buying second property for investment purposes

suave.4u · 23-12-2022 12:51am #1

Hi Guys,

So we bought our first home (mid terrace), all mortgage paid up now.

We have been saving for a bigger house, but whatever we see is either not worth it or is just too costly. Looks like we will have to wait for couple more months atleast. We have around 200K saving. Thinking of buying a second hand property (worth Eur 350K) and give it for rent. Planning to put the minimum 20% deposit and rest would be the mortgage amount.

The other house search continues and if we find something, we sell the present house (or take over another mortgage).

Is this a good idea?

regards,

Caranica · 23-12-2022 1:03am

No no no no no. Crazy idea in current rental legislative chaos. Don't do it.

nedkelly123 · 23-12-2022 1:11am

Be careful with this

i have 3 places and they can be a right pain .. don't forget you are effectively taxed on turnover at 50%

eg SIMPLE example

rent 1k

mortgage 1k

end of the year you have 0 in the bank but the revenue will send you a tax bill for 50% of 12k

no point buying a place at 350k when you will get the same rent at a place for 240k

only way to make money as a rule of thumb is if your rent is 2x your mortgage

go for a 3 bed house ~240k rather then a 2 bed apt for 350k

also check out the manifestos for several political parties

one was all for removing owner use and the sale of a property as a reason to end a tenancy ..

Ginger83 · 23-12-2022 1:12am

So you want to buy a property for 350k and hand it to someone with a contract that is effectively worthless

Have a read of this

https://www.irishtimes.com/crime-law/courts/2022/12/20/tenants-who-owe-over-70000-in-rent-arrears-can-spend-christmas-in-house/

DubCount · 23-12-2022 8:53am

Central bank rules on lending would require a 30% deposit at a minimum for a Buy2Let.

Having a Buy2Let mortgage could impact your ability to secure a larger mortgage on your own home.

Renting out property in Ireland at the moment is nuts. Its a high risk game, and the cards are all stacked in favour of the tenant. Just read some of the threads on here and you'll get the idea. Stay away - as far away as you can get.

Talk to a financial advisor on the best strategy to invest your money. It will be the best money you ever spend. Congratulations on saving 200k, thats a great achievement. Dont blow it on providing a "home" for someone else.

SteM · 23-12-2022 9:05am

https://www.boards.ie/discussion/comment/120027753#Comment_120027753

Doesn't it have to be their primary residence to avail of the rent a room scheme though?

CPTM · 23-12-2022 9:09am

Just a left field idea here, but there's some really good deals in the likes of Spain now. With interest rate increases and general inflation, they too are finding it difficult to get together a deposit for an apartment or house. This is putting a bit of pressure on the rental market.

Instead of investing in Ireland we're going to be buying some property over there with 50% deposits. The rent will be around 1000 euro per month and the mortgage will be around 400. And if we keep the money in Spain there are no tax implications for us.

It wouldn't be a good place to buy and sell every few years though because there are quite high taxes and fees involved in the sale of properties there. Around 10-15 per cent all things included. So we'd be buying with the idea of holding the property forever for rental income.

But if I were you I would be thinking of buying 3 properties there with small 400 euro per month mortgages on each of them. Find a reputable company to rent them out for you and let the cash build up in the Spanish account.

Gumbo · 23-12-2022 9:11am

https://www.boards.ie/discussion/2058276770/buying-second-property-for-investment-purposes

BTL requires 30% deposit.

you pay your legal fees and the legal fees of the lending bank too. Don’t forget to factor this in.

antoinolachtnai · 23-12-2022 9:12am

How would there be no tax in no locations if you kept the money in Spain?

you2008 · 23-12-2022 9:23am

https://www.boards.ie/discussion/comment/120028012#Comment_120028012

exactly 🤣

Donald Trump · 23-12-2022 9:23am

https://www.boards.ie/discussion/comment/120028041#Comment_120028041

Tax evasion

Q&A · 23-12-2022 9:38am

You've a sizable deposit sitting there. One advantage of such a deposit might be you can buy without having to sell. That will make you an attractive proposition to anyone selling. It might actually save you money as some vendors may be willing to accept a lower bid to avoid the hassle of relying on bidders having to sell their house.

