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Landlord Calculation? Anything Missing?

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  • 10-06-2020 1:10pm
    #1
    0gac3yjefb5sv7
    Closed Accounts Posts: 3,948 ✭✭✭


    Hey there.

    Just looking to do a basic landlord calculation.

    Apartment Rented for 1500 a month.

    Rental Income per year 18000.

    Expenses

    Repairs 500 Insurance 400 Mgmt Charges 1500

    Total 2400.

    Profit 15600

    Income Tax at 40pc is 6240 PRSI 4pc is 624 USC 8pc is 1248

    Total 8112

    Overall Profit 15600-8112 is 7488.

    Assuming Mortgage is 1k a month that's 12k a year.

    Overall loss 12k-7488 is 4512

    This is assuming no interest relief from 2021 and perfect tenants.

    Why would anyone want to be a landlord to lose money each year!?


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    #2
    frw5
    Closed Accounts Posts: 61 ✭✭frw5


    And what about property being sold later on, or that doesnt count?

    Ps the amount taxed is only a difference between rent and mortgage so the calculation is nowhere near correct.

    The amount taxed would be 1500 rent - 1000 mortgage = 500, so 500 is taxed.

    So overall its profit only + ability to sell afterwards.


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    #3
    victor8600
    Registered Users Posts: 1,641 ✭✭✭victor8600


    MattS1 wrote: »
    ....

    Income Tax at 40pc is 6240 PRSI 4pc is 624 USC 8pc is 1248

    Total 8112....

    Have you included the Mortgage Interest Relief?


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    #4
    0gac3yjefb5sv7
    Closed Accounts Posts: 3,948 ✭✭✭0gac3yjefb5sv7


    victor8600 wrote: »
    Have you included the Mortgage Interest Relief?

    That is being removed from 2021 I believe as per here:

    https://www.citizensinformation.ie/en/housing/owning_a_home/buying_a_home/mortgage_interest_relief.html#:~:text=Mortgage%20interest%20relief%20was%20due,cease%20entirely%20from%20January%202021.


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    #5
    Tar.Aldarion
    Moderators, Science, Health & Environment Moderators, Social & Fun Moderators, Society & Culture Moderators Posts: 60,096 Mod ✭✭✭✭Tar.Aldarion


    MattS1 wrote: »
    Hey there.

    Just looking to do a basic landlord calculation.

    Apartment Rented for 1500 a month.

    Rental Income per year 18000.

    Expenses

    Repairs 500 Insurance 400 Mgmt Charges 1500

    Total 2400.

    Profit 15600

    Income Tax at 40pc is 6240 PRSI 4pc is 624 USC 8pc is 1248

    Total 8112

    Overall Profit 15600-8112 is 7488.

    Assuming Mortgage is 1k a month that's 12k a year.

    Overall loss 12k-7488 is 4512

    This is assuming no interest relief from 2021 and perfect tenants.

    Why would anyone want to be a landlord to lose money each year!?
    "Lose money", you are gaining an asset you can sell for hundreds of thousands at a huge discount.


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    #6
    godtabh
    Moderators, Science, Health & Environment Moderators Posts: 23,218 Mod ✭✭✭✭godtabh


    Amy Teeny Shelf wrote: »
    Hey there.

    Just looking to do a basic landlord calculation.

    Apartment Rented for 1500 a month.

    Rental Income per year 18000.

    Expenses

    Repairs 500 Insurance 400 Mgmt Charges 1500

    Total 2400.

    Profit 15600

    Income Tax at 40pc is 6240 PRSI 4pc is 624 USC 8pc is 1248

    Total 8112

    Overall Profit 15600-8112 is 7488.

    Assuming Mortgage is 1k a month that's 12k a year.

    Overall loss 12k-7488 is 4512

    This is assuming no interest relief from 2021 and perfect tenants.

    Why would anyone want to be a landlord to lose money each year!?

    If you are asking boards to check your tax calculations to become a landlord I dont think you have researched this enough. My advice? Dont event think about it.


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    #7
    victor8600
    Registered Users Posts: 1,641 ✭✭✭victor8600


    MattS1 wrote: »
    That is being removed from 2021 I believe?

    I am talking about the tax relief for landlords, not the tax relief at source described here.

    Are they the same thing?


