FAQ Property Investment FAQ - Needs to be updated

TOP TIPS

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You get tax relief at your top rate on a mortgage for an investment property, so pay off your home mortgage before paying off your investment mortgage.

Investment property is not risk free. House prices are not guaranteed to continue rising forever. If you borrow to invest in property, make sure you can handle a serious downturn in prices.

Property is a long term investment due to the high transaction costs.

A mortgage broker such as Ferguson & Associates or Rea will get a commission from the lender and may split it with you or cover part of your legal costs. Check out the cheapest lender yourself and then talk to a mortgage broker.

Be very careful about investing in property overseas. It is very easy to get ripped off if you don't know the market and if you are not on hand to fix the problems.


WHICH LENDER PROVIDES THE CHEAPEST MORTGAGE FOR INVESTMENT PROPERTY?

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WHAT IS THE TAX POSITION?

Your tax return will be something like the following:
Rental income………….€12,000

Expenses
Mortgage interest………€ 8,000
Decorating & repairs…..€ 1,000
Insurance……………….€ 500

Taxable profit…………..€ 2,500

Tax at 42%……………..€ 1,050
PRSI at 5%……………..€ 125

BORROW 100% ON THE INVESTMENT PROPERTY AND USE THE DEPOSIT TO REDUCE YOUR HOME MORTGAGE

As you can see from the example above, you get full tax and prsi relief on the mortgage interest paid. So you should repay your home mortgage first.

Say you have a mortgage of €100k on your home which is worth €300k. And you want to buy an investment property for €200k, for which you have a deposit of €40k. You need to borrow €160k.

Home………….300k….less mortgage……100k……equity……200k
Investment…….200k….less mortgage…….160k……equity…….40k

You would be better off paying the €40k off your home mortgage and borrowing €200k on your investment property. Your total borrowings will still be €260k, so nothing has changed.

The lender will require a cross mortgage on both properties, but that is not a problem.

BUT AM I NOT PUTTING MY HOME AT RISK?

If you borrow to invest in property, you are putting your home at risk, whether you secure it against your home or not. If property values fall and your investment mortgage is higher than the property value, you can't just hand back the keys to the lender and walk away. You personally owe the money and the bank will get a judgement against you for the amount due.

Having a separate mortgage for the investment property provides no extra security.

WHAT STAMP DUTY DO I PAY ON BUYING AN INVESTMENT PROPERTY?

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Investors pay these rates whether the property is new or second hand.

WHAT EXPENSES CAN I CLAIM?

In calculating your taxable profit, you will be allowed deduct any expense incurred wholly, exclusively and necessarily in the letting of the property:

• interest paid
• depreciation of furniture and equipment (12.5% p.a. over 8 years - previously 20% p.a. over 5 years - see [broken link removed]).
• insurance
• maintenance
• payments to a letting agency
• refuse charges
• maintenance
• legal fees in drawing up leases

WHAT EXPENSES CAN I NOT CLAIM?

The following expenses are not allowed:
Costs of buying the premises e.g. legal costs, stamp duty
Cost of furniture and equipment
Pre letting expenses: e.g. decorating the house prior to the first tenant.( decoration between tenants is allowed)

WHAT IF I MAKE A LOSS?

If your expenses exceed your rental income, you can carry the loss forward against future rental profits. You cannot claim it against your PAYE or other income.

WHAT ABOUT Capital Gains Tax?

You will pay 20% CGT on any profit you make when you sell the house. The profit is calculated as the net sales proceeds less the cost of acquisition. The cost of acquisition includes legal fees and stamp duty and any pre-letting refurbishment or decoration for which an income tax deduction was not claimed.

This thread is seriously out of date. Verify the information elswhere before taking any action

WHERE CAN I GET FURTHER INFORMATION?

[broken link removed] A Revenue Guide to Rental Income is excellent. This link might appear not to work but it does! The Revenue insists on having huge pictures on their brochures which take ages to download - so be patient. While you are waiting, why not email the Revenue and ask them to put up text only versions of their leaflets? ([broken link removed]).

