Landlord incentives

[Leo]

I was waiting to see what they would announce in the budget but having seen the incentives I will either sell or leave the place empty.

Have you calculated what rarely using that apartment costs you?

From a purely financial perspective, choosing to sit on an asset such as that which costs money to maintain is the domain of the wealthy and that cohort tend to need a very significant financial incentive to forego little luxuries such as a bolt-hole away form home for occasional use. Selling it, investing the proceeds and using the income generated from that to rent accommodation where and when you want it makes a lot more sense.

 

[DannyBoyD]

Yes when it comes to tax. Otherwise no.

I disagree; the words carry the same meaning.

 

[T McGibney]

I disagree; the words carry the same meaning.

evade

1. to avoid or escape from someone or something: 2. to intentionally not talk…

dictionary.cambridge.org

 

[lff12]

So if a landlord was 60 and retired assuming all his income was in the lower tax bracket (below 42k) would he see any benefit?. Is this just for landlords who's rent is in the higher bracket?. Or am I misreading something?.

You seem to be correct?

 

[lff12]

Once again they promise to help, but again and again fail to really incentivise landlords to stay.
If they were serious, the least that they could do to encourage people to stay would be to backdate it include returns made for 2023. To think that this measure will only help in 2025, when a landlord is submitting their tax return, it’s useless to entice current landlord to stay.

The devil is in the detail - if the same property remains rented for the full 4 years they get an increasing tax relief in the 2nd, 3rd and 4th years. Its to incentivise maintaining longer term rentals.

 

[lff12]

Perhaps difficult but a system where landlord with properties well below market rate get more tax relief and those renting at the top of the market get none / little.

Could look at rent / property tax value for what is high or low value.

Similarly I know people paying very low rent getting a few months worth back.

Yes. If you are charging a modest rent, say 9k pa, & on upper rate (RTB & other research generally shows that most landlords are on upper tax brackets), there isn't a lot you can expense (such LLs would not be generally paying agents). So they'd be paying around 3600 on tax leaving them 5400.
Under new system - provisio being it continues to be rented for full 4 years...
2024 assuming rent increase of 2% - rent now 9180. After tax on 3k @20% (2400 net) & rem on 40% (3708) - they take home 6108 rather than 5508
2025 rent now 9364. After tax 4k @20% (3200) + 5364 @40 (3219) = 6419 rather than 5619
...
and so on - in percentage terms for such a LL its 600+800+1000+1000=3400 over the full 4 years which is more than 4 months gross rent - if you are looking for bigger returns than this, you probably shouldn't be looking in the PRS for them.

 

[lff12]

The data is obviously wrong. Even with record market rents, landlords are exiting the market in droves, and there are so many habitable and lettable properties being left empty that the government feels it necessary to levy a special tax on them. AAM users are even being advised in certain situations to consider leaving properties empty to evade RPZ rent controls.

It can't be wrong - the census is filled out by individuals who have no reason to describe their circumstances as anything other than it is. We have had a net increase in tenancies of around 10% since 2011.
We had very high levels of vacancy in 2011 so an awful lot of this will be renting properties that were vacant in 2011. Or new builds. Either way, there has been a shift in PRS investment here from small players to medium to large sized investors. Some small players are indeed leaving, but there has always been a cycle to PRS investment & it almost certainly reflects a large increase in very very amateur first time property investors who entered between 2000-2006 existing at the end of a probably 20 year mortgage. CB had some interesting data around 2012 on the number of BTL mortgages changing from interest only to interest in capital and the bulk was between 2013 and 2015 - which is exactly when rents started rising rapidly (naturally - landlords had large repayment increases). By this measure, assuming 20 year terms, you would expect to see a large number of such early 00s first time landlords exiting between now and 2027.

Old timers are a different matter - someone investing in rental market in 1998 wasn't going to turn their nose up at 700 pounds a month to rent a whole house and would not be assuming they are entitled to receive 4 times that per month 25 years down the road when inflation hasn't increased to that extent.

 

[Premos]

Are you talking about the 1998 LL before or after the huge increase in rent that year or the followings? My rent increased from 350 to 550 after my first year lease in 1998. I then moved to somewhere for 500 pounds that would not be considered fit for purpose nowadays. They were both one bedroom unit.

