New Government rules for LLs when selling their property etc.

Subutai

Old diesel wrote: »

The point about non payment elsewhere outside being a landlord is that if I run a company that has a customer not paying - you can stop supplying them.

You aren't obliged to keep supplying the non paying customer.

The point is that a large number of business areas involve payment only after the work is done. That is the commercial reality.

The business risk is identical. For landlords it is of course much easier to avoid, do not rent to indigent tenants. That discretion is seldom open to other service providers who have no good means of determining the solvency of their debtors.

beauf

It's not easier for a landlord to avoid.

I wonder how many of those and builders and retailers and solicitors ever lose a year or two of income with their disputes. How many of them have price caps on their products and services.

It would be interesting to see the amounts in those RTB disputes. Broken down, totalled and how many were ultimately left out of pocket.

voluntary

Subutai wrote: »

I've had friends fail to recover fees for 18 months work. Businesses regularly go under as a result of a debtor being unable to pay.

Again, were they forced to continue offering their services after non payment has started? Rental is like a subscription service, it's more like a Netflix then a deferred payment business. We're talking about monthly upfront payments here.

Subutai wrote: »

Even employees can find themselves at the sharp end of this problem,

Employees can leave if not paid. They are not obliged to work for another 18 months before leaving the job if not being paid.

voluntary

Marcusm wrote: »

They didn’t but they provide him with a similarly ineffective method of recovering money from defaulting customers as for tenants. If a landlord wants to regard himself as a business then he must appraise the risks - there have always been defaulting and overholding tenants. I wonder if it is truly worse now than before. This is the landlird’s business risk.

"This is landlord's business risk" - but it doesn't have to be. This is quite specific to Irish regulations and system's inefficiencies. This risk can be largely minimized, if not removed.

Marcusm wrote: »

It’s not that simple, lots of businesses supply goods and services for payment later. .

Renting business is not the one of them. Rental is usually pay per month, paid upfront, every month.

.

GGTrek

Marcusm wrote: »

I’m sorry but your comments re taxation are not well founded. In a personal context, other than for PRSI, there is no distinction as to the rate at which earned and unearned income is taxed. What would a landlord claim for his time in running the business? That is his activity no different from a shop keeper.

Your post presents itself as erudite when is is simply seafóid as my dear granny would have said.

You are wrong, your knowledge of tax law is limited. What you are saying is only valid for sole traders. If the landlord is a small/medium professional one, he/she is strongly discouraged from incorporating (something that was very common in the UK as a holding vehichle for real estate) with the closed company surcharge. This document from Revenue explains the details (unlike another know it all poster in this forum, I try to link):
https://www.revenue.ie/en/tax-professionals/tdm/income-tax-capital-gains-tax-corporation-tax/part-13/13-02-05.pdf


The fundamental fact is: rental income is considered passive income by the govvie UNLESS you have BIG money (in the tens of millions) to incorporate as a REIT or other types of Qualified Investors Funds which have very high almost FIXED auditing administrative costs (so not justifiable economically with just 10-20 properties).


I shall also give you another discrimination that the govvie has performed against Irish limited companies. If you incorporate a limited company in a foreign jurisdiction and this company purchases Irish investment property, then the foreign limited company will not be subject to closed company surcharge!!! The Irish tax system is a bad joke on the Irish residents!



The ignorance on sophisticated tax matters in this forum is outstanding, like the naive posters saying that investors in these funds pay income tax in Ireland :D:D. Most of these investors are non-resident (pension) funds who get very light tax treatment in their home jurisdictions (even in Ireland since tax for pension funds is usually postponed and paid many years later at a much lower tax band when the annuity is paid out to the beneficiaries).



So if I manage 10 properties in Ireland I get screwed by Revenue in any case since the govvie says that it is passive income (it is a bad joke on me with all the time I spend managing them), while if I manage 100-1000 properties, it is all fine and dandy and it is not considered passive income. It is exactly what a previous poster said: the Irish govvie is in bed with big corporations and it is screwing the SMEs. I understand why: Ireland is totally dependent on the big corporations to prosper.

voluntary

beauf wrote: »

It's not easier for a landlord to avoid.

I wonder how many of those and builders and retailers and solicitors ever lose a year or two of income with their disputes. How many of them have price caps on their products and services.

