# Becoming a landlord – is it really that expensive?



## Maybrick (28 Mar 2011)

Here’s a situation that I imagine applies to many other people today. I have a city centre apartment, would love to trade up but cannot sell my current property in today’s market. I had always assumed, perhaps naively, that if necessary I could rent out my old place it would only require a small monthly subsidy. Doing my calculations, I am starting to realise that I may have been way off – can anybody tell me if I am missing something.

Projected rental income is 850.
Claimable expenses are 781, which means I pay tax of 28 on the remainder and end up with a monthly income of 818.

BUT

Current monthly payment is 925.
If I rent it out, I presume I lose my mortgage interest relief of 20pc – therefore the payment goes up to 1,080.
Management fees cost approx 140 per month.
I would probably need an agency to find tenants, which adds at least another 50 per month.
Maintenance could be anything, but let’s say 20 per month.
If the place is empty for just one month per year, that costs 69 per month.
Last but not least, second home tax is 16 per month and will certainly increase.

When you add all that up, I reckon it could cost me well over 500 per month to keep the place going – a hefty amount by most people’s standards. Given that my situation must be fairly typical, I cannot understand why anybody would want to become a landlord these days – the laws seem to be stacked against them.

As I mentioned earlier, I would love someone to tell me I’ve got something wrong or left something out. But what?


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## z107 (28 Mar 2011)

how did you arrive at €781/month expenses?


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## Maybrick (28 Mar 2011)

It's obviously approximate, but it comes from:

Management fees 140
Mortgage interest 540
Capital allowance 31
Agency fees 50
Maintenance 20

Please don't tell me I've overestimated my claimable expenses, that would make the situation even worse!


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## dam099 (28 Mar 2011)

Is the mortgage interest the full amount of interest you pay? Only 75% can be deducted for tax purposes.

Also what's the capital allowance?


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## Maybrick (28 Mar 2011)

Yes, that mortgage interest figure is 75pc - currently I pay around 350 of the capital per month, so the interest on a mortgage payment of 1071 would be 721. And 75pc of that is 540.

Capital allowance is depreciation of furniture and fittings - it is obviously a guesstimate, but it's only a few quid either way.

I return to my original quetion - is it really this prohibitive to rent out your property? And if so, why does anyone do it?

PS Apologies if I originally posted this in the wrong forum, thanks to whoever moved out.


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## txirimiri (28 Mar 2011)

Maybrick said:


> As I mentioned earlier, I would love someone to tell me I’ve got something wrong or left something out. But what?


 
You also have to factor in PRTB registration fee (200 annually I think?)

Plus your house insurance will almost certainly go up.

Plus the flat will no longer be classified as your home but as an investment property, which may have implications in future for CGT


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## beffers (28 Mar 2011)

I hate to add to your woes, but you may need to recalculate your agency fees. I think that they are too low. When I was looking into renting out a house I owned last year, I called a firm of estate agents who also do lettings and property management. I was quoted a one time finders fee of 600 euros PER LETTING to find the tenants. This fee included marketing my property, taking professional photos of it, putting ads and photos of it on dafe.ie and myhome.ie, doing back ground and credit checks of prospective tenants, showing the property to prospective tenants, doing up the lease, taking a detailed inventory of house contents, and taking care of the signing of the lease. That fee was payable every time a tenant moved out, and they had to look for a new tenant to move into my place. ( There was no contract between me and the EA. If someone moved out, I was under no obligation to stay with the agency to find a new tenant. If I wanted to, I could dump them, do all the leg work myself, and save myself the finders fee. )

Once the tenant moved in, they took either an 8%, 10% or 15% cut of the monthly rent, depending on how involved they were in managing the property. They had 3 different tiers of management on offer. For example, if I took care of all maintenance issues with the house, I'd be on the 8% plan. If they did, I'd be on the 15% one. You may want to give some of them a call, and get some quotes before you presume that 50 quid will cover it per month. One thing that they will do for free is come over to your apt, and give you a free valuation of what they think you will be able to get for it per month. (They did for me anyway.) They will also give you a headsup on things that you may have to do to the apt to make it rentable legally. For example, in my house there were several things that were deemed to be a fire hazard. I would have had to change them before they would agree to take the house on as one of "their" properties, lest they be sued if the you know what ever hit the fan. If your apt is newish, you are probably ok on that score, but it can't hurt to get a free professional opinion. Best of luck to you !