Mad_maxx · 23-12-2022 9:46am

https://www.boards.ie/discussion/2058276770/buying-second-property-for-investment-purposes

If it were me I’d invest in an ETF that tracks the S+P 500 , it’s down almost a third from its all time high, could fall a good bit further but “it’s time in the market not timing the market “

buy to let market is far too much at the mercy of the government trying to appease leftists

Q&A · 23-12-2022 9:48am

Now if you're really want a bigger house is is a good idea to tie some or all of that money up in an illiquid asset. A deposit on a BTL worth 350k would be €105k. That half of your current savings. Forgetting about the state of the Irish rental market the transactions costs alone will be a factor. Stamp duty, solicitor x2 (buying and selling investment property), estate agent fees etc. If you're primary aim is not too be a long term landlord these costs may make a short term rental loss making.

That's before you factor ongoing cost of maintenance. Will you manage the property yourself or will you pay someone else. So you want the hassle of a tenant phoning you about a burst pipe at 2am (.... Or worse the 4am call to ask you to change a lightbulb)

You also say you don't think there is no value in the segment of the market you're looking at. There is no guarantee that at the €350k mark it will be any better.

JoChervil · 23-12-2022 9:53am

And if we keep the money in Spain there are no tax implications for us.

It's only for people, who have Spanish domicile

Furze99 · 23-12-2022 10:06am

https://www.boards.ie/discussion/2058276770/buying-second-property-for-investment-purposes

You want to upsize to larger house in near enough future? A bird in the hand is worth two in the bush, so hang onto your cash..

Fred Cryton · 23-12-2022 10:37am

https://www.boards.ie/discussion/2058276770/buying-second-property-for-investment-purposes

If you go down this route buy apartment in city centre and only rent to professionals. Try to get 2400 at least as once SF get in you won't be getting anymore, but inflation will hit you on the cost side.

Tbh though if you put all that money into the stock market now, given how much valuations have fallen in the past year, you could be looking at €50k profit 12 months from now.

DFB-D · 23-12-2022 11:00am

Yikes, a lot of negative comment here!

But my experience on this:

Investment property is a very good idea, nearly guaranteed to be the best return for risk available to you over 10-20 years.

But some risks involved as well, especially in the short term, there is a strong risk that house prices will reduce next year, some projections of between 5 to 10%.

As regards mortgages, BTL is not easy to obtain at the moment, you will easily get a residential mortgage. Some mortgage lenders will not lend to you if you have a mortgage already (mainstream), so having a BTL mortgage could effect your ability to get a residential mortgage. In theory you could get the residential mortgage from a mainstream lender and then take a second mortgage if possible from other lenders. But the other lenders are not lending at present.

I think take your time, talk to an advisor and consider your options carefully. Using the 200k to finance your next PPR would save 3-4% mortgage interest, which is not a bad return either...

suave.4u · 23-12-2022 1:15pm

Thank you guys.

-> I am married with 2 kids

-> I understand that if the rent is equivalent to the mortgage, then I would not be gaining much. If I put in 70K initial deposit, the repayments work out to around Eur 1400. I should be able to get a rent of around Eur 2200 in our locality.

-> Do I have to apply as BTL? Can't I just apply as a home owner and later decide to live in the existing place? As a married person , can't one person (say my wife) keep one bedroom and we rent the rest of it to avail the rent a room relief.

-> I understand that I might get a similar rent if I buy a house for say E240K; but not many are there for that price range. Did not want to go the apartment route. The location of the intended purchase is in a good locality, lot of schools nearby.

-> Not really looking at other locations like Spain. Also have some shares, so not looking at investing more there as well.

-> We really need to trade up, but as I said the newer houses are costly and not worth it.

The Student · 23-12-2022 3:12pm

https://www.boards.ie/discussion/comment/120028758#Comment_120028758

Can you afford to pay the mortgage if a tenant goes rogue? Are you strong enough to be a landlord?

