Absolutely clear that he should keep it.
You good certainly make a good case for retaining the rental but I wouldn't describe it as absolutely clear.
The accounts for the rental might look something like this:-
Gross rental income................................................................................19,500
Expenses:
Allowable Interest (80% of €200k @ 0.5%)....................................................800
Mortgage Protection Premiums..................................................................... 300
Annual Service Charge (OMC)....................................................................1,700
Estate Agent Letting/Management Fee............................................................ -
Repairs/Replacements & Maintenance............................................................500
Advertising Costs..........................................................................................45
RTB Registration Fee.....................................................................................90
Cleaning....................................................................................................... -
Legal............................................................................................................ -
Landlord Insurance Premiums.......................................................................200
House Insurance Premiums............................................................................. -
Refuse Charges/Local Authority....................................................................... -
Gardening..................................................................................................... -
Sundry (phone, postage, key cutting) .............................................................. -
Accounting.................................................................................................... -
Total Allowable Expenses..........................................................................3,635
Taxable Rental Income.............................................................................
15,865
Tax (Income Tax, USC & PRSI) @ 50%....................................................... 7,933
LPT........................................................................................................... 267
Non-deductible Interest.............................................................................. 200
Net Rental Income After Tax.................................................................
7,465
So, it's pretty clear that there is no net benefit to retaining the rental while the home renovation loan (€
[email protected]%) is outstanding.
If you ignore principal repayments, and assume that everything else remains constant, once the home renovation loan is discharged you could project a net benefit of €4,500 pa in retaining the rental over paying down the PPR mortgage (€100k@3%).
Over, say, a five year period (assuming the home renovation loan is paid off at the end of year 2), that averages out at €2,700pa. Is that a sufficient reward for bearing the risks and hassle associated with retaining the rent? Maybe.
Obviously the above ignores any possible capital appreciation/depreciation.