Yield on property if you are retired with no other income

Stockmaster

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I notice that all the discussions on rentals returns on property, suggest 41% tax, PRSI 4% and USC 7%. My question si if you are retired and you have no or little income. Then is your investment income not taxed at the lower rate. i.e the 20% rate, The table below is copied from an example at the 14% rate.



These are the figures for the property

|Investment|||95,000
Rental Income|||7,425
No of months|11||
Rent per month|675||
||||
Prtb|90||
Property Ins|400||
Property Tax|225||
Advertising|100||
Other expenses|1000||
Total Projected Expenses||1,815|
||||
Gross return after expenses|||5610
USC|7%|393|
Income Tax|41%|2300|
PRSI|4%|224|
||||
Total Tax|||2917
Net Return||||2,693
||||
Net Return on investment||||2.83%
|||||
[/QUOTE]
 
Yes most estimates on Income Tax on rental income assumes that the property owner already pays tax at the 41% tax rate which is not always the case

If rental income is your only source income then the first €8,250 will not be subject to PAYE at all as the taxpayer will normally have a tax credit of €1,650 to use against this income. After that the next €24,550 will be subject to PAYE at the 20% rate and 41% for anything over and above the €32,800 mark

Same theory applies to USC with the relevant limits being €10,036 @ 2%, next €5,980 @ 4% with the balance at 7%

If you are retired (< 66 years old) then there should be no PRSI on the rental income unless I am mistaken

I have assumed single cut-offs & credits for the PAYE above
 
Based on your figures, you would be getting a return of 6% gross and net, as you would not be paying any tax.

But I think with "only" €95k in assets, you would qualify anyway for the non-contributory pension, so that is going to make some of your income taxable.

Property investment is risky. Buying a single property is particularly risky. What if the tenant stops paying rent? There is very little you can do about it and your income will be gone.

Buying shares would be a different type of risk and certainly more volatile. But again the dividend income would be effectively tax free.

Brendan
 
Thanks for all the replies. My plan to to retire at 58'ish (5 years time) and have a total income of about 40000 between my pension which will be reduced due to early retirement of about 17K and make up the balance 23K from property. with similar returns to the one I listed above. So that would be 3 to 4 apartments at that level.AND I think now is the time to be picking them up, as if I wait until 58, the yields may be back at pre-boom levels. I am also currently looking at a apartment block which was built in the last 10 years with 6 apartments yielding about 300 each per month. which is asking 180K to purchase. So that would bring in about 21K before charges. I don't expect to have the usual building management charges as I would own the block and I would carry out whatever repairs would need to be done. But I have to look further as repairs etc would take a greater percentage of each 300€ per apartment if you know what I mean.
AS for dividends in stocks, I know you could spread your risk and try and perhaps get 3 -3.5% on relatively safe largecaps, but you would need 700K to get the return. I am think more like a 300K pot buying apartments, houses do not fir the bill either.
 
I am also currently looking at a apartment block which was built in the last 10 years with 6 apartments yielding about 300 each per month. which is asking 180K to purchase.

So that would bring in about 21K before charges.

I don't expect to have the usual building management charges as I would own the block and I would carry out whatever repairs would need to be done. But I have to look further as repairs etc would take a greater percentage of each 300€ per apartment if you know what I mean.


.


300 X 6 = 1800 a month or 21,600 annually. Building costs 180K. By my calculations on the rent ratio, the building is worth 260 to 300 or so. Added advantage is you're buying one block, and it's only 10 years old.

Without taking tax into account, you've the cost of the building back in 9 years.

I think it is an excellent time to buy, particularly as there is a potential upside and the added bonus of no CGT.

One block of six is very positive from many angles, one location, large rent roll, one place to maintain, one insurance, one location to collect rent from. In addition as you'd be retired it gives you a job to do, an occupation, a source of income, interaction with tenants and you're able to do the repairs yourself which cuts down on costs.

Shares I know nothing about.
 
Hope this is the correct section

I am about to move out of the family home and rent same. Is there a Key Post on the tax arrangements around this please?
 
Hope this is the correct section

I am about to move out of the family home and rent same. Is there a Key Post on the tax arrangements around this please?

No you shouldn't post on this thread. Go to the landlord or investment section and read that first and then ask an actual question. Figures and reasons would also be helpful.
 
These are the figures for the property 1) If working 2) Retired 3) Retired with large income from 3 apartments costing 85,000 @ 800 per month. Thanks for all the replies. Here is a summary based on feedback.

1) Working
|Investment|||85,000
Rental Income|||8,800
No of months|11||
Rent per month|800||
||||
Prtb|90||
Property Ins|400||
Property Tax|100||
Advertising|100||
Other expenses|1000||
Total Projected Expenses||1,690|
||||
Gross return after expenses|||7,110
USC|7%|497|
Income Tax|41%|2915|
PRSI|4%|284|
||||
Total Tax|||3,697
Net Return||||3,413
||||
Net Return on investment||||4.02%
|||||
[/QUOTE][/QUOTE]

2) Retired
|Investment|||85,000
Rental Income|||8,800
No of months|11||
Rent per month|800||
||||
Prtb|90||
Property Ins|400||
Property Tax|100||
Advertising|100||
Other expenses|1000||
Total Projected Expenses||1,690|
||||
Gross return after expenses|||7,110
USC|7%|142|
Income Tax|41%|0|
PRSI|4%|0|
||||
Total Tax|||142
Net Return||||6,968
||||
Net Return on investment||||8.2%
|||||
[/QUOTE][/QUOTE]


3)Retired with large income
|Investment|||255,000
Rental Income|||26,400
No of months|11||
Rent per month|2400||
||||
Prtb|180||
Property Ins|1200||
Property Tax|300||
Advertising|300||
Other expenses|3000||
Total Projected Expenses||4,780|
||||
Gross return after expenses|||21,620
USC|3%-Approx|648|
Income Tax|20% after allowance|2674|
PRSI|4%|864|
||||
Total Tax|||4178
Net Return||||17,433
||||
Net Return on investment||||6.84%
|||||
[/QUOTE][/QUOTE]
 
And if a married couple jointly owned an investment property (or properties) could they each equally earn ~€32800 in rent which would avoid the highest 52% rate of tax?
 
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