It would be interesting to see the amounts in those RTB disputes. Broken down, totalled and how many were ultimately left out of pocket.

Populist politics, no less and no more. Populist politics is like offering simplified solutions to complex problems. They never work. Or they do work, but never as intended.

GGTrek

Going back to the subject matter and avoiding the usual know it all old comrades (all three have appeared in force in this thread) straying off from topic.

This coming Tuesday the govvie will give carte blanche to the Housing Committee to amend to the Residential Tenancies (Amendment) (No. 2) Bill 2018:
https://www.oireachtas.ie/en/dail-schedule/?selecteddate=2019-04-09

It is the usual screw the landlord at the last minute strategy that was used in the Autumn of 2016, first they approve at second stage an amendment to the RTA that is a minor attack on LLs' property rights, then behind closed doors in the Committee they really turn the screw on landlords and the bill comes out at the other end almost ready to be enacted, major attacks on LL's property rights appear giving no time for any lobbying or change even remotely favourable to LLs. I am almost sure that the proposals of Murphy in the article in the first post of this thread will come out of the Committee much worse for LLs: after all we have one of the posters in this thread giving legal assistance to the govvie for their legislative tasks.

L1011

The intro to that post falls vastly below the expected standards here

Lumen

GGTrek wrote: »

If the landlord is a small/medium professional one, he/she is strongly discouraged from incorporating (something that was very common in the UK as a holding vehichle for real estate) with the closed company surcharge. This document from Revenue explains the details (unlike another know it all poster in this forum, I try to link):
https://www.revenue.ie/en/tax-professionals/tdm/income-tax-capital-gains-tax-corporation-tax/part-13/13-02-05.pdf

It is not tax efficient to let profits accumulate until you have in excess of 2m in a pension fund (and can probably rope in another 2m for a spouse), otherwise you end up paying corp tax and income tax compounded.

So I don't see why that should be a problem until you're swimming in cash.

Marcusm

GGTrek wrote: »

You are wrong, your knowledge of tax law is limited. What you are saying is only valid for sole traders. If the landlord is a small/medium professional one, he/she is strongly discouraged from incorporating (something that was very common in the UK as a holding vehichle for real estate) with the closed company surcharge. This document from Revenue explains the details (unlike another know it all poster in this forum, I try to link):
https://www.revenue.ie/en/tax-professionals/tdm/income-tax-capital-gains-tax-corporation-tax/part-13/13-02-05.pdf


The fundamental fact is: rental income is considered passive income by the govvie UNLESS you have BIG money (in the tens of millions) to incorporate as a REIT or other types of Qualified Investors Funds which have very high almost FIXED auditing administrative costs (so not justifiable economically with just 10-20 properties).


I shall also give you another discrimination that the govvie has performed against Irish limited companies. If you incorporate a limited company in a foreign jurisdiction and this company purchases Irish investment property, then the foreign limited company will not be subject to closed company surcharge!!! The Irish tax system is a bad joke on the Irish residents!



The ignorance on sophisticated tax matters in this forum is outstanding, like the naive posters saying that investors in these funds pay income tax in Ireland :D:D. Most of these investors are non-resident (pension) funds who get very light tax treatment in their home jurisdictions (even in Ireland since tax for pension funds is usually postponed and paid many years later at a much lower tax band when the annuity is paid out to the beneficiaries).



So if I manage 10 properties in Ireland I get screwed by Revenue in any case since the govvie says that it is passive income (it is a bad joke on me with all the time I spend managing them), while if I manage 100-1000 properties, it is all fine and dandy and it is not considered passive income. It is exactly what a previous poster said: the Irish govvie is in bed with big corporations and it is screwing the SMEs. I understand why: Ireland is totally dependent on the big corporations to prosper.

Please explain to me in simple terms, outside if REITs and s.110s, how an Irish company is advantages versus an Irish individual in terms of the computation of Sch D Case V income? Please explain the greater burden imposed on unearned income (Sch D Cases III-V) versus earned income (Sch D Case I/II or Sch E). These are the points on which I responded.

Your analogy with the U.K. is irrelevant, income from an Irish property is taxed in Ireland.

