Casual renting - mortgage & tax advice

massivemagumbos

Asking for a friend!

A friend of mine has an apartment in a high demand area. His job recently moved to close to his parents (5 min commute instead of 1 hour rush hour public transport commute with a toddler), so he is finding himself spending most nights in his parents (single parent so childcare is much easier). The apartment has been empty for most of the last 6 months, while he still pays the mortgage and bills, as well as helping out with his parents bills.

If he rents his 2 bed apartment as a 1 bed (effectively rent a room), and keeps the annual rent under 14k, would that maximise tax efficiency and avoid running foul of the bank? I've heard of people on tracker mortgages having their trackers taken away if the subject property is not the primary residence anymore?

To be clear, he wants to move back "home" to his apartment in a year or two, but it seems crazy that in a high demand area it's just sitting there empty. He really doesn't have the headspace to become a full time long term landlord, neither does he have the time to manage an AirBnb.

Any help is much appreciated, even to point him in the right direction of what time or professional to seek advice from?

Samuel T. Cogley

He can't as he's moving out. If he was maintaining it as a base and simply staying at his parents temporarily that would be a different matter. The guidance is where people would expect to find him. So he's going to be better off keeping the bills etc. in his name and spending the weekends there. Otherwise he needs to get involved in a tenancy which is a minefield.

No issues with mortgages and RAR. Renting out though could be an issue if the bank get wind of it, chances are they won't.

He could easily get a Mon-Friday tenant and charge the guts of €1200 a month depending on area if the situation is explained to the right tenant.

myshirt

Don't even dare try it, seriously. I work as a Chartered Accountant, albeit not in Tax, but I have faced off with these people in forensic accounting engagements. You will be found eventually and hammered wouldn't be the word, you could end up with an attachment order, garnishee order, interest and penalties, and a range of restrictions and hassle on you in banking, public contracts, or public services.

It's amazing the amount of people who think they have it figured out, no one will know, and sher it will grand. Remember, you have only been thinking about this and how it works for a couple of weeks at most. Those in Revenue have been doing this for years, they've seen it all. If it comes to it they can know more about you than your own mother no matter how smart you think the plan is. The fact that people can't figure out how they'd ever know... shouldn't give those people confidence... it should worry them.

So don't even dream of doing it. Fully, fully responsible for the tax bill if you rent. The tracker will go also, and interest relief (i.e double hit in rise to payments)

massivemagumbos

Thanks a lot for the advice. I’m 50% telling him to just leave it lie idle, but it seems wrong in this market. He’s not being greedy IMHO, just needs a help paying his mortgage for a place he rarely lives!

If he keeps the annual rent below €14k and rents the apartment in a rent-a-room fashion - would that be the easiest solution? He has tenants in mind who would know the full story but wouldn’t trust them 100% not to report him if things went sour.

Maybe AirBnb with a property manager person might work best.

Also sorry, who would offer the best advice on this? PRTB?

Samuel T. Cogley

massivemagumbos wrote: »

Thanks a lot for the advice. I’m 50% telling him to just leave it lie idle, but it seems wrong in this market. He’s not being greedy IMHO, just needs a help paying his mortgage for a place he rarely lives!

If he keeps the annual rent below €14k and rents the apartment in a rent-a-room fashion - would that be the easiest solution? He has tenants in mind who would know the full story but wouldn’t trust them 100% not to report him if things went sour.

If he keeps it above-board there is no need to worry about being reported. RAR income still needs to be declared so he'll have to be upfront with revenue anyway.

More and more people are needing to commute in this fashion. IMHO the weekend home, that one owns, with all of one's post going there with all the bills in the homeowners name is more a PPR than a Mon-Fri rented room in Dublin or wherever under a licensee agreement.

Don't be permanently moving though and just keeping a room, that bollocks has been well covered by the RTB and thus will be looked unfavourably on by revenue.

For advice a tax specialist is who you need to speak to. Ideally a specialist tax solicitor.

Fol20

What’s wrong if he advertised as a house share on daft. Took a picture of the add to cover himself. Then he could get rent of 6-800 a month to for the room and he can’t still sleep there any time he wants. It’s still is PPR so he won’t be hit with any capital gains in the future as well.

Lumen

Thread on this two days ago

https://touch.boards.ie/thread/2057849286/1/

myshirt

myshirt wrote: »

Don't even dare try it, seriously. I work as a Chartered Accountant, albeit not in Tax, but I have faced off with these people in forensic accounting engagements. You will be found eventually and hammered wouldn't be the word, you could end up with an attachment order, garnishee order, interest and penalties, and a range of restrictions and hassle on you in banking, public contracts, or public services.

It's amazing the amount of people who think they have it figured out, no one will know, and sher it will grand. Remember, you have only been thinking about this and how it works for a couple of weeks at most. Those in Revenue have been doing this for years, they've seen it all. If it comes to it they can know more about you than your own mother no matter how smart you think the plan is. The fact that people can't figure out how they'd ever know... shouldn't give those people confidence... it should worry them.

So don't even dream of doing it. Fully, fully responsible for the tax bill if you rent. The tracker will go also, and interest relief (i.e double hit in rise to payments)

If he rents the full apartment and never returns to it to stay then you are correct he shouldn't try it but if he rents a room only and still spends time in the apartment, staying there regularly he is fully entitled to claim rent a room relief so you should really explain things better as you may put people off legitamely claiming RAR with your post.

Also the tracker wont go if it's RAR and even if he rents it fully the tracker will only go if he is stupid enough to tell the bank, there are countless people on trackers with houses rented out.

Lumen

Well, Revenue is quite clear that "In general, an individual’s sole or main residence is that individual’s home for the greater part of the time".

That's not the case here. So it comes down to the implications of "in general".

However, tax and tenancy rights are separate issues. AFAIK he doesn't have to use the room for most nights in order to rent to a licensee, and therefore limit risks of over-holding, bad tenant etc.

Worst case is he pays tax on the income, but will still be better off than not renting the room.

myshirt

This is really why a couple of hours googling is extremely dangerous. Speak to a professional op.

hmmm

What's the problem here? It's still his main residence, he still has room, he is just renting out the other room. I thought that was the whole point of the scheme?

Peregrinus

hmmm wrote: »

What's the problem here? It's still his main residence, he still has room, he is just renting out the other room. I thought that was the whole point of the scheme?

It's not his "main residence" unless he spends most of his time there, is the Revenue position.