Renting out half a house

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On a Plain

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Myself and my sibling have recently inherited a house. My sibling wants to continue to live there and that is ok with me. We are going to come to an agreement on the rent. Would it be half the market value , as I am renting out my half of the property ?
 
On a Plain said:
Would it be half the market value , as I am renting out my half of the property ?
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You can agree whatever you like. It depends on what your arrangements are for things like repairs, renovations, etc. Also whether you have a right to stay over. I would recommend some kind of written agreement on this so you don't fall out down the line.

For tax purposes, anything substantially below 50% of market rent would be treated as a gift for CAT purposes. But you have a €3,000 tax-free allowance for a gift to any person in a year.
 
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Talk about the duration of this arrangement, what is the exit strategy, when will you review the rent, who will do repairs.

If it's intended to be of short duration, you should be ok. When these things go on longer than expected resentments can build up.
 
If you were renting the house to a third party on the open market, let's say you would charge €2,000 a month.

So, if she stays in the house, you are "losing" €1,000 a month.

So she should pay you €1,000 a month rent.

You must do a written agreement.
I would suggest that she agrees in writing that the property will be sold after 10 years.

The alternative is that you could sell your half to her now for say €300k and she could repay this to you over the next 20 years. This could be difficult to enforce if you fell out.

Or you could give her a loan to buy your share of the house and you would secure the loan on the property just like any other mortgage. This would stop her selling the house without repaying you.

If you charge interest on the loan, it would be taxable in your hands. But the capital repayment would not be.

Brendan
 
Brendan Burgess said:
you are "losing" €1,000 a month.
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Not really.

It's a business relationship with a sibling the house is co-owned with. It's very different from a business relationship with a tenant secured on the open market.

A sibling is not going to expect repairs and maintenance like a tenant is. They are much less likely to neglect the property. They might even let you stay over sometimes.

I think a discount to market rent is what you should agree.
 
On a Plain said:
Myself and my sibling have recently inherited a house. My sibling wants to continue to live there and that is ok with me. We are going to come to an agreement on the rent. Would it be half the market value , as I am renting out my half of the property ?
Click to expand...
You won't be renting out your half of the property. If the property was empty, you'd be renting the whole house and would get the going rent of a whole house. With your sibling still living there, you will be renting a room in a house. If that equals to half the going rate for a whole house, just keep the rental income yourself. If it is less, ask your sibling to make up the difference. You will need written agreement on this and on maintenance of the property too.

Steven
www.bluewaterfp.ie
 
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