Marcusm

voluntary wrote: »

"This is landlord's business risk" - but it doesn't have to be. This is quite specific to Irish regulations and system's inefficiencies. This risk can be largely minimized, if not removed.




Renting business is not the one of them. Rental is usually pay per month, paid upfront, every month.

.

But there is no landlord alive in Ireland who has experienced a more efficient eviction system other than those who engage people like the Border Fox. It’s a known risk which has existed long before the RTB. I agree absolutely that the system should be more efficient as should the repossession of properties by lenders. However, that is to confuse what we want the system to be with what it actually is.

beauf

Marcusm wrote: »

But there is no landlord alive in Ireland who has experienced a more efficient eviction system other than those who engage people like the Border Fox.

If over holding has increased, and there are less even no penalties. Instead only rewards for over holding. Legal action takes longer and is more expensive.

Seems logical that the eviction process is less efficient (speed and cost) than it has ever been. The fact that rtb delay the process of going to court causes this on it's own.

Marcusm wrote: »

It’s a known risk which has existed long before the RTB. I agree absolutely that the system should be more efficient as should the repossession of properties by lenders. However, that is to confuse what we want the system to be with what it actually is.

This far it seems this "we" (whom ever they are) wanted ignore all past experience and advice and create the worse housing crisis in the history state with the highest rents and property prices.

They aren't finished with it yet it seems...

davindub

GGTrek wrote: »

You are wrong, your knowledge of tax law is limited. What you are saying is only valid for sole traders. If the landlord is a small/medium professional one, he/she is strongly discouraged from incorporating (something that was very common in the UK as a holding vehichle for real estate) with the closed company surcharge. This document from Revenue explains the details (unlike another know it all poster in this forum, I try to link):
https://www.revenue.ie/en/tax-professionals/tdm/income-tax-capital-gains-tax-corporation-tax/part-13/13-02-05.pdf


The fundamental fact is: rental income is considered passive income by the govvie UNLESS you have BIG money (in the tens of millions) to incorporate as a REIT or other types of Qualified Investors Funds which have very high almost FIXED auditing administrative costs (so not justifiable economically with just 10-20 properties).


I shall also give you another discrimination that the govvie has performed against Irish limited companies. If you incorporate a limited company in a foreign jurisdiction and this company purchases Irish investment property, then the foreign limited company will not be subject to closed company surcharge!!! The Irish tax system is a bad joke on the Irish residents!



The ignorance on sophisticated tax matters in this forum is outstanding, like the naive posters saying that investors in these funds pay income tax in Ireland :D:D. Most of these investors are non-resident (pension) funds who get very light tax treatment in their home jurisdictions (even in Ireland since tax for pension funds is usually postponed and paid many years later at a much lower tax band when the annuity is paid out to the beneficiaries).



So if I manage 10 properties in Ireland I get screwed by Revenue in any case since the govvie says that it is passive income (it is a bad joke on me with all the time I spend managing them), while if I manage 100-1000 properties, it is all fine and dandy and it is not considered passive income. It is exactly what a previous poster said: the Irish govvie is in bed with big corporations and it is screwing the SMEs. I understand why: Ireland is totally dependent on the big corporations to prosper.

Landlords are not sole traders (hint is in the name!):eek:

You haven't yet linked to a source regarding your version of "intend to sell" and "current rules in place since 2015", are we going to see something on this? You presented it as legal advocacy & since you are not posting as a legal professional, it's only fair to state you were mistaken.

I haven't read your link on close company surcharges, but I can tell you seem to have missed the part where it only applies if you are a close company ( there are criteria ) and that the charge only applies to undistributed profits. REIT's have to distribute most of their profits, so there is an advantage to retaining profits in some instances? It is a bit sophisticated to work out, but if you add 25% & 12.5% it may be less than the income taxes (40% & 4% & usc on whatever).

voluntary

Marcusm wrote: »

But there is no landlord alive in Ireland who has experienced a more efficient eviction system other than those who engage people like the Border Fox. It’s a known risk which has existed long before the RTB. I agree absolutely that the system should be more efficient as should the repossession of properties by lenders. However, that is to confuse what we want the system to be with what it actually is.