It is not as easy as people think. The answer to the above questions are crucial for your decision.

Dante · 25-12-2022 11:32pm

https://www.boards.ie/discussion/comment/120028029#Comment_120028029

No tax implication? lol wut?

DFB-D · 26-12-2022 8:13am

https://www.boards.ie/discussion/comment/120033992#Comment_120033992

I assume they are on remittance basis tax.

Or if not, don't know they need to pay tax in Ireland on Worldwide income.

DubCount · 26-12-2022 10:39am

https://www.boards.ie/discussion/comment/120034241#Comment_120034241

If you are tax resident in Ireland, you pay tax on your worldwide income. If you own an investment property in Spain, you will need to make a tax returns in Spain and Ireland. Any tax payable payable in Spain is allowable as a credit against your Irish Tax Liability.

Caranica · 26-12-2022 10:40am

You cannot qualify for rent a room relief if you're not living there.

You are also supposed to notify your bank (and insurance company) if you rent out your home.

DFB-D · 26-12-2022 8:30pm

https://www.boards.ie/discussion/comment/120034411#Comment_120034411

If you are Irish resident, Ord resident and not Domiciled in Ireland, you are only charged income tax on foreign income remitted to the state.

Honestly, look it up.

Donald Trump · 27-12-2022 12:50pm

https://www.boards.ie/discussion/comment/120036078#Comment_120036078

I think you have that arseways. Domicile is relevant for tax purposes insofar that it allows the State to apply some tax to wealthy Irish people who deliberately move abroad to escape tax residency while really maintaining their long term base here.

If you are tax resident then you will be tax resident and have to pay tax on your income. Your domicile won't matter.

A person can, in theory, be ordinarily resident, stay here for more than 6 months in this year so that they are technically tax resident, but have split year treatment applied if they genuinely move abroad. If they were going permanently, they could change their domicile to the foreign country. But they'd still be subject to the split year treatment. So it would make no difference as regards tax. Unless they wanted to avoid the domicile levy after they went

DubCount · 27-12-2022 2:30pm

https://www.boards.ie/discussion/comment/120036078#Comment_120036078

The chances of OP being Tax resident in Ireland but non-domiciled in Ireland is pretty slim. Domicile is a long term concept and to change your domicile of origin, you'd need to show a determination to live long term in another jurisdiction (having family and children living there and having a permanent job there etc.). Domicile also has implications outside of tax. Its not an easy tax dodge.

Marcusm · 27-12-2022 2:32pm

https://www.boards.ie/discussion/comment/120037626#Comment_120037626

You have that wrong. Persons who are resident here but who have an Irish domicile may benefit from the remittance basis whereby their non-Irish sourced income is subject to Irish income tax only to the extent that it was remitted to or enjoyed in Ireland.

The domicile levy was created as a result of an outcry that some very wealthy Irish domiciled but non-resident people paid little or no Irish tax despite having large amounts of income, significant Irish property etc. this was generally because they were non-resident while remaining Irish domiciled. Persons such as JP McManus, Dermot Desmond and Denis O’Brien were often cited although it was not expressly related to them.

As the publican/hotelier Louis Fitzgerald has recently found, the domicile levy can also be applied to Irish resident persons. In his case his substantial income was sheltered from Irish income tax by capital allowances/tax depreciation but he paid USC. He has been forced also to pay the domicile levy despite being resident.

Donald Trump · 27-12-2022 2:38pm

https://www.boards.ie/discussion/comment/120037900#Comment_120037900

Persons who are resident here but who have an Irish domicile

What has your post got to do with the post I was replying to which implied that the OP could be tax resident, ordinarily tax resident, but non-domiciled.

The OP will still be subject to tax somewhere on that income.

