To sell or rent out

tscul32

Mother in law is moving in with sister in law, leaving a large 4 bed semi in a decent rental area (close to dublin city) vacant. She's thinking of selling but not sure if she can bring herself to do it. So maybe rent it out instead.

If she rents it and it's no longer her ppr would their be tax implications if she sold in say, 5 years? Would renting have any impact on the fair deal scheme should she ever need it?

It's in reasonably good condition but there would need to be some minor upgrades/investment before renting.

Can you keep a garage/shed locked for personal storage when renting out your property?

What are the main pros and cons of either approach?
Not sure which way to advise....

Thanks

DubCount

I don't see a problem with having a locked shed on the premises if its set out as part of the terms and conditions of the lease.

There have been many threads on Boards about the risks and problems with renting out a house as a small time landlord. Does your mother in law want to deal with making tax returns, and managing requests from tenants in relation to breakages etc.. Its not as "hands off" as people make out.

The biggest issue is the risk of getting a bad tenant. If she's unlucky and ends up with the wrong kind of tenant, you could be looking at a painful 2 year eviction process with RTB and court appointments and thousands of euro in legal fees and property damage. Sadly, its this risk that means selling is the only sensible option.

I would encourage her to talk to an independent financial advisor to give her direction on the best approach to managing he money. Always worth the fee.

overkill602

sell

Febreeze

Sell. She'll be doing herself a huge favour in the long run. Renting will cost more and god knows what tenants she'll get. They could be lovely or could be absolutely demented. Sell. Keep money and live a happier life. Renting could stress her out even more.

Caranica

Sell, sell, sell. It sounds like she has an emotional attachment to the house. Been there, done that. The shock, and heartbreak, and stress, and expense of seeing your beloved home trashed by tenants is horrific.

Make a clean break, so much better.

And that's before all the tax and tenancy law hassles. I wouldn't advise my worst enemy to rent out their former home.

Humour Me

Second the recommendation to speak to a financial advisor, I would also speak to a solicitor. This is a decision that needs to consider her long term needs.

Does she have a pension and is it sufficient for her needs? Would she be able to afford the tax due on the rent as well as any maintenance costs on the house? You mentioned the fair deal scheme, if she went into a nursing home, who would be responsible for managing the tenants etc? Does she need a regular income or would she prefer a lump sum by selling the house now? (assuming the mortgage is paid off)

If she sold in 5 year time, capital gains tax would be due on a portion of the sales proceeds (the time it was her PPR would be exempt).

Caranica

tscul32 wrote: »

Would renting have any impact on the fair deal scheme should she ever need it?

Sorry, forgot to reply to this bit. Unless they make a much needed change to the Fair Deal scheme then yes. They take almost all of the gross rent, meaning that tax, insurance, maintenance expenses need to be paid but the remainder is not sufficient to cover these. I think it might be around 90%, tried to help someone last year in this situation.

tscul32

Thanks for all the replies. I often read this board and my instinct is to advise her to sell, too many risks. However it is none of my business. I just don't want to see her at a loss, but obviously I don't have any personal attachment to the house. I've shared the responses with my husband and he and his brother and sister can discuss it with her.

Edgware

tscul32 wrote: »

Thanks for all the replies. I often read this board and my instinct is to advise her to sell, too many risks. However it is none of my business. I just don't want to see her at a loss, but obviously I don't have any personal attachment to the house. I've shared the responses with my husband and he and his brother and sister can discuss it with her.

I agree with those advising sale. There is just too much uncertainty now in rental market.
Bad tenants, bureaucracy, maintenance, property not meeting rental standards etc.

You could look at a long term option of offering the property for rental to the local authority or a housing agency. There are a lot of pros and cons which need considering.
I have a friend who rented out a three bedhouse in suburban land to a separated lady with three kids 15 years ago. She kept the place immaculate and all the kids had a stable upbringing and went through third level. Then of course I am aware of nightmare stories too.

JustAThought

Caranica wrote: »

Sorry, forgot to reply to this bit. Unless they make a much needed change to the Fair Deal scheme then yes. They take almost all of the gross rent, meaning that tax, insurance, maintenance expenses need to be paid but the remainder is not sufficient to cover these. I think it might be around 90%, tried to help someone last year in this situation.