Sure, but just because something has been done for a long time does not mean it's right. Catholic church has been covering child abuse for generations, but this is not enough reason for acceptance and/or keeping the status quo.

Things can be improved hugely and areas of improvements are known. The current rental crisis should be enough reason to implement these improvements.

Marcusm

voluntary wrote: »

Sure, but just because something has been done for a long time does not mean it's right. Catholic church has been covering child abuse for generations, but this is not enough reason for acceptance and/or keeping the status quo.

Things can be improved hugely and areas of improvements are known. The current rental crisis should be enough reason to implement these improvements.

I fully agree that it should be reformed, both in relation to speeding up the legal process and enforcement. Enforcement would require a bailiff system and/or hugely increased staffing for sheriffs. Despite the perspective that politicians are of the landlord class, there is no political appetite to take action.

My view as regards business risk is that a landlord needs to approach it as a business and have regard to the potential of overholding. Greater vetting of tenants, higher deposits, etc.

3DataModem

Woshy wrote: »

Between tax, maintenance costs (over 7K in 18 months, we've been unlucky) and other costs we are losing a good bit of money so somebody else can live in our house.

If the amount you are putting into the property is smaller than the amount your mortgage is being paid off, you are making money. It might not feel like it, but you are. This is a huge misconception about property 'breaking even' by some small / new landlords.

beauf

A deposit is meaningless if you can over hold and cause damage with no penalties many times the deposit. 3 months is norm in some countries. Very little appetite for that here.

Vetting a tenant. I've seen and heard so many scams around this. It's not like anyone you ring or get documentation from is going guarantee the tenant and cover money owed.

In the last 25yrs when there's been so many changes to tenants rights. Nothing has been put in place to even slightly improve any of this. With the exception of the RTB which at least will give a ruling on deposits retention.

The Student

Marcusm wrote: »

They didn’t but they provide him with a similarly ineffective method of recovering money from defaulting customers as for tenants. If a landlord wants to regard himself as a business then he must appraise the risks - there have always been defaulting and overholding tenants. I wonder if it is truly worse now than before. This is the landlird’s business risk.

The risk has increased simply because supply of rental property has not kept pace with demand. Overholding has always existed but not to the extent it is now because in the past tenants just moved out and on to the next property.

Now because it is so difficult to get another property the tenant knows the RTB will delay the eviction process thereby giving them time.

Yes tenants overholding is a business risk to landlords but what people fail to consider is that landlords unlike other professionals have the risk concentrated in one asset and a single source of income to discharge the costs of business.

Very few businesses will own the property they trade from, most have a lease, very few businesses will own the fixtures and fittings or the machinery/equipment they use for the day to day operation of the business.

Landlords have invested in "bricks and mortar" and don't have the flexibility that other professionals have to minimize their losses due to rogue tenants.

Most businesses automatically include a 5% provision for bad or doubtful debts as part of their business forecasts and charge a premium to customers to fund this risk.

Landlords do not have either (a) the ability to offset this risk against other tenants if the landlord only has a single property or (b) include a premium on other tenants to fund this risk as the Govt have imposed rent caps.

People should recognize that the renting of a property is a business transaction pure and simple. Evictions should be quicker if a tenant breaches a lease they should be evicted. Landlords if they breach a lease they should also be held accountable.

beauf

The current model favours large landlord as they can spread the risk and cost over multiple properties

The Student

3DataModem wrote: »

If the amount you are putting into the property is smaller than the amount your mortgage is being paid off, you are making money. It might not feel like it, but you are. This is a huge misconception about property 'breaking even' by some small / new landlords.

If the costs included in operating as a landlord is greater than the return that you receive then you are losing money.

If a property is still in negative equity or you are on interest only and the income from the property is less than the cost of your mortgage repayment then you are losing money.

If your mortgage each month is €1000 and your net after tax income is €800 you are losing money.

You are subsidizing the mortgage by €200 per month. If however the property is in positive equity and you are subsidizing the mortgage once the value of the capital appreciation exceeds the amount of the mortgage you are subsidizing then and only then are you making money (on paper). You will only have made money if the value of the property when sold exceeds the value of any outstanding mortgage at that point and also any Capital Gains Tax liability.

it is only after all of the above can you finally say a property has made money.

beauf

3DataModem wrote: »

If the amount you are putting into the property is smaller than the amount your mortgage is being paid off, you are making money. It might not feel like it, but you are. This is a huge misconception about property 'breaking even' by some small / new landlords.

