country rent, and the majority are decent and will not withhold rent or overhold. I work in an industry of young professionals, the vast majority of whom rent, without any difficulty on either side.
Looking briefly at the rtb website, yes there are about 50 cases this year of overholding that have been adjudicated on - but this represents a very small percentage of the number renting. I agree that a major problem is that any adjudication does not appear to be legally binding.
Overall, this will likely work out just fine without any difficulties, as it does for most tenant-landlord relationships. You do need to go in with your eyes open, and consider how all aspects of managing the property will be dealt with even if you have an agent eg. any breakages, damage to property, frequency of inspection etc. I would strongly recommend meeting any potential tenants and not relying on an agent to choose them. Obviously check up on references. Give plenty of notice of when you are planning to move back - ideally giving a moving out date of a month or two prior to when you actually need to take possession to allow for any problems. I have several friends and family members renting out property - overall no difficulties, the commonest complaint I hear is that the place isn't looked after like it's their own, but that's because it's not their own.
Again, as mentioned, you need to not be completely relying on the rent money to pay the mortgage - just in case.
I've just come through a long and difficult purchasing process - if you've found a house that's right for you now, you're probably right to jump at the chance.

Claw Hammer

dancingqueen wrote: »

You can use a fixed term lease. When that ends, you can either renew it with another, or move in yourself. I am on a 12 month fixed term lease now, and have been in the past also. It isn't ideal as a tenant but as a landlord it means you have greater control over the length of time your tenants can stay in the property.

https://www.rtb.ie/dispute-resolution/dispute-resolution/terminating-a-fixed-term-tenancy

When the fixed term lease ends the landlord has to issue a notice of termination. The notice of termination can't be incorporated in the lease. A fixed term lease is no better for the landlord than no lease from the point of view of recovering possession.

sbsquarepants

Graham wrote: »

Tenants acquire part 4 rights after 6 months which your lease cannot override. Once this happens you can only end the tenancy under very specific circumstances.

.

What happens after 6 years is up?
After renting for 6 years and 1 month are you legally back to the same position as if you'd been renting for just the 1 month?

Also to read some of the posts on this forum you'd swear that renting out a house / apartment is akin to throwing your life savings in the fire.

Surely things cannot be that bad??

Roaving bands of tenants, scouring the country and hijacking the buildings of unsuspecting landlords for years on end with the full support of the government!

Claw Hammer

sbsquarepants wrote: »

What happens after 6 years is up?
After renting for 6 years and 1 month are you legally back to the same position as if you'd been renting for just the 1 month?

Also to read some of the posts on this forum you'd swear that renting out a house / apartment is akin to throwing your life savings in the fire.

Surely things cannot be that bad??

Roaving bands of tenants, scouring the country and hijacking the buildings of unsuspecting landlords for years on end with full support of the government!

A further part 4 tenancy will have started. The notice periods for termination also increase each year up to 8 years.

sbsquarepants

Claw Hammer wrote: »

A further part 4 tenancy will have started. The notice periods for termination also increase each year p to 6 years.

So, once a tenant is in place for more than 6 months, they can legally stay for a further 5 and a half years if they choose?
Except under a few specific circumstances that is.

Claw Hammer

sbsquarepants wrote: »

So, once a tenant is in place for more than 6 months, they can legally stay for a further 5 and a half years if they choose?
Except under a few specific circumstances that is.

Yes, unless the Section 34 grounds apply.

sbsquarepants

Jesus, that is scary!

Would one of those grounds be simply that the owner wanted to sell?

Claw Hammer

sbsquarepants wrote: »

Jesus, that is scary!

Would one of those grounds be simply that the owner wanted to sell?

Yes.

pilly

sbsquarepants wrote: »

What happens after 6 years is up?
After renting for 6 years and 1 month are you legally back to the same position as if you'd been renting for just the 1 month?

Also to read some of the posts on this forum you'd swear that renting out a house / apartment is akin to throwing your life savings in the fire.

Surely things cannot be that bad??

Roaving bands of tenants, scouring the country and hijacking the buildings of unsuspecting landlords for years on end with the full support of the government!

You sum it up fairly well, in fact housing associations including councils are advising people to overhold believe it or not.

sbsquarepants

Claw Hammer wrote: »

Yes.

That's not as bad I suppose.
Still fairly outrageous though, that legally a tenant can just refuse to move out after their lease expires!

pilly wrote: »

You sum it up fairly well, in fact housing associations including councils are advising people to overhold believe it or not.

Sure why wouldn't they if the law supports it.
Surely it's the law itself that's crazy, not the groups advocating it be utilised.