Implications and costs of renting my apartment

T

Tallwan

Guest
Hi,
I apologise in advance incase this is in the incorrect forum (I'm new here) -I'm Wondering the costs and implications of renting out my apartment.
I bought apartment in August 2008. Have a mortgage of approx 198K left on it and have decided to move in with my boyfriend into his house. Paying approx 900/mth on a variable mortgage (first time buyer) in Limerick city. Rental that I would get would be approx 600 - 650/mth, so obviously not close to covering mortgage rates and understand that I'll need to top up payments for mortgage (planning on continuing to pay mortgage and save rental received)
Really stuck as trying to find out the tax implications and other costs associated with renting out my apt and anything else that I'm missing?
Really looking for step by step, so that I don't miss anything. Hoping to rent out from January, but have heard so many horror stories from people not following all steps required.
Am fit to pull my hair out as there is so much information out there. Really just want simplified 1, 2, 3 etc of what I need to do, so that I'm compliant and won't miss anything that I should do or costs that I will incur. Really want to go into this with my eyes wide open.
Thanks all in advance for your help!
Confused!
 
My friend was in a similar situation a few months ago and sent me an email with a few specific questions, here is the response email I sent to her, a lot of it probably applies to your situation:

Should you try and get "cash"
I would strongly advise never to go "cash" because you are leaving yourself wide open to being rightly mucked about. A tenant could decide not to pay rent and you have no comeback. If the tenant lost their job they would want to claim rent supplement and it would come out then. You may choose to let it to a rent supplement recipient in the first place. Revenue could find out and you'd be caught for interest and penalties. In my mind it's not worth it. You'd save a few quid (maybe even a lot of quid) in tax, prtb, nppr, etc but you'd lose it in sleep.

Should you pay an auctioneer to manage it?
8% auctioneers fee for management sounds pretty ok. Does he collect the rent for that? I reckon you'd be perfectly capable of managing it yourself. I would have a concern (I don't know Gary at all) that when you're spending someone else's money it's easier to spend: Oh you want a new washing machine, no problem. Can't work the shower, let me send around a plumber at $100 per hour, etc.
Might be better to get him to find and vet tenants and you then manage it. I am of course always here for help, advice, etc.

TRS
If you are not living there you should not be claiming TRS. See points about sleep above.

The tax bit:
Rent receivable is taxable income at your marginal rate. If we assume you are paying tax at the higher rate, this will also be at the higher rate. It is necessary to complete a tax return (generally Form 12) to account for the rental income.
There are certain deductions allowed against the rent:
75% of mortgage INTEREST paid IF you have registered the property with the PRTB (this deduction is worth far more than TRS but may be reduced in the next budget.)
Repairs and maintenance
PRTB registration fee of $70
Insurance - both house and life provided it's the basic mortgage protection
Letting fees
Depreciation of furniture, etc at 12.5% pa over 8 years starting when purchased (so the fridge you bought last year has already used up 1/8)
So, using made up figures:
Rent in 500x12 = 6600
Interest (180000x2.5%x75%) = 3375
PRTB = 70
Insurance = 300
Letting fees = 640 (incl VAT)
Furniture (eg 5000x12.5%) = 625
Total taxable = 1590 @ 41% = 652
There is also USC but I don't know the figure.

Other tax - CGT
When you sell the house in 5 years time for twice what you bought it for you'll have to pay CGT at 25% on the profit apart from the time you lived there... oh wait... just checked my calendar again, it's not 2006, don't worry about it...

Painting the House:
Pre-letting expenses such as decoration are explicitly NOT deductible for tax. Check with your guy whether it would be possible to let it as is and paint as soon as the lease starts.

PRTB:
Costs $70 to register the tenant. If you don't then you can't deduct mortgage interest for tax and also can't get legal to remove a tenant.
They are also the authority to deal with landlords' and tenants' rights and obligations. Have a look at their website (which is awful) and also here (which is good)

NPPR:
There is a non-principal private residence charge of $200 per year payable to the local authority if you own a house/apt which is not your ppr on the 31st March each year. If you don't pay it by the end of June you will be charged $20 PER MONTH in late fees. This fee appears not to be tax deductible.

The Bank:
Your tracker is probably for your ppr and in theory you could lose it by renting out the house and be moved to investment mortgage rate. Without seeing the mortgage documentation I couldn't say but it is likely a condition of the tracker. Personally I wouldn't tell the bank in your situation and if they find out plead ignorance.

You also need to consider whether you are going to pay the boyfriend rent or how that's going to work out. Obviously you're not thinking about it not working out (and sorry to bring it up) but it's much easier to sort these things out now when it's all good than if something were to go wrong down the line.

Maybe have a look through here too.

Sorry about the $, don't have Euros on my keyboard hehe
 
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