I'm not sure why you quoted 7k costs in 18 months. Or how far back you went to find that. No morgage included in that unless it's tiny.

handlemaster

https://www.independent.ie/business/personal-finance/property-mortgages/rents-to-soar-again-as-cuckoo-fund-housebuying-hits-record-37992104.html


The government are walking the public into a sense of security when the opposite it true. The main areas for employment withing the country will have the housing controlled by international companies. But rental prices will be only going higher. The government in shooting the small time landlord have made it worse for renters in the long terms. A vote winner for the people who think landlords are loaded with cash but the real losers will be the renters. Be careful what you wish for is alive and real.

Yurt2

handlemaster wrote: »

https://www.independent.ie/business/personal-finance/property-mortgages/rents-to-soar-again-as-cuckoo-fund-housebuying-hits-record-37992104.html


The government are walking the public into a sense of security when the opposite it true. The main areas for employment withing the country will have the housing controlled by international companies. But rental prices will be only going higher. The government in shooting the small time landlord have made it worse for renters in the long terms. A vote winner for the people who think landlords are loaded with cash but the real losers will be the renters. Be careful what you wish for is alive and real.

BTL landlords and faceless REITs are after the same thing: yield and capital appreciation of the asset. Lets not pretend that your average BTL landlord is performing some kind of social good by taking on housing stock. I'm not speaking in defense of REITs for what it's worth.

handlemaster

Yurt! wrote: »

BTL landlords and faceless REITs are after the same thing: yield and capital appreciation of the asset. Lets not pretend that your average BTL landlord is performing some kind of social good by taking on housing stock. I'm not speaking in defense of REITs for what it's worth.

All true, but why pick the landlord out that cannot benefit from all the virtually zero taxing of rental income for means for transferring that as a cost to an internal business loan. Lets try and keep the tax rental income within the country.

Fol20

handlemaster wrote: »

All true, but why pick the landlord out that cannot benefit from all the virtually zero taxing of rental income for means for transferring that as a cost to an internal business loan. Lets try and keep the tax rental income within the country.

Exactly. All of the expenses a BTL ll use are reinvested back into the economy. All the taxes they earn is invested back into economy.

I had to do a lot of work last year and my net income was 1/6 of my gross from my rental income. If i was a REIT that would be much much higher and the majority of the money would go abroad. Im against protectionism but a fair balance needs to be sought.

Yurt2

handlemaster wrote: »

All true, but why pick the landlord out that cannot benefit from all the virtually zero taxing of rental income for means for transferring that as a cost to an internal business loan. Lets try and keep the tax rental income within the country.

My sense is that the government (starting with Michael Noonan) made the call that getting them in the door was a quick and dirty way of breathing life into the property sector and by proxy making AIB a more attractive proposition when it came to the government offloading their stake in the bank. Did they take care to look at what that might do on the back end? Did they f*ck.


Eoghan Murphy doesn't seem all that interested:

https://www.irishexaminer.com/breakingnews/ireland/call-to-review-foreign-purchases-of-property-862910.html

"This would be unenforceable in the EU. We haven’t considered it, we are not currently considering it and it is not on the horizon."

voluntary

The Student wrote: »

If your mortgage each month is €1000 and your net after tax income is €800 you are losing money.

This isn't quite right. Mortgage each month consist of the capital repayment part and interst part. The capital repayment part should not be taken into your consideration as this is yours, it's your asset which you can then sell in the future.

The income is really the rent collected minus all the costs related to running the property minus monthly interest paid to the bank. Then deduct all the months which the property is lying unoccupied, non-payed months etc.

The Student

voluntary wrote: »

This isn't quite right. Mortgage each month consist of the capital repayment part and interst part. The capital repayment part should not be taken into your consideration as this is yours, it's your asset which you can then sell in the future.

The income is really the rent collected minus all the costs related to running the property minus monthly interest paid to the bank. Then deduct all the months which the property is lying unoccupied, non-payed months etc.

My entire post explains my point, picking a sentence out of the post to repost takes away for the whole post.