Becoming a landlord reluctantly

polydactyl

So can anyone guide me to a simple “rules, to do list” for becoming a landlord post?. Hopefully moving in next 6m to new home and will be renting our apt. If we go with an agency (no time or inclination for managing it myself) will they guide us or do we ask the RTB etc???? Can’t sell as still minimally in neg equity so reluctantly becoming a landlord and ideally as hassle free as possible

4ensic15

polydactyl wrote: »

So can anyone guide me to a simple “rules, to do list” for becoming a landlord post?. Hopefully moving in next 6m to new home and will be renting our apt. If we go with an agency (no time or inclination for managing it myself) will they guide us or do we ask the RTB etc???? Can’t sell as still minimally in neg equity so reluctantly becoming a landlord and ideally as hassle free as possible

It is not simple, agents vary in quality. There is no substitute for doing research yourself and taking an active interest in it. It is far too serious a business for leaving the keys with a random agent and hoping for the best. The RTB is not an advisory bureau.

Jeff2

You might want to check renting to council on the rent assistance scheme.
You will get less than market price but they pay you whether there is a tenant in the flat or not.

I think it is a minimum four year contract.

polydactyl

Jeff2 wrote: »

You might want to check renting to council on the rent assistance scheme.
You will get less than market price but they pay you whether there is a tenant in the flat or not.

I think it is a minimum four year contract.

Thanks for the advice and I will research it it was more a pointer to “essentials” etc that must be provided that I see mentioned here but don’t see the “list”.

Below market rent is not an option I’m afraid. I can’t afford it with a new house to pay for so council scheme out. The apt is in Dublin City and in fab condition if I do say so myself so not too worries about it not renting now but want to rent it out properly and legally etc to attract hopefully good clients.

4ensic15

polydactyl wrote: »

Thanks for the advice and I will research it it was more a pointer to “essentials” etc that must be provided that I see mentioned here but don’t see the “list”.

Below market rent is not an option I’m afraid. I can’t afford it with a new house to pay for so council scheme out. The apt is in Dublin City and in fab condition if I do say so myself so not too worries about it not renting now but want to rent it out properly and legally etc to attract hopefully good tenants.

Via PM can anyone recommend any agents in Dublin or ones to avoid?

http://www.irishstatutebook.ie/eli/2017/si/17/made/en/print

handlemaster

OP you say properry is a little below what you paid for it or what you own on it ? Be aware if you get a tenant they can stay without paying thanks to the tenant friendly irish rental system. Even if you win a court case no chance of getting your rent

polydactyl

Duplicate post

polydactyl

What I owe on it. It’s in neg equity. Trust me if it was near what I paid It would def be gone! this is what terrifies me and added the “reluctant” to my title. I am going to see how it goes for a year to 6m. And if it’s a disaster. Up for sale it will go![/quote]

Pkiernan

After 6 months your tenants will have the right to stay for 6 years. It's called Part IV tenancy.

Also are you aware that you will be taxed at your marginal rate on the entire rental income, not just the difference between the rent and your mortgage payment?
Some deductions exist but a lot of private landlords don't realise their tax liability.

So if you rent it for say 1200 a month you'll have a tax bill of approx 6500 per year.

californiabear

From experience, there is one major piece of advice that comes to mind...choose the tenants yourself. Having spoken to a number of landlords, using an agent was a total no-no for me. I personally met and vetted the tenants and checked into references thoroughly. Don’t be apologetic about doing this, they could end up costing you a LOT of money if they trash the place or stop paying rent.

Apart from that, find a decent accountant who will advise you on making an annual tax return and how you can legally reduce your tax bill. Also make sure you use a proper rental contract with the tenants, and ask for at least 1.5 months rent as deposit. Visit the property every few months (having notified tenants first of course) to make sure it’s being kept well.

If you find good tenants, it will be fine. Good luck!

Gumbo

polydactyl wrote: »

Thanks for the advice and I will research it it was more a pointer to “essentials” etc that must be provided that I see mentioned here but don’t see the “list”.

Below market rent is not an option I’m afraid. I can’t afford it with a new house to pay for so council scheme out. The apt is in Dublin City and in fab condition if I do say so myself so not too worries about it not renting now but want to rent it out properly and legally etc to attract hopefully good clients.

the bolded part above would scare me.
You need to be keeping the rental cash and your cash completely separate.

You say you cannot afford the new house without getting market rate for the apartment, but do you know how much tax you will pay on the apartment?

You need to do some preliminary tax returns to create a forecast of what your tax bill is likely to be.