This thread is seriously out of date. Verify the information elswhere before taking any action

Three suggestions:

1. Letting agents will arrange viewing, tenants' references and the lease contract but will change a standard 6.25% of the first year's rent in return.

2. In calculating CGT the gain is apportioned for any period when the property was the landlord's principal private residence.

3. On the security issue, isn't the lenders ability to pursue the landlord's home limited by the legal protections given to the family home?

See [broken link removed] for the Revenue list of expenses that are allowed to be offset against rental income.

Re: Property Investment FAQ

Brendan said:

TOP TIPS


WHAT IS THE TAX POSITION?

Your tax return will be something like the following:
Rental income………….€12,000

Expenses
Mortgage interest………€ 8,000
Decorating & repairs…..€ 1,000
Insurance……………….€ 500

Taxable profit…………..€ 2,500

Tax at 42%……………..€ 1,050
PRSI at 5%……………..€ 125

.

Click to expand...

Hi Brendan,

Just wanted to make you aware that above tax position "top tip" omitts the 2% Health Levy which should also be applied to taxable profit.

A buddy of mine in revenue confirmed this and my tax consultant is also in agreement. My tax consultant did mention that revenue don't tend to follow up and chase for the 2% if it's not included in a tax return as it a social welfare levy they are collecting on someone's elses behave rather than a tax.

I myself pay the health levy but I think some landlords don't or are not aware of the requirement.

Donking

You must register your property with the PRTB in order to be eligible for mortgage interest relief.

The amount of this relief was reduced in the last budget to 75%.

You must pay the new 200 Euro property tax by September, 2009

Landlords with problem tenant's should seek advice from the Irish property owner's association.

Make sure that all utilities are in the tenant's names and continue to be.

You should inspect your property regularly

Depending on the location of your property there are different schemes whereby the local council/health board etc will pay the rent. Be very sure what scheme it is, some pay rent directly to landlords, some place the tenant's for you etc. In most cases, despite the rent coming from a government body, it does not mean that the government body acts for the tenant which is a common mistake landlords make so if you have a problem with the tenant your resolution lies with the tenant and not the government body.

You can deduct both house insurance and life insurance (as long as it's the very basic type of life insurance) from your profits.

Keep the deposits separate to the rent so that you will have it ready to hand back to the tenant when the lease it up.

Have a contingency fund ready for repairs and unexpected items.

Keep your property up to date it's much easier to rent this way. Houses require constant maintenance.

I don't know how to do links so maybe someone else can do that.

Mortgage interest relief is reduced to 75% from the 7th April 2009

You must pay the new property tax (NPPR) by the 31st October, 2009

Mortgage interest prior to the 7th April 2009 is at 100%. Mortgage interest for 2010 is at 75%.

You do not need the tenant's signature anymore (July 2009) on the PRTB form. If any tenancy in a property of however short the duration is not registered than no mortgage interest relief is available for that property.

Revenue have the right to request your data from the PRTB.

NPPR for 2010 has to be paid from 31st March 2010, you cannot pay it before that date (system problem). It also as far I understand the rules has to be paid by that date, they will probably fix the system problem.

NPPR liability date for 2010 is 31st March 2010 and you have to pay by 30th June to avoid penalties. NPPR system is working to take the payments for 2010.

There are new minimum standards for rental accommodation from the 1st February 2010 in relation to sanitary, heating, structural repair etc.

Prtb

You can now register your tenancies online. You have to firstly set up your account with the PRTB.

To register the new tenant you need their PRSI number. If there is an existing tenancy you need to email or phone the PRTB to tell them the tenancy has ended otherwise you will not be able to register the new tenancy. You get an email confirmation within 24 hours that the new tenancy is registered and apparently the tenant will get a paper copy confirming the tenancy. Landlords will not get a paper confirmation if they have ticked the email box on the online system.

Your existing tenancies are not in the online system unless you ask the PRTB by email or phone to link them. You'll have to tell them exactly which tenancies you want linked.

Personally I find the online system awful.

Unregistered Landlords

The PRTB and Social welfare have a new computer system making it easier for the PRTB to find unregistered landlords. People have been fined between 1K and 3K plus costs of circa 3K for not registering their tenancies.

