# Retiring & looking to get things in order



## D6west99 (21 May 2013)

Hi, I am retiring & want to manage cash flow/get some advice on whether I need to sell a property, etc. i am divorced & my situation is as follows:

Property:
Home worth €550k, €67k owing (500 p/m)
Apartment worth €280k, €309k owing

Pension: (due to start in a few wks)
After-tax lump sum of €96k
Monthly payments of €1850 p/month

Other Income:
Students in home = €2200 p/m for 8 months
MINUS food + cleaner for students = €600 p/m for 8 months

2nd job:
€1000 pm after tax

Loans:
Bank €17k
Other €10k

Apartment:
Rent of €1400 pm
Mortgage repayments of €2000 pm
Maintenance €2200 per annum
Property Tax €500 p/a
Tax €700 roughly
Extras €400 p/a

Life Assurance:
€330 pm 
Covers all mortgages being paid fully plus €300k lump sum


Outgoings: total = €1,165
VHI €180 pm
House phone + broadband €70 pm
Mobile phone €125 pm
ESB €150 pm
Gas €150 pm
Car Insurance €50 pm
Car Tax €30 pm
House Insurance €80 pm
TV Licence €15 pm
Refuse/waste €20pm
Sky tv €65
Petrol & Food (when no students) €200 pm
Property Tax €60

So, I am due to retire in 2 wks, and would like some advice.

1. Should I sell the apartment ? it is costing me say €10k a year to keep hold of it. I can pay the outstanding with the lump sum & also clear my remaining house debt & other loans. Thoughts?
2. Should I keep on the life assurance? (I have 3 kids so would like to leave them in a good situation)

All ideas welcome. Thanks for reading.

D6W


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## TommyB (21 May 2013)

Could you clarify the situation with the students? Are they lodging in your main property and not the apartment?


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## D6west99 (21 May 2013)

Yes they lodge in my main residence so I don't pay tax on those earnings


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## TommyB (21 May 2013)

Ok thats a bit worrying. This might impact hugely on your retirement lump sum depending on how long you have been renting to students.

You are not entitled to any tax relief as you have been going way over the threshold. The threshold is €10,000 per year and you have been receiving 17,600. You would now have to pay full tax on all of that income and maybe penalties. You were previously paying the top rate of tax in your earnings, minus some deductables (very little interest) you will probably owe revenue approximately €6,000 in tax for every year you have rented to students. This will also have a knockon effect on the tax situation of your apartment.

See here for more info.
citizensinformation.ie/en/housing/owning_a_home/home_owners/rent_a_room_scheme.html

Message me if you need an accountant as the one I use (based in D6) is very good and clear about what you can deduct.


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## D6west99 (21 May 2013)

Ok I have only started with the students in past few months so not over threshold yet, so will bear in mind with regards the 10k threshold.

Any furthers thoughts now that has been clarified? Cheers for response


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## D6west99 (21 May 2013)

I was only planning on having the students 7 or 8 months of year so would have been a figure of circa 12k not 17k fwiw


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## TommyB (21 May 2013)

D6west99 said:


> Ok I have only started with the students in past few months so not over threshold yet, so will bear in mind with regards the 10k threshold.
> 
> Any furthers thoughts now that has been clarified? Cheers for response



The college year has just ended? 

Reading between the lines I would be very, very careful with students. A lot of them know the tax situation with landlords and some might hold a grudge. A tax settlement could be very damaging financially. My own tax dodging brother was blackmailed and successfully, I might add, for a good wedge by an ex tenant.

7 times 2220 is 15,400. 
Your costs do not come into it.



> Exclusions from rent a room relief
> 
> You will not qualify for tax relief on the rental income if:
> 
> ...


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## Brendan Burgess (21 May 2013)

> 1. Should I sell the apartment ? it is costing me say €10k a year to  keep hold of it. I can pay the outstanding with the lump sum & also  clear my remaining house debt & other loans. Thoughts?