SwimClub · 27-12-2022 3:06pm

https://www.boards.ie/discussion/comment/120037897#Comment_120037897

Hardly that slim, anyone who is a citizen of another country but resident in Ireland could claim non-dom status, you would just need to claim that you plan to move back to your own domicile ultimately (your domicile is sometimes associated with where you 'intend to die'). Non-dom originated as a tax break to encourage people to go abroad to the colonies for extended periods, their income being tax-free while out of the UK. In the UK they have levels of non-dom, where after 7 years you start paying huge amounts in charges to claim non-dom. But the fact you can claim it at all after 7 years shows that it isn't temporary. The Irish non-dom status is inherited from the British system.

Donald Trump · 27-12-2022 3:33pm

https://www.boards.ie/discussion/comment/120037974#Comment_120037974

I don't think we have the exact same loopholes here as the UK does

Still, you can't just be living in Ireland your whole life, buy a property in Spain and say "I intend to move to Outer Mongolia" and therefore I don't have to pay any tax on any of the rental income anywhere in the world"

There is a bit on it here though

https://www.revenue.ie/en/jobs-and-pensions/tax-residence/domicile-domicile-levy.aspx

Remittance basis of assessment

You may be Irish tax resident, but non-ordinarily resident and not domiciled in Ireland for a tax year. In this case you will pay Irish tax only on your:

Irish source income
foreign income to the extent that it is remitted into Ireland.

This is called the remittance basis of assessment. Remittance means the funds you send to Ireland from abroad by:

wire
mail
online transfer.

27-12-2022 3:38pm

https://www.boards.ie/discussion/comment/120027682#Comment_120027682

You can deduct your mortgage interest and other allowable expenses to reduce your tax bill FYI

HeidiHeidi · 27-12-2022 3:50pm

https://www.boards.ie/discussion/comment/120038052#Comment_120038052

Mortgage interest is only allowable on PPR, not on investment properties. And unless you buy a wreck, which is a whole different ball game, expenses won't be enough to make a noticeable dent in your tax bill. It will be in or around 50% of your rent.

OP, you'd be tying a lot of money (over half your savings) up in a potentially very illiquid asset, depending on what happens in the next few years.

If you will definitely want/need to move in the near future, I personally would be finding a far more flexible home for my savings.

Donald Trump · 27-12-2022 4:06pm

https://www.boards.ie/discussion/comment/120038078#Comment_120038078

It should be the same as any other income. Just because a person decides to use it to pay for a capital asset in no way implies that it should be tax deductive. No more than a PAYE taxpayer should be able to receive their 100k annual bonus tax free because they want to use it to put an extension onto the back of their house.

When the the asset is sold, the seller is assessed on CGT only on the excess above the price they paid for it.

HeidiHeidi · 27-12-2022 4:08pm

https://www.boards.ie/discussion/comment/120038110#Comment_120038110

Not sure why you quoted me, as that's what I was saying?!

Donald Trump · 27-12-2022 4:10pm

https://www.boards.ie/discussion/comment/120038114#Comment_120038114

Sorry, I was adding to yours, not contradicting you.

I edited it there to use "they" rather than the general "you".

Take that Enoch Burke

27-12-2022 4:48pm

https://www.boards.ie/discussion/comment/120038078#Comment_120038078

That's not correct. Can you show where it states that mortgage interest is only allowable on PPR?

https://www.revenue.ie/en/property/rental-income/irish-rental-income/what-expenses-are-allowed.aspx

DFB-D · 27-12-2022 10:54pm

https://www.boards.ie/discussion/comment/120037897#Comment_120037897

It's very common.

You are thinking from an Irish person perspective, changing their domicile.

But it is very common for a person coming here from another state and maintaining a connection to home.

It is not a tax dodge, just is not liable to Irish tax, taxed in their home country.

DFB-D · 27-12-2022 11:08pm

https://www.boards.ie/discussion/comment/120037626#Comment_120037626

Are you getting the remittance basis confused with the domicile levy?

Put it this way, a Polish person coming here for work, becomes resident, becomes Ord resident, will still not pay any Irish tax on rental income earned in Poland, once the income is not remitted here. They will be liable to Polish income tax.

Look all for learning, but if you don't understand something, be careful how you answer, your answer was designed to be demeaning, in light of the above you might improve your attitude.

