Help - A first time buyer landlord in trouble

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nick nack

Guest
I purchased an apartment 3 years ago with my mother as an owner- occupier.

Although I lived in it for a few months I lost my job and I decided to go traveling for 6 months and rent it out.

As it was only temporary I didn’t declare it. As I was a first time buyer I didn’t have to pay stamp duty when I bought it.

As it happened I met my partner in Australia and now two years later I’m still here.

My apartment has been on the market for almost a year without selling (there are 7 for sale in the same block). I have been given an offer but it’s less then I paid for it so I can’t afford to sell.

I’m really concerned as I’m not a landlord nor do I have a lot of money.

My sister is currently living in the apartment at a very cheap rent, which only covers two thirds of the mortgage.

What is the best thing to do? Should I hold on to the apartment for another 5 years and hope that it goes up again? It’s in Aryfield, Dublin 13.

If I declare it to the taxman will I get fined heavily? My stamp duty would have been €10,800 if I had bought it as an investor.

My sister pays €900 a month but the mortgage and maintenance fees amount to almost €1,400 a month.

Can someone give me advice or point me in the direction of a good tax accountant?

I’m concerned I will end up with a tax debt that I will never be able to pay!
 
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nick nack said:
I have been given an offer but it’s less then I paid for it so I can’t afford to sell.
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By the sounds of your post, you cannot afford not to sell.
You have not paid the tax you owe and every week that passes you increase your tax liability. Add to the fact that there is no sign of house prices increasing any time soon, and it is hard to see any logic in keeping the property.
 
soy said:
By the sounds of your post, you cannot afford not to sell.
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How is the op going to come up with the shortfall between the outstanding balance on the mortgage and what they get for selling the apartment so that the bank willl release the security?
To the op: It makes no sense to me that you are struggling financially and yet "My sister is currently living in the apartment at a very cheap rent". I'm not familiar with D13 but under the circumstances I'd be trying to get the going rental rate for the area.
 
demoivre said:
My sister is currently living in the apartment at a very cheap rent
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OP, are you sure about that - is it a 1 or 2 bedroom? If it's a 2 bedroom, tell her to get someone else in to make up the shortfall. If it's a 1 bed then you'll never get someone to cover the mortgage and management fees.

Anyway, as a landlord (and you are one), maintenance fees are your problem, not the tenants. In normal circumstances maintenance fees and mortgage interest would be written off against rental income but that option isn't open to you...

Is your sister claiming Rent Relief? Presumably not, but she is entitled to it, regardless of your tax affairs. If she isn't claiming to cover up for you, you should be footing the bill for that also.
 
IS the mortgage interest only ?

If not then perhaps you should consider going for teh interst only option to take off some of teh burden for a few years.
 
My sister is not claiming rent relief . It's a two bedroom place and he boyfriend also lives there. I think the going rate is about $1200 for the area but then there is many apartments for rent in the area that are vacant at the moment. All are pretty nice. Although the area has a cinema, gym and shopping complex it's not great for young people who like to socialise in town.

I wanted to know if I was to start paying the tax what I would be in for? I worked two jobs for the first four years of my working life to afford this. I really want to sort the mess out now before I lose everything. Does anyone know of a good accountant who can guide me in the direction where my loses are not too great.
 
Guys, I don't really care about the Euro symbol on my keyboard. I came here for advice on my tax problem which I really need help before I end up bankrupt. Can someone please help me out and point me in the direction of a good tax accountant. Many thanks
 
@nick nack, keyboards and currency symbols aside, there are other aspects of your post that unfortunately aren't clear to me. You claim FTB status on the apartment but you state
nick nack said:
I purchased an apartment 3 years ago with my mother as an owner- occupier. ...
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Whose name is on the deeds?
Whose name is on the mortgage?
What part did your mother play in the transaction
- did she fund the deposit
- is she a guarantor on the debt to the mortgage company
- did she live for a time at that address ?

I ask because some of the above could impact on your taxation situation or on other mortgages / loans in your mother's name.

Another poster (rmelly ?) asked if your sister had claimed rent-relief on the rent she pays you. I'm not sure she can claim (which in the circumstances might be just as well) as you are siblings .

Oh and BTW, for your own sake, when someone here asks questions of clarification on your posts, don't come over all defensive - contributors on here genuinely want to help, but may be discouraged if you sound like you want to start a fight.
 
Both my mother and I are on the deeds. The reason being was at the time I didn't earn enough to secure a mortgage alone. We both funded the deposit , lawyers fees, furniture, tradesmen etc. The original intention was that eventually when my salary went up I could buy out my mothers share of the place. My mother never lived at that address but I did only for a few months as circumstances changed and I went travelling. I was only meant to go for three months but I got a really good opportunity to stay in Australia for a few years. I was advised by the lawyer at the time that I didn't need to pay stamp duty as I was a first time buyer and the place was new. I didn't think it was an issue as I was meant to come home and live there. Then we tried to sell it but have had no luck. It is a beautiful apartment and very well maintained but there are too many for sale in the apartment block and nothing appears to be selling.