You will be doing well if the rental account will pay for itself, but most will have to supplement the account to pay the tax bill. What position will this put you in?

Grumpypants

A few things are a concern the main one being you said you need to charge full market price to be able to afford your other housr. You say you have negative equity on the flat and you are buying a house.

So i assume you will have two mortgages? And big ones if the flat is in neg equity.

So please don't make the mistake of thinking that my mortgage payment on the flat will be covered by the rent.

If your mortgage payment is €1000. And you get €1200 in rent. You pay tax on the 1200 at about 58%. You will also spend on average €200 a month on upkeep. So that 1200 is more like 3-400.

So you will be paying you new mortgage and topping up you flat mortgage by about 700 a month.

polydactyl

Pkiernan wrote: »

After 6 months your tenants will have the right to stay for 6 years. It's called Part IV tenancy.

Also are you aware that you will be taxed at your marginal rate on the entire rental income, not just the difference between the rent and your mortgage payment?
Some deductions exist but a lot of private landlords don't realise their tax liability.

So if you rent it for say 1200 a month you'll have a tax bill of approx 6500 per year.

Thanks. I do realise the tax implications and have calculated for that.

polydactyl

Thanks all, I can afford the tax liability/top up on the rent due to tax. I have accounted for all of that. And I could pay both mortgages for 6 months if it was not rented as have put aside savings to cover 6m as per bank recommendation for second mortgage. Obv I can’t afford to just have it lie idle and in this rental market that would be daft surely as it’s a 2bed plus study in a very sought after area but I appreciate all the advice. What other option do I have? Sell in neg equity? Surely that’s not a sensible option at this market. Certainly the bank etc wanted me to keep it on.

As for tenants for 6m = they can stay 6 years. If they pay the rent that’s fine by me. I assume if they don’t pay the rent the RTB will not le them stay 6yr? Tell me it’s not that easy!!!

Also god point on picking the tenants myself. Must think about that. A friend managed his own property and cautioned against it as he was constantly getting calls in th the middle of the night about things like lightbulbs and squeaky doors etc.

polydactyl

Grumpypants wrote: »

You will also spend on average €200 a month on upkeep. So that 1200 is more like 3-400.

So you will be paying you new mortgage and topping up you flat mortgage by about 700 a month.

This bit I am worried about. 200 a month upkeep? The flat will have new beds and furniture in it (accounted for) and is in perfect condition at the moment. Do you mean 200 every month? On what for example or do you mean to budget for big ticket items every now and then?

minikin

Don't forget if it's no longer your principal private residence you may have a liability for capital gains tax upon sale.

polydactyl

Yep and this is another reason I don’t want to sell it right now. Renting seems the only option to keep paying the mortgage off to get it out of neg equity but all you hear are horror stories! If I got a good tenant who paid the rent and didn’t trash the place I would be sorted obv but aggghhh that nearly seems like th exception rather than the rule. I was always an exemplary tenant when renting even as a student. Tell me there are loads of decent renters left!

Grolschevik

Grumpypants wrote: »

You will also spend on average €200 a month on upkeep.

While that might be a prudent "worst case scenario to plan for", I've been renting 25 years and have never had a landlord incur anything like that monthly. Not even yearly, averaged out...

amcalester

minikin wrote: »

Don't forget if it's no longer your principal private residence you may have a liability for capital gains tax upon sale.

Only an issue if the OP sells at a profit which I am sure he would be delighted to do.

polydactyl

Grolschevik wrote: »

While that might be a prudent "worst case scenario to plan for", I've been renting 25 years and have never had a landlord incur anything like that monthly. Not even yearly, averaged out...

Thank you!! I never did enter when I was renting! There is hope so

polydactyl

amcalester wrote: »

Only an issue if the OP sells at a profit which I am sure he would be delighted to do.

it would be sold in the morning if it were possible

Michael D Not Higgins

http://www.citizensinformation.ie/en/housing/renting_a_home/

polydactyl

polydactyl wrote: »

Also god point on picking the tenants myself. Must think about that. A friend managed his own property and cautioned against it as he was constantly getting calls in th the middle of the night about things like lightbulbs and squeaky doors etc.

Be it selling a car or renting a house you should always use a burner phone that you can turn on and off when you want and just check the messages. Now I don't mean you turn it off and throw it in a drawer and forget about it but you don't need to be contactable 24/7 either so you could check it once a day or what ever to see if there is any requests and turn it off at night, don't have to have it on you all the time etc.

polydactyl

Another good idea about the phone! Thank you!!

