What is a fair % discount for renting to a relative

Former Dublin BlowIns · 15-07-2021 10:21am #1

Morning all. I'd appreciate your thoughts on the question above. The benefit of renting to a relative in my mind equates to lower risk/peace of mind. To acknowledge this lower risk I am considering proposing a 15% discount from market rents. What are people's thoughts on this level of discount?

Chijj · 15-07-2021 10:42am

You should note that any difference between Market rate will be taxable for the tenant....if they find out

Patsy167 · 15-07-2021 10:49am

Renting to family/friends can be very messy. Worth keeping in mind the potential downsides as well

homer911 · 15-07-2021 10:57am

You can give them a discount of up to €3k per annum without attracting a possible CAT charge. If they are not related and the discount is greater than this, they pay tax on the difference. If they are related, any excess will eat into their lifetime allowance

ec18 · 15-07-2021 10:58am

Former Dublin BlowIns · 15-07-2021 10:59am

Hi guys. Thanks for the above. I want to charge a market price but one which takes account of the lower risk. Am i in the right ballpark at 15%? Not looking to gift anything

joseywhales · 15-07-2021 11:01am

You say lower risk but is it not higher risk? What will you do when they don't pay rent?

Former Dublin BlowIns · 15-07-2021 11:03am

Both secure jobs so risk of non payment very low in this case. Do appreciate it could be different in other cases though

thejaguar · 15-07-2021 11:20am

https://boards.ie/discussion/2058198840/what-is-a-fair-discount-for-renting-to-a-relative

Seems a lot to me - 10% would be the max if you ask me, even that is very generous. As noted above - the risk is not necessarily lower.

dingding · 15-07-2021 11:24am

Also it could devalue your property as future rents are based on the current rents if you are in a rent control area.

Ray Palmer · 15-07-2021 11:33am

https://boards.ie/discussion/comment/117613078#Comment_117613078

You have to consider that if\when they leave and you are in RPZ you must offer the same discount to the next tenant.

Flinty997 · 15-07-2021 11:39am

With RPZ, every tenant after your relatives will more or less get the same discount for years.

If you were going to buy a buy to let property and one had a 15% less rent. Do you think it would effect the selling price of the property.

Former Dublin BlowIns · 15-07-2021 12:06pm

Not in a RPZ however I agree this would be a risk as that could change. My thinking on discount was the relative in question is coming the end of a 10 year stay in another let accomodation and I know the owner who says the place is always immaculate and he never has to do a thing. This peace of mind is worth something thinking of a future letting for my own place.

Former Dublin BlowIns · 15-07-2021 12:07pm

https://boards.ie/discussion/comment/117613382#Comment_117613382

Yes but we have no plans to sell in the next 10 years so less of a concern for us

o1s1n · 15-07-2021 12:10pm

I have a similar situation myself and was considering renting to either a family member or a friend at a discount. The RPZ thing put me off though and I would also be a little concerned an issue might come up where they lost their job or something and I'd be expected to help them out (in effect, having to make up the shortfall out of my own income)

Decided that when it comes to business (which is what a letting is, really) it's best not to add friends and family into the equation.

Turkish1 · 15-07-2021 1:07pm

To avoid any potential (future) RPZ/or similar implications. You could charge them fair market rent and then give them an unrelated gift say twice a year equivalent to approx. 15% of the market rent (assuming less than €3k total). Means you are not then hamstrung to a 4% increase on a rent of 85% of the market value in case they do indeed leave sooner than you expect.

Flinty997 · 16-07-2021 5:46pm

https://boards.ie/discussion/comment/117613615#Comment_117613615

Either your plans or their plans could change in 10yrs.

Unless the legislation changes, (it its hardly likely to improve for LLs) you'll still have the same issue in 10yrs.

I would never get involved with family or friends when it comes to money. Anytime I've seen it, its never ended well. Even in the best cases there were still moaning about it years later.

Bass Reeves · 16-07-2021 9:55pm

What Turkish posted seems an obvious solution however if it's a gift you have to pay tax on it before you gift it back to them. The easier way is a rent rebate which you can give them. A months rent is approximately 8.4% of yearly rent. So two months is nearly 17%.

I consider that kind of rebate fair if I was not getting based for small things and if they kept the property painted and looked after for you.

Pelagia · 17-07-2021 8:43am

My experience of family members renting to relatives has been very positive. The tenants have been charged less (out of goodwill). The advantage to the landlord is knowing that their properties are in good hands and the rent will always be paid.