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    #8
    frw5
    Closed Accounts Posts: 61 ✭✭frw5


    MattS1 wrote: »
    That is being removed from 2021 I believe as per here:

    https://www.citizensinformation.ie/en/housing/owning_a_home/buying_a_home/mortgage_interest_relief.html#:~:text=Mortgage%20interest%20relief%20was%20due,cease%20entirely%20from%20January%202021.
    With the idea of a massive sell-off of rental properties?
    Or with the idea of ripping a whole in renters 2nd pocket, the one that covers childcare and what not leading to less and less population needing the house in the first place?


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    #9
    victor8600
    Registered Users Posts: 1,641 ✭✭✭victor8600


    frw5 wrote: »
    Ps the amount taxed is only a difference between rent and mortgage so the calculation is nowhere near correct....

    AFAIK, the taxed amount is = rent - interest on the mortgage.


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    #10
    Fian
    Registered Users Posts: 2,192 ✭✭✭Fian


    frw5 wrote: »
    And what about property being sold later on, or that doesnt count?

    Ps the amount taxed is only a difference between rent and mortgage so the calculation is nowhere near correct.

    The amount taxed would be 1500 rent - 1000 mortgage = 500, so 500 is taxed.

    So overall its profit only + ability to sell afterwards.

    this is incorrect.

    The rent is taxable as income (not the profit) but there are some expenses permitted as deductions including management fees, insurance and the interest portion of the mortgage. Until recently not even all the interest portion of the mortgage payments was deductible. Mortgage interest payments for buy to let mortgages are higher than for principal private residence mortgages, typically around 5% per annum or so.

    However as other posters have pointed out paying off the amount you borrow in a mortgage is the same as saving, when the property is eventually sold the landlord can keep the difference between the sale price and the amount of the mortgage that remains outstanding, less capital gains tax of course.


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    #11
    frw5
    Closed Accounts Posts: 61 ✭✭frw5


    Aha makes sense. So landlord would have been getting 2 things so far:
    mortgage interest relief when buying +tax relief for landlords and both of these are then gone in 2021?

    Potentially good when it comes to rent pressure zones.
    And I guess the plan is to prevent investing into rentals so you wouldnt have a case where new properties come out at insane prices to cover this cost.


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    #12
    Geuze
    Registered Users Posts: 13,385 ✭✭✭✭Geuze


    frw5 wrote: »

    Ps the amount taxed is only a difference between rent and mortgage so the calculation is nowhere near correct.

    The amount taxed would be 1500 rent - 1000 mortgage = 500, so 500 is taxed.


    As has been stated thousands of times, it's the mortgage interest that is one of the several deductions from gross rental income, in order to calculate net rental profits.

    How anybody can even consider buying/owning or even talking about rental property without knowing this is beyond me.


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    #13
    Geuze
    Registered Users Posts: 13,385 ✭✭✭✭Geuze


    victor8600 wrote: »
    I am talking about the tax relief for landlords, not the tax relief at source described here.

    Are they the same thing?

    No.

    TRS/MIR is for owner occupiers.


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    #14
    gypsy79
    Registered Users Posts: 1,785 ✭✭✭gypsy79


    Amy Teeny Shelf wrote: »
    Hey there.

    Just looking to do a basic landlord calculation.

    Apartment Rented for 1500 a month.

    Rental Income per year 18000.

    Expenses

    Repairs 500 Insurance 400 Mgmt Charges 1500

    Total 2400.

    Profit 15600

    Income Tax at 40pc is 6240 PRSI 4pc is 624 USC 8pc is 1248

    Total 8112

    Overall Profit 15600-8112 is 7488.

    Assuming Mortgage is 1k a month that's 12k a year.

    Overall loss 12k-7488 is 4512

    This is assuming no interest relief from 2021 and perfect tenants.

    Why would anyone want to be a landlord to lose money each year!?
    You are missing the most important thing as explained

    Thread closed imo


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    #15
    Geuze
    Registered Users Posts: 13,385 ✭✭✭✭Geuze


    The mortgage interest payment is an allowable expenses, against gross rental income.

    The mortgage capital repayment is of course a form of saving, building up an asset.


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    #16
    0gac3yjefb5sv7
    Closed Accounts Posts: 3,948 ✭✭✭0gac3yjefb5sv7


    gypsy79 wrote: »
    You are missing the most important thing as explained

    Thread closed imo

    This has already been mentioned below. This is being removed.

    https://www.citizensinformation.ie/en/housing/owning_a_home/buying_a_home/mortgage_interest_relief.html#:~:text=Mortgage%20interest%20relief%20was%20due,cease%20entirely%20from%20January%202021.

