Rebelrebel
Registered User
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Hi, Looking for some thoughts from anyone on the below.
My wife and I are in the process of buying a second Family home. We currently we live in a 3 bed semi-d in west Dublin. We are contemplating renting the three bed semi. Currently the mortgage is 225,000 and if the house were sold it would probably fetch 285,000. We are on a tracker on this and the monthly repayments are currently approx. 1,050. If we were to rent it, the rent would be 1,500 per month.
I’m familiar with the tax obligation we would incur. The house was recently renovated (new kitchen, tiling, flooring, converted attic etc.) and we would be able to write off a good amount against the 12.5% capital costs for 8 years. Having said that the house is in excellent condition and would probably attract a premium and perhaps some competing interested parties if we were to sell.
Given this information and the calculations below I’m looking for some thoughts on whether you think it makes more sense to rent out the house or to sell. The logic to rent it out would be that we could use it as part of our pension at the end or indeed sell before the 8 years of capital allowance depreciation comes to an end and the tax liability becomes larger. Of course I understand the downsides of renting – hassle, potential non-paying tenants, damage, repairs etc etc.
Note the interest rate on the new house would be approx. 3.60% and the mortgage on the new house would be 440,000 (if anyone would like to include that as part of their consideration)
I estimate the following would be how the finances work out and the approximate tax obligation. I’m open to any corrections to the below or factors that I have not yet considered.
My wife and I are in the process of buying a second Family home. We currently we live in a 3 bed semi-d in west Dublin. We are contemplating renting the three bed semi. Currently the mortgage is 225,000 and if the house were sold it would probably fetch 285,000. We are on a tracker on this and the monthly repayments are currently approx. 1,050. If we were to rent it, the rent would be 1,500 per month.
I’m familiar with the tax obligation we would incur. The house was recently renovated (new kitchen, tiling, flooring, converted attic etc.) and we would be able to write off a good amount against the 12.5% capital costs for 8 years. Having said that the house is in excellent condition and would probably attract a premium and perhaps some competing interested parties if we were to sell.
Given this information and the calculations below I’m looking for some thoughts on whether you think it makes more sense to rent out the house or to sell. The logic to rent it out would be that we could use it as part of our pension at the end or indeed sell before the 8 years of capital allowance depreciation comes to an end and the tax liability becomes larger. Of course I understand the downsides of renting – hassle, potential non-paying tenants, damage, repairs etc etc.
Note the interest rate on the new house would be approx. 3.60% and the mortgage on the new house would be 440,000 (if anyone would like to include that as part of their consideration)
I estimate the following would be how the finances work out and the approximate tax obligation. I’m open to any corrections to the below or factors that I have not yet considered.
Monthly Rent | Annual | |
Rent | 1,500 | 18,000 |
Expenses | ||
EA Letting Fee | 1,500 | 1,500 |
EA Mgmt Fee | 150 | 1,800 |
Mortgage Interest | 210 | 1,890 |
PRTB | 90 | 90 |
Insurance | 500 | 500 |
Mortgage Protection | 40 | 480 |
Capital Costs | 45,000 | 5,625 |
Repairs | 1,000 | 1,000 |
Total Expenses | - | 12,885 |
Net Profit | - | 5,115 |
Tax liability (52%) | - | 2,660 |