This is really a key question and you need to provide more information. 

Most people make the mistake of deducting the repayments from rental income and saying whether they are making a profit or a loss. But unless your mortgage is interest only, your repayments include an element of capital, so the correct way to look at this is

Rental income
Less interest per year 
Less other expenses
Less taxation
= profit 

As the mortgage is €309k, I presume that the interest is  not more than €15k  year. If you have a cheap tracker, it would be a lot less. 

Think of it this way, if you continue this level of repayments, you will clear the negative equity over the coming years - assuming prices don't rise or fall. 

If you want to post these calculations in detail, I will review them for you.


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## Brendan Burgess (21 May 2013)

I am not sure that you need to be paying life insurance. You have pretty good assets anyway if you die, so you shouldn't be paying  €4,000 a year for more to leave behind you.  Having said that, the way life insurance premiums are calculated, you are probably paying a very low premium for the higher risk of dying as you get older, so it might be good value now. 

You don't need the income from the students and as it will all become taxable when it exceeds €10,000 it's not worth the hassle.  Unless you enjoy their company, in which case reduce the rent. 

Have you considered trading down to a smaller house?  I don't think that you need to do so from a financial point of view, but it would be easier to live in a smaller house on your own than in a big house with students.


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## D6west99 (21 May 2013)

So regarding the students: is the first 10k tax free, and then I pay tax on the remaining 7600 @ say 40% or whatever my tax band is?


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## TommyB (21 May 2013)

D6west99 said:


> So regarding the students: is the first 10k tax free, and then I pay tax on the remaining 7600 @ say 40% or whatever my tax band is?



No. You pay full tax on it all once you go over €10,000 per year. You lose the right to claim the relief. 

If you took on tenants in January this year then the first five months up until now would have already see you liable for the full tax.


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## D6west99 (21 May 2013)

Right thks. So if I get 17600 in, I will have to pay tax at say 40%? Or what band will I be in now? Leaving me with 10560 say minus 600 costs a month for 8 months leaving me with 5760 which is 720 nett for the 8 months....

I love the house & happy to stay there for a few more years tbh, and I enjoy the students company.

Thanks Brendan, I will get the details & let u know.


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## D6west99 (21 May 2013)

What about best thing to do with lump sum?


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## Knuttell (27 May 2013)

You need to look closely at your outgoings,there are a few items that are almost off the radar as far as cost is concerned.


*House phone + broadband €70 pm
Mobile phone €125 pm
ESB €150 pm
Gas €150 pm
House Insurance €80 pm
Sky tv €65*

Home phone and broadband can be gotten from Vodafone for about €40pm
https://www.vodafone.ie/home-phone-broadband/
Saving €30 pm

Mobile phone can be gotten for €20 pm on 48 network,all calls to all networks,all texts to all networks,30gb data and 50 mins landline calls.
http://www.48months.ie/membership/the-don
Saving €105pm

ESB and Gas-you ned to change provider for the best deal available to you.
www.bonkers.ie
Saving conservatively €17pm

Your House insurance is very high,building costs have come down significantly,you are paying €960 a year.
That should really be no more than €450 a year if you ring around prior to renewal
Saving €41pm 

Sky TV at €780 a year is quite high,unless of course you get use out of the sports package,if not then think of getting free to air.
Saving €65 

Total saving without much or indeed any loss in quality of service is close to €258 pm or €193 if you elect to keep Sky,multiply by 12 = €2316 that just evaporates with no real benefit to you.


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## D6west99 (31 May 2013)

Thanks alot knuttell, I use my mobile for my marketing role, but will look into cutting costs on the other items, the house insurance is of particular interest!


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## Knuttell (31 May 2013)

You will find this house rebuild cost calculator from the Society of Chartered Surveyors Ireland very handy for calculating the price of your property for insurance purposes.

[broken link removed]


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