Donald Trump · 27-12-2022 11:28pm

https://www.boards.ie/discussion/comment/120039450#Comment_120039450

The original post I responded to was about someone claiming you could be simultaneously resident, ordinarily resident, but non-domiciled. (The person referred to in the OP is implied to be an Irish person btw, but how and ever)

As I pointed out on page 1 of the thread, and provided a link from revenue.ie you must be non-ordinarily resident for your remittance basis.

Your post above is incorrect.

QED.

Consider improving your own attitude.

DFB-D · 28-12-2022 12:20am

https://www.boards.ie/discussion/comment/120039514#Comment_120039514

Well there you go, I warned you, and you've done it again.

You didn't find the use of the word "May" suspect at all? 😂😂😂😂

Donald Trump · 28-12-2022 12:26am

...

Caranica · 28-12-2022 12:33am

OP have you actually considered investing abroad? If not maybe the thread could cease to be derailed?

DFB-D · 28-12-2022 12:43am

https://www.boards.ie/discussion/comment/120039644#Comment_120039644

😂

Ah go on, I'll help you a little.

Revenue produce tax and duty manuals covering nearly the entire finance act, at a minimum, read the relevant one.

Donald Trump · 28-12-2022 12:46am

https://www.boards.ie/discussion/comment/120039663#Comment_120039663

I don't care anymore. Has nothing to do with the OP

DFB-D · 28-12-2022 1:04am

https://www.boards.ie/discussion/comment/120039668#Comment_120039668

Tut tut 😂

Anyway, for everyone else:

https://revenue.ie/en/tax-professionals/tdm/income-tax-capital-gains-tax-corporation-tax/part-05/05-01-21a.pdf

It clearly gives examples including an ordinary resident person.

Donald Trump · 28-12-2022 1:53am

https://www.boards.ie/discussion/comment/120039693#Comment_120039693

I don't care. Do yourself a favour and read the document. It is of no relevance to the OP who doesn't even want to invest abroad.

If they do, they will be liable for tax on the income. Despite your false "advice". Which, if followed, would amount to them breaking the law. Here and probably abroad too.

28-12-2022 2:51am

https://www.boards.ie/discussion/comment/120039724#Comment_120039724

what’s with the refusal to admit you were wrong about something which you have clearly been proven to have been, I assume you are human? You keep moving the goal posts to save face but to be honest it’s not reflecting great on you and you attitude isn’t ideal. Will proceed with caution going forward when I see your posts

Donald Trump · 28-12-2022 3:06am

https://www.boards.ie/discussion/comment/120039745#Comment_120039745

I am not wrong. The advice the other poster is giving and implying is that the OP can buy a house in Spain, tell the Revenue that even though they are Irish, living here and no intention of going anywhere, that they've decided to change their domicile and not have to pay any tax in Ireland, or any tax in Spain on any rental income from it.

Now when it is pointed out to certain posters that that is incorrect, they go on about a Polish person coming to Ireland and paying their tax in Poland. That is where the goalposts are being shifted. I shifted nothing. The OP is not a Polish person coming here temporarily. They are an Irish person who is living here and has their house here paid off and who has no interest in buying abroad.

The OP cannot just change their domicile like that. They could change their tax residency immediately (with split year treatment as I said). But they would have to actually leave to do that.

Unless you think that the OP can buy a house in Spain and not pay any tax anywhere on the income as long as they don't transfer it to Ireland? Are you saying that too? Because if you are, then you are also wrong.

28-12-2022 3:11am

https://www.boards.ie/discussion/comment/120039745#Comment_120039745

He consistantly does it across the platform so it's no surprise.

It has completely derailed the thread.

lawrencesummers · 28-12-2022 6:56am

I wouldnt touch it, and im a small landlord.

Tax makes it unprofitable and the wrong tenant makes it a complete nightmare.

I would look at investing a portion of that money. Plenty of places to put it that should give a hassle free return.

buying second property for investment purposes

Comments

Remittance basis of assessment