NPPR 2011

The liability date for this is 31st March 2011 which means if you own a property on that date which is not your principal private residence you are liable.

You must pay it by 30th June 2011 in order not to pay penalties. The charge is per unit and not per property.

The NPPR website is excellent.

PRTB

The fee to register your tenancy is now 90€ or 180€ if registering more than one month late.

The PRTB registration website is a disgrace despite the PRTB sending out multiple letters to landlords stating otherwise.

[FONT=&quot]There are several ways in which you can invest your money in the real estate market. Moreover, money invested in real estate market will not go waste and your investment will surely fetch you good returns in a span of about few years. So, I suggest opt for a real estate agent before you are planning to buy or sell your property.
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3 days to pay the NPPR. The website is not working as well as it used to. Some local authorities are now sending out letters about the NPPR.

It is also unclear as to how one can de register properties and what proof is required.

If you are not earning in Ireland what Tax would you have to pay on say a monthly income of €700.

WHAT IS THE TAX POSITION?

Rental income………….€8,400

Expenses
Mortgage interest………€ 5,000
Decorating & repairs…..€ 1,000
Insurance……………….€ 500
NPPR.....................€ 200

Taxable profit…………..€ 1,700

Tax at 20%……………..€ 340?
PRSI at 5%……………..€ 85?

AllenK you should have done a new thread and not post on here. NPPR is not tax deductable.

NPPR 2012 - €200 per unit not per property. 2 flats in one property = 2 charges.

Liability date is 31st March, 2012. You can pay up to the 30th June, 2012. After that there are serious penalties. The NPPR website is very well laid out. They now have a very handy table showing how high the penalties are if you haven't paid from the beginning.

In addition the website states for those selling the local authority can give you a certificate of discharge.

It is not tax deductable.

Household charge - €100 per unit not per property. This is due also by homeowners, basically everyone in the state except those covered by the exceptions.

Liability date is 1st Jan, 2012. You can pay up to the 31st March, 2012. And there are serious penalties if you don't. Also the website refers to a certificate of discharge which will be needed if you are selling the property.

It is not tax deductable.

Even if your rent does not cover your mortgage you can still owe tax.

Local Property Tax

The LPT is a self assessed tax, so regardless of what the indicative valuation is, it's up to you to value the property and pay whatever you like.

The point of the indicative valuation is that this is an amount that Revenue will definitely accept. If you declare a value in a lower band and pay less LPT then you leave yourself open to having your figure challenged, and having interest & penalties imposed.

(from poster mandelbrot)

NPPR 2012 - €200 per unit not per property. 2 flats in one property = 2 charges.

Liability date is 31st March, 2013. You can pay up to the 30th June, 2013. After that there are serious penalties.

NOTE: It is considered by some to be tax deductable. I will be backdating a claim on this, this year. Revenue never did come back with full clarify on it.

To the two posters on AAM in the last month that claims never to have heard of the NPPR, here it is in black and white.

This is the last year it's due.

Local Property Tax. 2 flats in one property = 1 charge. Ditto for granny flats. 2 flats with separate legal title in the same block of flats would be 2 charges

Local Property Tax 2014. What to do in 2013

Single Debit Authority

If you set this up for 2013, you will have to set it up again for 2014.

You must set it up online by 28th November ( 7th November by paper)

It will be taken from your bank account on 21 March 2014

Bronte said:

NPPR 2012 - €200 per unit not per property. 2 flats in one property = 2 charges.

Liability date is 31st March, 2013. You can pay up to the 30th June, 2013. After that there are serious penalties.

NOTE: It is considered by some to be tax deductable. I will be backdating a claim on this, this year. Revenue never did come back with full clarify on it.

To the two posters on AAM in the last month that claims never to have heard of the NPPR, here it is in black and white.

This is the last year it's due.

Local Property Tax. 2 flats in one property = 1 charge. Ditto for granny flats. 2 flats with separate legal title in the same block of flats would be 2 charges

Click to expand...

Can one of the mods change the year at the beginning of this from 2012 to 2013 please.