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## Gervan (28 Mar 2011)

Not a landlord myself, but I think in the past people have rented out knowing they would make a rental loss, but expecting eventually to have a sizeable capital gain.
Many people who now find themselves renting out would prefer not to, but are finding the house unsellable and the mortgage unaffordable. They are doing the best they can think of, or rather, the least worst.


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## Maybrick (28 Mar 2011)

Many thanks for those comments, although I can't pretend they have cheered me up much!

So what the hell are you supposed to do if you have an unsellable apartment (as so many of them are now) and need to trade up? Keep saving until you can buy a house for cash?

Sorry to sound so negative, but it seems to me that the rules really are stacked against new landlords. We're not doing out of greed, it's pure financial necessity. At the very least, allowing people to maintain their mortgage interest relief would make some difference?

Anyone out there in a similar situation?


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## Greta (28 Mar 2011)

txirimiri said:


> You also have to factor in PRTB registration fee (200 annually I think?)



No, that's non-principal residence charge, PRTB fee is 90 per tenancy and lasts for 4 years (or until the tenancy is terminated, if that's earlier), and it's tax deductible.


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## Complainer (28 Mar 2011)

You get far higher mortgage interest relief as a landlord €540 than as a owner occupier €155. And you want the State to give you more?


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## Bronte (29 Mar 2011)

As Complainer states the OP clearly has not got a grasp of the figures on mortgage interest relief. The 75% interest relief is of far greater benefit to a landlord than the home owners mortgage interest relief. 

What property tax of 16% OP are you talking about. 

To register a tenant with the PRTB costs 90Euro. The NPPR (property tax) is a straight 200 per unit.

Do up the figures on an annual basis to make the calculations easier. Rent = X, annual mortgage interest relief is y, maintenance is z etc. Have a look at the key posts on here to get a better feel for it.  

You don't have to go through an agency, personally you're better off doing it youself. 

In relation to your problem about getting yourself sorted financially you should understand that becoming a landlord and hence a businessman should not be confused with the fact that you cannot sell your apartment. And actually yes you can sell your apartment or you can decide that becoming a landlord is not for you and you stay where you are and pay back your mortgage and save for a new bigger place. You didn't buy the apartment to rent, you bought it to live in which is two separate things. The fact that the value has gone down is not the government's job to sort out for you.


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## Jimbobp (29 Mar 2011)

Have you applied for a mortgage for a new property? Many lenders will no longer accept rental income as cover for your first mortgage so you have to show you can afford both mortgages. I would check this first before looking at the ins & outs of renting out your property as it may be incidental. What might be more realistic for you is to rent out the first property and then rent a bigger property at the best rate you can get.


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## Maybrick (29 Mar 2011)

Well, hang on a minute. The 75pc of mortgage interest is offset against the tax you pay on your rental income. Since this is a hefty 41pc, I don’t think the State is doing too badly out of the deal.

The bottom line remains that renting out my apartment would cost me well over 15,000 a year and I would be lucky to get an income of 9,000. I am not whinging about this, just pointing out the facts. Making it easier to rent out your home would enable people to trade up, which would surely benefit the property market as a whole – surely a worthwhile objective when so many people currently feel trapped.

Bronte, just to clarify - the 16 is the monthly payment for second home tax, ie 200 a year. I think there is general agreement that this will be (at least) doubled soon.

Jimbop, thanks for your suggestion - yes, it is something we are considering although it is still a very expensive option.


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## Guest105 (29 Mar 2011)

Maybrick - could you increase your font size, your post is difficult to read.


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## Maybrick (29 Mar 2011)

Sorry about that – here it is again:

Well, hang on a minute. The 75pc is offset against the tax you pay on your rental income. Since this is a hefty 41pc, I don’t think the State is doing too badly out of the deal.

The bottom line remains that renting out my apartment would cost me well over 15,000 a year and I would be lucky to get an income of 9,000. I am not whinging about this, just pointing out the facts. Making it easier to rent out your home would enable people to trade up, which would surely benefit the property market as a whole – surely a worthwhile objective when so many people currently feel trapped.

Just to clarify, the 16 is the monthly payment for second home tax, ie 200 a year. I think there is general agreement that this will be (at least) doubled soon.