 

[Bank Manager]

I didn't wait for the Budget. Tenant moved out a few months ago, and I've now sold the apartment - like others getting well below market rent as in RPZ and the prospect of SF in Govt saying they'd freeze rents for 3 years enough to convince me to get out.

 

[fistophobia]

VHT - they are saying only 25,000 letters were sent to households.
I know of 2 people who got the letter, with neither house being vacant.
One being my elderly mother, who is now in a distressed state.

 

[Purple]

VHT - they are saying only 25,000 letters were sent to households.
I know of 2 people who got the letter, with neither house being vacant.
One being my elderly mother, who is now in a distressed state.

Tell her to turn on aa few lights the odd time.

 

[Firefly]

Tell her to turn on aa few lights the odd time.

I think the sale of timers is going to go through the roof. It would be a lot cheaper for people to use some electricity for 30 nights than to pay the increased tax. Not great for the environment though.

 

[faketales]

WE are out too after this budget. We were hopeful. We said we might rent a room instead and get 14k tax free.

Can you help me understand this? Is the room you are planning to rent in the apartment you are renting out?

 

[BigBoots82]

I would expect rental income here refers to taxable rental profits rather than gross rental income

 

[Jordan Belfort]

Yeah pretty much no benefit if you are in lower tax bracket as all your income would be subject to standard rate plus USC and prsi. The relief assumes most/all landlords pay higher rates of tax (which is obviously not case in all instances)

Back of fag packet calc is below (USC and PRSI excluded for simplicity). Open to correction also on any point.

	Current	2024​	2025​	2026​	2027​
Rent	15,000	15,000	15,000	15,000	15,000
Less expenses	5,000	5,000	5,000	5,000	5,000
Taxable	10,000	10,000	10,000	10,000	10,000
Standard Rate 20%		600	800​	1000​	1000​
Marginal 40%	4,000	2,800	2400​	2000​	2000​
Total Tax	4,000	3,400	3200​	3000​	3000​
Net profit	6,000	6,600	6,800	7,000	7,000

I hope not. I assume the bit about disregarded at standard rate means the the first 3k next year will be taxed at 20% lower than normal. If you pay 20% tax thin first 3k will be zero......this like how they give medical and health insurance relief at standard rate so that everyone benefits by the same amount.

 

[Calico]

Have you calculated what rarely using that apartment costs you?

From a purely financial perspective, choosing to sit on an asset such as that which costs money to maintain is the domain of the wealthy and that cohort tend to need a very significant financial incentive to forego little luxuries such as a bolt-hole away form home for occasional use. Selling it, investing the proceeds and using the income generated from that to rent accommodation where and when you want it makes a lot more sense.

TBH you are right...in this case there is a sentimental/emotional element to my keeping it as it is, in effect, the family home in my hometown etc.

Between charges and utilities it probably costs me around €4,000 a year to leave more or less empty which is ridiculous.

Not a smart financial decision and one I'm only "getting away with" because property prices are going up.

 

[faketales]

TBH you are right...in this case there is a sentimental/emotional element to my keeping it as it is, in effect, the family home in my hometown etc.

Between charges and utilities it probably costs me around €4,000 a year to leave more or less empty which is ridiculous.

Not a smart financial decision and one I'm only "getting away with" because property prices are going up.

Is there a tax change that the government could have made that would have tipped you over in to renting it out?

It seems you don't need the cash and don't want the hassle / risk. Fair enough imo. A lot in that position I imagine and I'm not sure any tax change would solve.

Ultimately a stick of increasing property taxes on second homes further may be the best policy to either get you to rent it, sell it or just generate income.

 

[imalwayshappy]

I would expect rental income here refers to taxable rental profits rather than gross rental income

No doubt these points will need further clarification. The detail in the supporting budget documents is extremely light...

 

[Calico]

Is there a tax change that the government could have made that would have tipped you over in to renting it out?

Had they extended the rent-a-room scheme to include it I would for sure rent it out.

 

[Bronte]

86% own just one or two properties

Temporary tax relief for small

€3,000
€4,000 2025
€5,000 for 2026 and 2027

Will be disregarded for standard rate tax

So is that 600 Euros? 3000 X 20%. Does anyone seriously think this will incentivise any landlord. They have not got one clue. And I suppose this is another paper mess for us to try and figure out. More tinkering. They never stop interfering.