Grumpypants

polydactyl wrote: »

This bit I am worried about. 200 a month upkeep? The flat will have new beds and furniture in it (accounted for) and is in perfect condition at the moment. Do you mean 200 every month? On what for example or do you mean to budget for big ticket items every now and then?

My house is only 12 years old and has only been rented for 3 of those years. Everything was top quality. So far I've done this

Painted inside and outside 3k.
Carpet the stairs/upstairs hall. 300
new washing machine X2 600
Fix a loose toilet, lose sink, and cleaned gutters 200
Put in a new shower. 500
Boiler serviced every year. 300
New Boiler 2.5 K

7.7k / 36 months = €215ish.

Now I did seem to have a bad run with a washing machine and gas boiler going in back to back months which took out all my back up funds. But if I hadn't accounted for about €200 a month I would have been in trouble.

And I don't have any management fees, if you have an apartment with them that is another cost to factor.

Mrs OBumble

Houston Shapely Junkie wrote: »

Be it selling a car or renting a house you should always use a burner phone that you can turn on and off when you want and just check the messages. Now I don't mean you turn it off and throw it in a drawer and forget about it but you don't need to be contactable 24/7 either so you could check it once a day or what ever to see if there is any requests and turn it off at night, don't have to have it on you all the time etc.

So a pipe bursts, the place is flooding ... and the LL doesn't want to know for 24 hours? Yeah, great idea. Not.

By all means use the 2nd phone wil doing viewings. But the selected tenant should be given your real number.

OP consider letting unfurnished. Less capital cost for you, and you'll likely get better tenants.

Mrs OBumble

Mrs OBumble wrote: »

So a pipe bursts, the place is flooding ... and the LL doesn't want to know for 24 hours? Yeah, great idea. Not.

.

If the place is let through an agency they wont be contactable outside of 9 to 5 so its not like its rare. Its a risk I'd be willing to take since a burst pipe is such a rare occurance. You can always monitor the second phone more cloesly if there is bad weather etc but it gives you the option to turn it off and not be pestered with small stuff in the evenings, while at work or at night etc.

Even when you have a LLs main number they probably have their phone on silent or do not disturb at night so they aren't going to see the call or text anyway. My LLs rarely answered the phone and would usually ring back when it was handy for them.

Grumpypants wrote: »

My house is only 12 years old and has only been rented for 3 of those years. Everything was top quality. So far I've done this

Painted inside and outside 3k.
Carpet the stairs/upstairs hall. 300
new washing machine X2 600
Fix a loose toilet, lose sink, and cleaned gutters 200
Put in a new shower. 500
Boiler serviced every year. 300
New Boiler 2.5 K

7.7k / 36 months = €215ish.

Now I did seem to have a bad run with a washing machine and gas boiler going in back to back months which took out all my back up funds. But if I hadn't accounted for about €200 a month I would have been in trouble.

And I don't have any management fees, if you have an apartment with them that is another cost to factor.

There is a decent chunk of choice in there though in fairness. You didn't have to paint in just 3 years, most rented places I've been in weren't painted for 10 years+, boiler service was never done every year anywhere I've rented (its over 3 years since we serviced our own boiler never mind in a rental), were the new carpets really necessary? Why did the tenants break 2 washing machines in 3 years, doesn't sound like wear and tear.

The rest is fair enough but on top of that a large amount of that will reduce your tax bill so you are just paying for repairs instead of paying a bigger tax bill so it probably didnt cost you much more than if you had no repairs and had a big tax bill which in itself is a reason to get bits fixed up that you wanted to do anyway for if you move back in again.

phildin

My own view is that letting agents don't add a lot of value beyond the initial role of getting tenants in the door and collecting their references. You should be present at the viewing and make your own decision about who to give the tenancy to. You should also be prepared to follow up on the references yourself, don't trust the agent to do this. Make sure the tenant sends proof of having set up a standing order to you. If for some reason they can't do this, that's an alarm bell.

As a former landlord, once tenants were settled in, I didn't do any formal inspections as I'd be in the property a couple of times per year with regular landlord/tenant interactions and that tended to be sufficient. However, I suggest that in the first 6 months that you do 1 inspection after the first month and another after 5 months. If you have any misgivings on the first inspection, that's the time to act on them. If there are any items to be corrected following the first inspection, spell this out in writing and organise a follow up inspection for a few weeks later. If there are any problems with paying the rent in the first 6 months then seriously consider whether your want the tenants in your property. Sob stories will be a major alarm bell at this point.