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## beffers (29 Mar 2011)

The text in your posts is still very small and hard to read.


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## Maybrick (29 Mar 2011)

Ok, last time I promise!

Well, hang on a minute. The 75pc is offset against the tax you pay on your rental income. Since this is a hefty 41pc, I don't think the State is doing too badly out of the deal.

The bottom line remains that renting out my apartment would cost me well over 15k a year and I would be lucky to get an income of 9k. I am not whinging about this, just pointing out the facts. Making it easier to rent out your home would enable people to trade up, which would surely benefit the property market as a whole - surely a worthwhile objective when so many people currently feel trapped.

Bronte, just to clarify, the 16 is the monthly payment for second home tax ie 200 a year. I think there is general agreement that this will be at least doubled soon.

Jimbobp, thanks for your suggestion - we are exploring that option although it is obviously still very expensive.


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## Bronte (30 Mar 2011)

The font looks the same to me except for the last one. 

Maybrick can you do up annual figures so we can see where you are getting 15K.  

Also you are not taking into account that the rent is helping to pay back your mortgage.


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## Maybrick (30 Mar 2011)

Here's where I get 15k:

Mortgage repayments: 12,840 (monthly payment 1,070)
Management fee: 1,500
Agency fee: 600
Second home tax: 200
Maintenance: 240
Tax on rental income: 28

And this does not take into account the likelihood of mortgage rate increases, second home tax increase, new property tax, non-paying tenants etc.

Bronte - yes, I appreciate that my mortgage would also be reduced by approximately 3.5-4k over the year. But my net worth would still be down and in any case it is the effect on cash flow I am most concerned account.

My conclusion? The only people who can afford to become landlords now already have a lot of spare cash and can afford to wait many years before seeing any return on their investment.


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## shesells (30 Mar 2011)

You haven't allowed for the PRTB registration fee of €90 per tenancy. Also your tax figure seems waaaaaay too low. We pay about €2k a year with a similar income/expense ratio.


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## Maybrick (30 Mar 2011)

Apologies, that tax figure was monthly rather than annual - the real figure should be 336.

Which just underlines my original point!


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## lightup (30 Mar 2011)

Bronte said:


> As Complainer states the OP clearly has not got a grasp of the figures on mortgage interest relief. The 75% interest relief is of far greater benefit to a landlord than the home owners mortgage interest relief.


 



Bronte said:


> becoming a landlord and hence a businessman should not be confused with the fact that you cannot sell your apartment.


 
As you state becoming a landlord is starting a business.  Therefore mortgage interest is a business expense and should be fully allowable.  Try telling any other business that their costs are not allowable.


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## Complainer (30 Mar 2011)

Maybrick said:


> Making it easier to rent out your home would enable people to trade up, which would surely benefit the property market as a whole – surely a worthwhile objective when so many people currently feel trapped.


Govt policies that 'benefit' the property market are what got us into this mess. The last thing we need is more reliefs to keep prices artificially high. 

At a personal level, I have sympathy for you, but I don't see what a Govt can do, without making other people pay for your property.


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## Maybrick (30 Mar 2011)

A fair point, Complainer. But surely a frozen market such as the one we have now is hardly desirable either? There must be intelligent ways of stimulating the market as well as stupid ones - and it seems to me that making it easier for people to rent out their homes would belong to the first category.


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## Butter (8 Apr 2011)

Anyone wanting to become a landlord in today's market needs their head examined I think.  You would be better off paying down your mortgage as quickly as you can with a view to building up as much equity as you can so you can sell it whenever there is some market recovery and move to a bigger gaff then.  But with prices still falling your equity is also falling - catch 22 situation. 
Becoming a landlord is not easy, not cheap and can be a major headache if you are unlucky enough to have bad tenants.  I would think long & hard about it.  And yes you are right - the shortfall that a landlord has to put into an investment property these days (especially one with a big mortgage) makes it a pretty uneconomical thing to do!


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## RMCF (9 Apr 2011)

As someone who has recently become a landlord, my honest opinion is that I would rather sell my original house rather than rent it out, but unfortunately the market forced me to become a landlord.

I have only started on this road, and will not have to make my tax return until late 2012, but to me its just extra hassle. In this current economic climate I would much rather have one mortgage than two.


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