In relation to the (un fair) fair del this is correct - as is the 50% tax on the rent whether paid or not by the tenants that is due every year. God isn’t making any more land but I’d be wary of renting in this climate as you have no idea if the tenants will be able to pay the rent, or will keep their jobs etc. That said she could get one of the government / local council rental schemes in (I wouldn’t) - their small print terms and conditions are worth a look - some depend on the tenant complying with theor social welfare conditions ( or not being caught cheating), some are for 10 years only, some guarlarantee payment but at a lower rate if you let them choose the tenants ( read itinerants) etc. Under new rules you cannot exclude anyone who is a tenant from applying for rent assistance or HAP once they meet the conditions are are there for longer than 6 months so even securing a normal commercial tenant is fringed with doubt these days - particularly as many companies could go to the wall.

With regards the unfair deal it is a total nightmare and you would want proper scrutiny over your m-i-l financial affairs before making decisions. For example - a family member had their own family house, had a small pension, hd their lifes savings of 100k and a modest house - did not qualify for fair deal because of the savings and value of the house as demnd for hiuses had pushed its paper value up. Now had to go into a nursing hime and use the 100k lifes savings to pay for the care. When the bulk of that 100k is used up they will then re-evaluate her paper wealth and assets and then take the house and 90+% of her pension. In this instance she would have been better off gifting 20k (legally) to each of her children and then submitting an application to the fair deal. As it is, everything is gone.

If there is a dependant / entitled family member living in the house then the house cannot be sold by fair deal for an agreed number of years should the FD be needed or accepted - this would allow the family to avail of the rent a room scheme where 14k per annum aprox can be earned tax free ( ie not paying the 50% rent tax) and it is also easier to manage the tenant(s) - the family member / owner occupier is supposed to live there or have it as their principle primary household - you can google how many days a year or percentage of the time you are supposed to be there. Eg you could be working a lot in another part of the country, spending time with a partners house, commuting from a more convenient location for work x oart of the time etc.

If you live out of the country it is a different tax regime.

Your m-i-l would also need to weigh up the benefits of tinkering with her assets versus her attractiveness as a wealthy woman to nursing homes to ‘find’ a room for should she need long term care. However as a family a care package for her IN her own home could be organised FOC via the HSE should they deem care necessary - the max at present ( in yhe past 2 years) you could have got was 5 contact hours a day - help getting up am, lunch, mid afternoon, evening meal, bedtime - or however you would like to organise it. Having a house could also make private arrangements possible - two live in carers with accommodation in the house as part of their wages/ work conditions who could on a schedule provide the at home care she might need - a private contract used perhaps in tandem with HSE care workers.

There could also be the possibility of getting planning permission and splitting the house into 2 appartments - retaining the garden, prt driveway and bottom half for you mother in law and having either a family rental from the appartment or a private tenant and keeping your options open.

A person can also gift a house if they are expected to live longer than 5 years - huge tax benefits to this but a risk should she die in the interim, God forbid. This would leave her in high risk King Lear situation and is not one I would ever advocate or do, thou no doubt a deal could be ringfenced by contracts tied up with a solicitor.

In relation to legal advice a solicitor cannot be part of any ‘illegal’ activity so it is unlikely you will get a full range of practical options going to most. There used ve a crowd called TAB down near charlotte quay would you could oay for financial advice and they were great for advising on the different tax implications of different decisions - they also published a book at one stage - havn’t had to use them in years for work tax advice so don’t know if they are still operating.

In this climate where banks are reevaluating mortgages and there is a lot of uncertainty She might almost be be better to just hold off and keep her house ticking over and fallow as she adjusts to living elsewhere - she may feel less trapped then , and it may be that the arrangment may not suit despite the best of intentions on all parts - then she will still have options.

It would be worth looking at the tax thresholds for inheritance tax also - as well as scrutinising the (un)fair deal small print.

We had a private night nurse for a family member for years - they were working in the early evening and overnight, assisted in the morning and getting to bed, and the daytime was spent with family members in their home who wasn’t working - I guess nowadays you could apply for a carers grant for that part. It worked extremely well, the nurse was a semi retired Irish lady ( ex registered nurse) who was kind, professional, and who we knew and had good values and was on the right cultural and language wavelength . She was with our family for years and was became more of a companion and friend than nurse. All the family members paid a certain amount towards her salary and it worked really well. That could also be an option - especially in a divided appartment situation where you could also have an income or owner occupier houseshare rental income ( so no lease only agreed length of term) which could help towards the nurses fees.