If you're not a handyman, find one and if they do a good job, stick with them. Having a long term relationship with someone you can trust is very valuable and if they know the property, it will save you a lot of hassle.

One minor point; if your kitchen appliances have a warranty, the manufacturer might decide that being in a rental property does not constitute normal domestic use. I've no idea of the legality of this argument but it's best to not draw attention to it should the issue arise.

Register with the RTB, there's no upside to you not registering.

Put everything in writing even when there's an amicable relationship. If a rent payment was late, something had to be repaired, something was broken etc, send a letter stating this to the tenant even if there's no outstanding action. It's just a case of acknowledging the event and having it in writing. You never know when you'll need a paper trail.

I know you've calculated your tax liability but just to be sure (to be sure), here's a quick sample calculation:

Mortgage payment = €1,200 per month (€500 interest and €700 capital)
Rental income = €1,100 per month

This can look to some people like a loss of €100 per month but it's not.

Your annual income in this case was 12 x €1,100 = €13,200
Your annual expenditure on interest is 12 x €500 = €6,000

The last time I checked, 75% of interest was deductible so your net income = €13,200 - €4,500 = €8,700
Therefore, your tax liability is on the €8,700 and will be approx €3,800

Any repairs that you make should be tax deductible so if you had to pay a plumber €150 to unblock the toilet, then you take €150 off the €8,700. If you hire a cleaning company, that will be deductible but you can't claim for your own time cleaning unless you're self employed as a cleaner (and even then, it might raise some eyebrows in revenue).

Furniture and appliances are normally not considered expenses, instead you depreciate them over a period of time. Revenue have guidance on this but if you spend €400 on a washing machine and depreciate it over 8 years, then you can claim 12.5% of €400 as an expense each year over the period.

Keep these expenses in a spreadsheet and keep the receipts filed by year. You should plan on retaining these for 7 years.

There's advantages and disadvantages to going with the rental accommodation scheme (RAS). I suggest looking into it; get them to make you and offer and then decide. They say that you should expect to receive approx 10% below market. In my experience, I spent two years getting above what I would have accepted and two years a little below so it balanced out overall. There's no real downside to getting the offer from them.

Phil

polydactyl

Seriously people thank you. Huge amount of helpful advice and much appreciated.

Phildin that was just perfect thank you so much!

I am the cautious type so have been planning on just saving 50% of the rental income so to speak to cover tax and if it’s too much then it’s a bonus and into the savings it goes so should have some bumper for emergencies.

As for expenses. Apt newly painted, all wooden floors etc so hopefully nothing like that to be sorted for now.

As for unfurnished. I never even considered it! Do you just advertise on daft as unfurnished and then if they need a second bed etc buy it before they move in?? Am taking most of my furniture to new place so was planning on having to buy new beds, sofa etc for rental.

April 73

There are minimum standards that you must provide, but after that there is no obligation on you to provide anything.
http://www.housing.gov.ie/housing/private-rented-housing/inspections/minimum-standards-rented-accommodation

The advantage is less up front cost to you, less risk of the items being damaged & needing replaced & more liklihood of securing tenants who have some financial liquidity, an interest in making the place a home & looking after it (a generalisation I acknowledge but probably true).

You could try to let it unfurnished first & if you are finding it difficult to let then furnish & try again.

Another tip for you - definitely let it yourself. Meet the potential tenants & talk to them. I have found that genuine people will turn up with references, will offer bank statements & will provide ID etc. You can get a feel for people when you meet them & you have more interest in finding honest, decent tenants than any agent will have.

This will then feed through into tenants who don’t ring & bother you over tiny things. They behave like adults & sort minor issues & will only bother you when necessary. I’m assuming your place is in Dublin - minimum of €1500 a month. The tenants will be paying you €18,000 a year in rent. For that you should be willing to put some time into finding the right people and then making sure you are a decent landlord to them.

You will get all the horror stories on here but there is another side to it too. I’ve let an apartment in Dublin for 15 years. I’ve had three sets of tenants in that time, met them personally & I’ve looked after any issues myself. They’ve been mainly minor in nature - washing machines has been replaced a few times, repairs carried out on the boiler, repainting, new bathroom fan. Honestly nothing major (touching wood here!). I’ve paid between €2k-€4K in tax every year (which has increased as the mortgage has been paid down). But I am 5 years off owning the property outright. Picking the right tenants can make or break you.

Good luck. It’s not all horror out there!

Claw Hammer

A washing machine should last longer than 18 months. Unless it is of the lowest quality and run around the clock it should last a few years.