Any benefits of setting up Property Management Company for own properties

lonelyplanet

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Hi,
I know that there have been many posts around the pros and cons of investing in property through a Ltd company and from what I gathered that its not a viable solution to property investing for an individual due to the punitive taxation when selling.

However I am wondering if there is any any sense in setting up a Ltd company to manage the letting, repairs etc of property owned by myself.

I have 4 properties which I let out and manage all repairs etc myself and wondering if there are any benefits in setting up a company to manage that side of business...ie collect rent and manage repairs. I am thinking if there is any way of claiming some of the repair expenses through a company structure that would benefit me ?
 

Mrs Vimes

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To manage property that you don't own you need to be licensed by the Property Services Regulatory Authority so I believe you would need a formal qualification.
Also, if you claim a deduction for the value of the time you spend on repairing the property then you must submit a return for the income you have made as a property repairer so it would be a zero sum game.
 

lonelyplanet

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Thanks Mrs Vimes. I have 4 properties of my own with very good rents with approx 7k per month gross rent...so my tentative plan was to see if it was worthwhile setting up Ltd company For managing my own properties. I have been managing properties for many years so thinking of pursuing the Prsa license
 

Gordon Gekko

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It’s an interesting question. I’m not sure whether the level of income would justify incorporation. You’d have to apply market rates in terms of the management charge, so that would only be circa €700 pm/€8.5k a year based on 10%. Then the money’s trapped inside a company.
 

Brendan Burgess

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I am thinking if there is any way of claiming some of the repair expenses through a company structure that would benefit me ?
The company can claim the same expenses as a sole trader.

Some contractors set up a limited company to make it look as if they are not an employee and so they claim extra expenses. But this would have no relevance to you.

Brendan
 

cremeegg

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A very interesting question.

Also, if you claim a deduction for the value of the time you spend on repairing the property then you must submit a return for the income you have made as a property repairer so it would be a zero sum game.
There is no question of claiming a deduction for the value of the time.

The management company would charge a fee for its services, that's a tax deductible expense against the rental income for the owner.

The management company would pay the owner a wage for his work managing the property. That would be taxable income for the owner, and the employees PRSI would be an additional burden. Slightly worse than zero sum so far.

The owners income from the management company would be income from employment and would create the possibility for pension contributions against earned income, as I understand it.

The company can claim the same expenses as a sole trader.
They are not identical. As an employee of the management company the OP could submit expenses to the management company and be reimbursed for those. Many such expenses cannot be claimed as tax deductions against rental income by a property owner.

As an example. From Revenue.ie

Use of private vehicles
You can repay your employees when they use their private cars, motorcycles or bicycles for business purposes.

This payment can be made, tax free, by the amount of business kilometres travelled. You can either:

  • use the current schedule of Civil Service rates
 
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lonelyplanet

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Thanks for the replies...I am wondering if I have a rent of 10K per month and management fees of 12 K per annum that are expenses to me the owner which I can deduct and have 12K income in company which I can pay myself a small income and hopefully use the management company for managing other properties/ doing maintenance work etc/.

I am struggling to figure out the pros and cons of this proposal with respect to the actual cost to me if I set up a company versus being a sole trader where I am taxed on all the rental income and can claim very little expenses... Say if I have a management company and there are repairs to be done..ie repair/replace washing machine can I charge owner(myself) via company and claim this as an expenses through the company...Maybe I am spouting nonsense. I am wondering if general maintenance work, replacement of goods are a claimable expense if processed through a company structure and if so is it worth going with this solution..
Thanks
lonelyplanet
 

RedOnion

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4,285
Sorry, I'm being a little slow understanding this one.

You are proposing reducing your taxable rental income by 12k, by putting it into a company?
How do you get the 12k out of the company at a lower tax rate?

So instead of you paying tax on say 100 euro rental income that your company is going to charge you for repairing a washing machine, which your company then pays you 100 euro for to pay for your time, and you pay tax on that 100 income from the company?

I note the point about some expenses, but the biggest expense we seem to be talking about is charging for your own time?

There's an angle I'm obviously missing here?
 

Gordon Gekko

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If the rental income was €1m a year, there might be merit in the plan.

i.e. bill the going rate for managing the properties, say €100k, pay oneself a modest salary, make big employer pension contributions, and maybe look at things like retirement relief down the line.

But at the levels being talked about, the economics just don’t work.
 
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