Edgware

As regards Fair Deal if someone has resources to pay why shouldnt they. I know that the relatives waiting to inherit wont be too happy but why should the tax payer subsidise their inheritance

Donald Trump

It might be more cost efficient to do the reverse and for the daughter to rent out her house and move in with the mother.

mrcheez

Is it not possible to rent but offload all responsibility of managing it to a letting agency?

I'm thinking of doing this with my own place once the mortgage is paid off..maybe move to Thailand and live off the rent from this place

I understand the net earnings would be less using an agency but is it not an option to hand over the stress of letting to an agency?

Edgware

mrcheez wrote: »

Is it not possible to rent but offload all responsibility of managing it to a letting agency?

I'm thinking of doing this with my own place once the mortgage is paid off..maybe move to Thailand and live off the rent from this place

I understand the net earnings would be less using an agency but is it not an option to hand over the stress of letting to an agency?

You could hand over the entire letting and ongoing management to a letting agency.
The cost of this would vary depending on the agency but the fees would roughly be 5% of the annual rent to organise a tenant and then 5% of the monthly rent for ongoing management. V.A.T. added.
All fees can be claimed against tax.
If you could get the right agency who will do a good job on management it could work out ok
Depending on any other income of course there will be a tax liability but you could still be banking roughly 60% of the annual income. There are a lot of expenses you can put against tax.
Depending on the condition and location of the property you might get a foreign family in who would be less likely to move rather than an Irish one waiting for a house build etc

Also there is no difficulty securing a storage unit or garage once it is specified in the lease as not being available to the tenant and that you would have a right of access either anytime or by notification.

tscul32

Donald Trump wrote: »

It might be more cost efficient to do the reverse and for the daughter to rent out her house and move in with the mother.

They would prefer to live in the area the daughter lives as it is very close to us too and we have the grandkids. Other sibling is abroad. Plus they prefer the smaller house. Mother in law usually would spend 2-3 nights with daughter anyway and has been there constantly since the "lockdown" began.

tscul32

Edgware wrote: »

You could hand over the entire letting and ongoing management to a letting agency.
The cost of this would vary depending on the agency but the fees would roughly be 5% of the annual rent to organise a tenant and then 5% of the monthly rent for ongoing management. V.A.T. added.
All fees can be claimed against tax.
If you could get the right agency who will do a good job on management it could work out ok
Depending on any other income of course there will be a tax liability but you could still be banking roughly 60% of the annual income. There are a lot of expenses you can put against tax.
Depending on the condition and location of the property you might get a foreign family in who would be less likely to move rather than an Irish one waiting for a house build etc

Also there is no difficulty securing a storage unit or garage once it is specified in the lease as not being available to the tenant and that you would have a right of access either anytime or by notification.

A letting agency would definitely be used if she decides to let the house.

Caranica

tscul32 wrote: »

A letting agency would definitely be used if she decides to let the house.

We used a letting agency. Didn't stop the house getting trashed.

Bass Reeves

If the house is sold and your MIL ends up in an nursing home long-term then the fair deal scheme will not be applicable. AFAIK cash, assets or property has to be transferred a number of years (5 I think)before there is no call back on it.

Talk to s financial advisor. It may well be that renting may be the best option I. The long-term.

MrMusician18

If she is to sell same needs to get it to market pronto.

Otherwise she might be waiting years for it to achieve Q1 2020 prices.

Empty_Space

Sell and quickly, house prices and rents about to plummet.

Edgware

Caranica wrote: »

We used a letting agency. Didn't stop the house getting trashed.

Sadly that can happen and the deposit may not necessarily cover refurbishment. In many cases the tenant wont pay the last month and do a flit before any action can be taken.
Thats why I would recommend a sale before renting. It would be very distressing for the owner to know her family home is being abused. The family have a lot of matters to consider but a good sized house nicely located will maintain its sale value better properties such as apartments or houses out in the far suburbs

vandriver

'....... as is the 50% tax on the rent..'
'... ie not paying the 50% rent tax....'
Are you under the impression that this is some kind of law?Or are you privy to the lady's other income amounts?

Steer55

If the person selling is elderly then they should def sell the place. Giving it to a letting agency will not prevent the trauma of having the house thrashed to bits.

Yes they will be liable for some CGT for the years the house is rented out.

Bass Reeves

vandriver wrote: »

'....... as is the 50% tax on the rent..'
'... ie not paying the 50% rent tax....'
Are you under the impression that this is some kind of law?Or are you privy to the lady's other income amounts?