    If anyone could correct the calculation it would be much appreciated. The post was for feedback and advice.


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    #17
    gibgodsman
    Registered Users Posts: 569 ✭✭✭gibgodsman


    Its not really a loss though is it, your gaining a huge asset at the end for a fraction of the price, You would rent it out if you could not afford the mortgage in the first place, huge difference between being a landlord with a property you own, compared to being a landlord with a property the bank owns


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    #18
    Pkiernan
    Registered Users Posts: 4,310 ✭✭✭Pkiernan


    1. Employer gives you money each month. You pay tax on this income.

    2. Tenant gives you money each month. You pay tax on this income.

    It doesnt matter if there is a mortgage or not.

    It is all income.

    How is this difficult to understand?


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    #19
    victor8600
    Registered Users Posts: 1,641 ✭✭✭victor8600


    MattS1 wrote: »
    This has already been mentioned below. This is being removed.

    https://www.citizensinformation.ie/en/housing/owning_a_home/buying_a_home/mortgage_interest_relief.html#:~:text=Mortgage%20interest%20relief%20was%20due,cease%20entirely%20from%20January%202021.

    If anyone could correct the calculation it would be much appreciated. The post was for feedback and advice.

    Reread what I and others had said. The relief being removed is not the landlord relief. Read about the relevant relief here
    https://www.revenue.ie/en/property/rental-income/irish-rental-income/what-expenses-are-allowed.aspx

    A whole 100% of the interest can be deducted. Frankly, I think you are trying to troll.


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    #20
    0gac3yjefb5sv7
    Closed Accounts Posts: 3,948 ✭✭✭0gac3yjefb5sv7


    victor8600 wrote: »
    Reread what I and others had said. The relief being removed is not the landlord relief. Read about the relevant relief here
    https://www.revenue.ie/en/property/rental-income/irish-rental-income/what-expenses-are-allowed.aspx

    A whole 100% of the interest can be deducted. Frankly, I think you are trying to troll.

    Thanks!


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    #21
    BrokenArrows
    Registered Users Posts: 7,498 ✭✭✭BrokenArrows


    MattS1 wrote: »
    Hey there.

    Just looking to do a basic landlord calculation.

    Apartment Rented for 1500 a month.

    Rental Income per year 18000.

    Expenses

    Repairs 500 Insurance 400 Mgmt Charges 1500

    Total 2400.

    Profit 15600

    Income Tax at 40pc is 6240 PRSI 4pc is 624 USC 8pc is 1248

    Total 8112

    Overall Profit 15600-8112 is 7488.

    Assuming Mortgage is 1k a month that's 12k a year.

    Overall loss 12k-7488 is 4512

    This is assuming no interest relief from 2021 and perfect tenants.

    Why would anyone want to be a landlord to lose money each year!?

    The amount you pay on a mortgage is not a loss. It's a repayment of a loan.

    Every repayment you make increases your equity in the property.

    Assuming you rented it out for the lifetime of the mortgage then you will not have paid anywhere near the value of the property, your tenants will have.

    That's the true value of being a buy to let landlord. Accumulating a valuable asset.

    You cannot expect to make a monthly profit with a large mortgage.


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    #22
    Marcusm
    Registered Users Posts: 10,320 ✭✭✭✭Marcusm


    MattS1 wrote: »
    Hey there.

    Just looking to do a basic landlord calculation.

    Apartment Rented for 1500 a month.

    Rental Income per year 18000.

    Expenses

    Repairs 500 Insurance 400 Mgmt Charges 1500

    Total 2400.

    Profit 15600

    Income Tax at 40pc is 6240 PRSI 4pc is 624 USC 8pc is 1248

    Total 8112

    Overall Profit 15600-8112 is 7488.

    Assuming Mortgage is 1k a month that's 12k a year.

    Overall loss 12k-7488 is 4512

    This is assuming no interest relief from 2021 and perfect tenants.

    Why would anyone want to be a landlord to lose money each year!?

    How much of the mortgage payment is capital? You do not take that into account in determining profit or loss although it is negative cash flow. There are plenty of rental apartments bought in late boom which may not have any significant positive cash flow when account is taken of total mortgage payments etc.


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