Bass Reeves · 17-07-2021 11:01am

The other thing to factor in OP is if these people will be renting from you longterm. If so then it's a win-win for you giving a discount/rebate. As well.of they are there longterm I be less worried about rental regs regarding what you can charge next tenant

The Mighty Quinn · 17-07-2021 11:57am

If you gave them a discount, as people say the next tenants are due the same rate if in an RPZ............ but.......... really, who'd know?? Is it only if it's a PRTB registered tenancy?

bb1234567 · 17-07-2021 12:02pm

https://boards.ie/discussion/comment/117623029#Comment_117623029

How can that be known? Just because they are family? People don't just not pay rent for the fun of it, they do it because of unforeseen impacts of circumstances generally outside of their control , that can happen people you are related to too!

mrslancaster · 23-07-2021 11:17am

https://boards.ie/discussion/comment/117623516#Comment_117623516

Tenancy has to be registered with rtb so there would be a record of rent amount for any future tenants unless the relative is a spouse, child or parent then no rtb required afaik.

OP, if it's some other relative & they can't pay the rent for whatever reason & you have to repay a bank, or you need the house back for your kids, or to sell, it could get very messy. Circumstances change & relatives will still be around & nobody wants a rift in a family because of a house but it happens. If you want ten years low risk, you could rent to the council but that has its own downsides too.

JimmyVik · 23-07-2021 11:45am

My brother rented a 1 bed apartment to our sisters son and his girlfriend.

All was good until this year when my brother decided to retire and wants to sell the house to fund his retirement.

So the way things stand now, the whole family hate my brother, which is ridiculous.

The way it started was about 4 years ago my brother was going to sell when tenants left. Nephew asked could they have it and he said yes. He gave them a nice healthy discount. They are still paying him €750pm and he could get €1500 today if he rented it (well he cant because RPZ etc.)

But he was happy enough with the arrangement. The apartment is worth €250k.

So last year around Easter my brother told nephew he needed the house back in January 2021 because he was selling it.

In December Nephew announces that GF is pregnant.

Brother has now jacked in his job to retire and is going to Portugal with the wife.

He got the apartment valued and the RPZ and the low rent really effects the valuation, but he is hoping an owner occupier buys it and doesnt look at the small rent it can only achieve.

So all of a sudden nephew and pregnant girlfriend get a shock at how much they will have to pay for rent when they move out. Go crying to mammy, and granny and grandad. All of them putting pressure on the brother to let them stay. He said ok stay til the baby is born, which is next month.

They have no intention of moving out and cant afford to anyway, and my sister has told me on the QT that they are going to go to the RTB and will not move out. Already the nephews other brother, wife and 2 kids have filled up his own mothers house and will not be moving out, so no room for them there. So there is my brothers reduced retirement fund locked up in an apartment, subsidizing a couple he was doing a big favour for in the first place and now looking like a bully to everyone else. And all he wanted to do was retire and use his property to fund his new life in Portugal and wherever else he wants to go. Instead he is still paying a mortgage and tax on a low rent property that he cant get at. And he is the bad guy.

Nobody is actually a bad guy in this, but its all tied up in knots because its family. Never ever have financial dealings with family.

Claw Hammer · 23-07-2021 12:38pm

"Brother has now jacked in his job to retire and is going to Portugal with the wife."

The sooner you brother sell that apartment and goes to Portugal the better.

The Mighty Quinn · 23-07-2021 2:38pm

Hmm. Maybe a lesson here based on JimmyVik's post?

If renting to family, charge them full whack, so there's a paper trail of such, but refund them the difference between market rate and family rate as a bank transfer, or cash or whatever. That way the tenancy is registered at rent of - say - 1400pm, even if family are paying 900pm, removes issues with future tenancies/sales.

HerrKapitan · 23-07-2021 2:41pm

I think renting a place without going through the usual application routes and competitions is enough of a favour? I would keep the rent the same as how you would with the non-relative.

listermint · 23-07-2021 2:46pm

Fella i know rented his house to his best friend (at the time) and his father. roll forward a few years he was an entire year trying to get them out so he could sell it and buy a home with his new wife. The former friend stopped paying rent for months then strung him out every inch of the process.

DO NOT RENT TO FAMILY OR FRIENDS, there are never any winners. just say no.

What is a fair % discount for renting to a relative

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