If OP's MIL is only income source is the OAP, tax on the rent will not be a huge issue. She will still have a tax credit of just less than 4K. Certain expenses are allowable and remainder is taxable at 22%.

Therefore say rental income is 18K, giving rental expenses of 2K the tax liability would be around 2.5K. Unless OP's MIL has a substantial private pension it is unlikely she would hit the higher tax rate.

Op you need to access the tax liability, your MIL needs to decide what she wishes to do with sale proceedings if she sells. You need to access who you possible tenants are. Is your MIL house in an area that you would get decent tenants into such as a professional couple, a corporate tenant or a number of professionals to rent. While rents may come under pressure in the short term they should recover in the medium term. Selling may be slow at present and renting may be only option.

If your MIL decides to rent the property your spouse needs to manage it is he capable of doing that. Has he contacts such as a plumber, electrician or is he good at a bit of DIY himself. If no is the answer to them two questions he need to get such numbers and have these contacts in place. The final part of the jigsaw is picking your tenants and being willing to scarfice 10%+ possible of rents to achieve that

the_syco

tscul32 wrote: »

She's thinking of selling but not sure if she can bring herself to do it. So maybe rent it out instead.

This is even more a reason to sell, tbh.

fliball123

tscul32 wrote: »

Mother in law is moving in with sister in law, leaving a large 4 bed semi in a decent rental area (close to dublin city) vacant. She's thinking of selling but not sure if she can bring herself to do it. So maybe rent it out instead.

If she rents it and it's no longer her ppr would their be tax implications if she sold in say, 5 years? Would renting have any impact on the fair deal scheme should she ever need it?

It's in reasonably good condition but there would need to be some minor upgrades/investment before renting.

Can you keep a garage/shed locked for personal storage when renting out your property?

What are the main pros and cons of either approach?
Not sure which way to advise....

Thanks

I would not sell I would keep the smallest bedroom for herself and say she is still living there and then do 3 rent a rooms and she can earn 14k rent free and no leases or hassles when wanting the tenants out as its not a rental. Also if the 3 other tenants still think that you are living there they are more likely to behave

JimmyVik

OP Just read all of this thread.


https://www.boards.ie/vbulletin/showthread.php?t=2058074447


And then the countless other threads on what happened to people who rented out their houses instead of selling. You might be one of the lucky ones who have dream tenants, but if you arent can you afford to suck up the losses that could be in the tens of thousands. Plus you are effectively giving away your house to the tenant. The tenants has more rights to it than you do nowadays.


So many landlords are getting out. The only ones getting in are the people who havent actually done their homework on the risks involved.


I wouldnt rent it out if it were me. I would sell it.

JimmyVik

fliball123 wrote: »

I would not sell I would keep the smallest bedroom for herself and say she is still living there and then do 3 rent a rooms and she can earn 14k rent free and no leases or hassles when wanting the tenants out as its not a rental. Also if the 3 other tenants still think that you are living there they are more likely to behave

Problem there is tenants say nothing until you decide you want the house back. Then they come up with all the proof they have kept all the time that she wasnt living there and you wont get the house back.

duffman13

If you think the fair deal scheme may end up on the cards in the next 3 to 5 years, I would 100% sell. The rent will be swallowed up by that once in. If she decides to sell while in fair deal then the cash from the sale is fair game until she passes away. Is she sells 3 years before then she will only have to pay from the cash pool for the first 3 years of fair deal.

Renting in fair deal will cost her money when you actually take into account everything. So if a nursing home is on the agenda, shift the house now

mrcheez

Caranica wrote: »

We used a letting agency. Didn't stop the house getting trashed.

Is there no way of vetting letting agencies and sourcing one that will be extra careful about tenants and how they treat the property?

Bass Reeves

duffman13 wrote: »

If you think the fair deal scheme may end up on the cards in the next 3 to 5 years, I would 100% sell. The rent will be swallowed up by that once in. If she decides to sell while in fair deal then the cash from the sale is fair game until she passes away. Is she sells 3 years before then she will only have to pay from the cash pool for the first 3 years of fair deal.

Renting in fair deal will cost her money when you actually take into account everything. So if a nursing home is on the agenda, shift the house now

I think people misunderstand the rules of fair deal scheme. Any cash in in the bank can be reduced to 35k under the fair deal. House can only be reduced by 7.5%/year for 3years. I. When fair deal happens you stop renting as risk out weights benefits