Long term lease to Local Authority - Pros & Cons

goofy141

Has anyone done this on a 10/20 year lease, and can give me the pros & cons?

Many thanks,

hawkelady

I've done it and my advise is do not contemplate it. If you read my other thread , the council will be happy for tenants to overhold and pass the blame. Also , why would you be happy with 80% market rate in this day and age. Also remember the type of tenant that the council houses, before I get my head bitten off , not all council tenants are bad but if 10% have zero respect that a risk you take cause the council will provide the tenants and you will have no real say into who gets to live there. IMO , do not do it

stargazer 68

If your circumstances change OP it is practically impossible to get your property back for yourself.

It can be done but it has taken my sister months and she is still waiting.

murphaph

The council's idea of market rates are also way off. I got offered 1400 for RAS (so supposedly 90% of market value) for a property that got 2k on the open market.

jimmycrackcorm

Once you do a long-term lease then you will have no opportunity to maximise the revenue opportunity for your property. The only possible upside would be where there was a glut of property supply and you could guarantee rental income, but you'd be crazy to do it and even fix rental income in a restrictive council payment scheme long term.

Constitutional property rights for landlords are being constantly eroded. The government caps rent increases, but would never enable a floor in a scenario like a post tiger bust. On top of that, you're screwed for tax, both on 52% rental income and then capital gains. You still get all the hassle for under the market rent.

Unless you struggle to find tenants, why bother?

circular flexing

You will likely not be able to get any house insurance.

circular flexing

jimmycrackcorm wrote: »

Constitutional property rights for landlords are being constantly eroded. The government caps rent increases, but would never enable a floor in a scenario like a post tiger bust. On top of that, you're screwed for tax, both on 52% rental income and then capital gains. You still get all the hassle for under the market rent.

I see this 52% figure a lot - it's worth pointing out that it's only 52% if this is your marginal rate. If you don't reach the threshold for the higher tax band or if you live overseas, the rate is a lot lower.

hawkelady

circular flexing wrote: »

You will likely not be able to get any house insurance.

Well that's not true at all. I had no trouble getting insurance

DubCount

circular flexing wrote: »

I see this 52% figure a lot - it's worth pointing out that it's only 52% if this is your marginal rate. If you don't reach the threshold for the higher tax band or if you live overseas, the rate is a lot lower.

The income level at which you start paying higher rate tax in Ireland is very low. If you take rental income as marginal income, then the 52% marginal tax will likely apply.

If you live overseas, you will pay a lower income tax in Ireland, but will most likely pay additional tax on that income in your country of residence.

For OP. I looked into this about 2 years ago and decided not to go with a 10/20 year long term lease to the Local Authority. My main problem was around the repairs and maintenance area. Without any say in who the tenant was going to be, the LL seems to get landed with any breakages etc.. While I liked the certainty of income it gave, the risk around the maintenance side (and the lower rent in a rising market) made me dump the idea.

Cunning Stunt

I would not rent to the council until they have a workable system in place for re-housing tenants, should you ever wish to get your house back.

As it is, the system is broken and biased - shafting the ordinary landlord seems to be the tactic used by the authorities to lesson the blow of this housing crisis and keep people off of their emergency accommodation list.

Mitzy

OP I cannot emphasize enough not to do it. There is nothing in it for Landlords to go down the route of renting to the council.
You have no control over who they put into the property but if something goes wrong with the tenants (and trust me it will) you will be left to sort out the mess. The council will just shaft you at every opportunity and you will have to fund the mess left behind.

My own feeling is that legislative interference is making it impossible for small time landlords to operate so you would be crazy to tie yourself into long term arrangements such as what the Council's offer. You could leave yourself very exposed to these changes so if you have a 1 year lease in place with a regular tenant you have the choice to get out of the market when you choose.

murphaph

circular flexing wrote: »

I see this 52% figure a lot - it's worth pointing out that it's only 52% if this is your marginal rate. If you don't reach the threshold for the higher tax band or if you live overseas, the rate is a lot lower.

You only have to earn 32k to be on the top rate of tax. I'd wager most landlords are in this category.

murphaph

There seems to be a lot of confusion on this thread about long term leasing and RAS. With long term leasing you have no tenants other than the council itself and they are responsible for interior maintenance. The LL retains responsibility for structural maintenance only.

Still would not go near it. The rates on offer are laughable.

circular flexing

hawkelady wrote: »

Well that's not true at all. I had no trouble getting insurance

Aviva for one do not do insurance for this scheme. There's a thread on irishlandlord.com about it.