My sister doesn't claim rent relief as the rent is so low. My mother and I make up the balance of the repayments and bills.
I'm worried that even if I came back tomorrow I would still get done as I haven't being working in Ireland for two years. I really need to find out what is the best route to take. Should I sell it at the bargain basement price which would mean that we wouldn't get what we paid for it but as we have been paying capital on the mortgage so we wouldn't owe the bank anything now. Or should I declare to the taxman (and end up with debts) and hold on to the place for another five years and hope that the economic situation improves? My place which is a two bedroom, two bathroom and carspace in Dublin 13 was purchased four years ago for E260,000, went up to E340,000 until a year ago and is now worth E260,000 so the estate agent tells me. Have properties really dropped by 23.5%? I thought that was just the pricey places and the cheaper places had dropped by 9%? Do you think it will drop even further? Sorry to ask so many questions but I'm not an investor and am really scared for my future.
 
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you say you are not an investor, but by default I think you are, at least that is prob the view the revenue would take as it is no longer your principle private residence. You can't avoid the taxman so either sell and bite the bullet or rent it for full market rent and put everything above board.
 
Fair play to you for coming here and asking advice. It's a first step. Fact is, you should get some professional advice about this quickly, as your situation is unlikely to improve in the short term.
You are surely, as gerry said, going to be regarded by the revenue as an investor. They are chasing down people like yourself at the moment.
So you have to work out whether you can afford to be pouring money into a black hole for the next five years, hoping that the markets will recover at that stage, or whether you are better off cutting your losses now.
Neither situation is great. And I don't have the name of a good accountant. But you need to speak to one, and the sooner the better.
 
If you pay tax late, the standard penalty is 10% + interest of 13% pa provided you deal with the revenue nicely. If you are caught (and if your sister is living there it is unlikely) penalties can go up to 100% - depends on your level of cooperation. Thats the carrot for being somewhat compliant.

If you would sleep better having paid the tax, get an accountant to deal with it for you. Cant imaging the fees would be hefty (c 1500 say) for a decent small firm. Given the mortgage cost, its unlikely that any tax on the rent is due as the interest on the mortgage is deductible. Could be penalties for not filing returns but if it is handled sympathecially by the revenue, then they may choose to overlook them.

Thing is you need to get an accountant.

ps, very helpful relevant advice on keyboards, always want to know that stuff.
 
You could consider going interest-only on the mortgage for a few years to reduce the payments until you're in a better financial situation.
 
Thanks everyone for your advice. I think the best thing to do is cut my loses and try and sell if I can, as getting the cash together for the Stamp Duty, penalties etc is going to going to cripple me financially and with the state of the Irish economy it's unlikely I will make it back any time in the next decade. I guess every young person wants to get their first foot on the property ladder and feel a sense of achievement. I worked incredibly hard for years to afford the place and it's such a shame that it was all in vain and I have to start the saving for years all over again. It's easy for someone who is a decade older having bought before the boom to be smug about the crash and call people like me an idiot for buying places so overvalued but we were just trying to do the right thing for the future and got burned. I guess it's a lesson learned for all!
 
Get the going rate for rent for a start. There's no need to feel guilty over it - in fact your sis and b/friend should be feeling guilty about not giving you a fair rent especially if they know your situation
 
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soy may be right....nobody know when prices are even going to level-out..never mind increase, it may be time to cut your losses and take the next reasonable you can get. but at the end of the day you are the one that has to decide. i think you are right to take some expert advise.
 
I could be wrong as I havent dealt with this in a while but

(A) Do not all people purchasing a property need to be a FTB for there to be no stamp duty liability even when buying as an owner occupier (i.e. both need to be purchasing for the first time and both need to be owner occupiers)? As your mother is on the deeds and helped with the deposit as well as current payments I think this is a matter of when not if for revenue to find out.

(B) The fact that you rented it out before the claw back period was over means that you are and will always be liable for the clawback (even if you were not actually a FTB from a stamp duty point of view due to purchasing with your mother who didnt live there). whether you attempt to evade this fact wont make it so and it could come back to haunt you at any time and be alot worse

(C) Is there tax liabilites on the rental income? Even if this does not cover the mortgage does it not need to be declared both in ireland and australia? I know you do not want revenue to find out that you are renting it but that doesnt mean they wont, even if your sister is not claiming rent relief. Was there not a story of revenue recently knocking on doors asking questions about the owner, the landlord and the people living there?

(D) Did you declare this property on last weeks australian tax return? If not then you now have tax liabilities in Australia as well as Ireland and could be gaught for tax evasion in 2 countries.

If I declare it to the taxman will I get fined heavily? My stamp duty would have been €10,800 if I had bought it as an investor.
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Yes you will get heavily fined...but no where near what the alternative holds...

From what I gather, you are evading tax on all points and there is no 2 ways about it. People have been getting away with it for years but with Revenue now going after rogue landlords to aid funding a deficit, im not sure if you would be well advised to attempt to keep getting away with it.

My advise would be to try to determine all your liabilites and come up with the best solution to meet them. The stress alone of knowing that no matter how long you may avoid the call from revenue it is more or less guaranteed at some stage and the longer it goes the worse it gets. Personally I would rather get it over with and deal with it rather than waiting for the worst.

I think you really need to speak with a tax expert, perferably one with international experience so you can deal with Irish and Australian liabilities...they do earn a lot for a reason..

I gather from your posts that you are thinking about going all or nothing i.e. going to try to get away with it or face up to your liabilites and right it down to a very expensive lesson...my advice would be the latter...the former might come back onto you until the day you die...better to deal with this as soon as possible, i know you stated that you may not be able to afford to but the reality is you might not be able to afford not to in the long run..
 
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