# Sell rental property or continue to rent it - on behalf of elderly landlord



## Buffet (15 Feb 2021)

Hi,

What financial/other criteria should be applied when considering this question?

The gentleman has owned the property (3 bed semi-detached, in provincial town) for many years. 
There is no mortgage on the property. 
The rent has been below market value for quite some time. 
The property is not in a RPZ.

He is elderly, and is now finding it quite hard to manage the work involved, and it is becoming a source of stress for him.
He has/had a very "hands-on" approach, and did not use a property management company before now.

Recently the long term tenants (5+ years) vacated the property, and is forcing a decision to be made about what the best next steps are.
The gentleman has requested support in making this decision, and so I am looking for advise/guidance on his behalf.

Are the only options one of the following:

Rent through a property management company, reducing the work load significantly but increasing the costs of rental. 
Would require some investment to bring up to "rental" standard.

Sell it, and remove the work associated with it completely?
We have consulted with one agent, and there is a demand for both options in the area.

Is there is anything else that should be considered when reviewing these options or other options? 
Thanks in advance.


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## Bronte (15 Feb 2021)

We need you to give us figures. Including the man’s income. Also his age.


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## Buffet (15 Feb 2021)

Gentleman is 86 years old. Never married, and has no children.
I don't have a figure for his income, but I don't think he has any monetary concerns, lives a low cost lifestyle, and would have no debts.
He has one other rental property, with "low maintenance" long term tenants who benefit by having below market value rent. 
And he rents his (small) farm land to a neighbour. I think he also has a small pension, and has some cash assets. 
His car is probably his biggest expense.

Figures/facts obtained from estate agent/property management company:

Quite a bit of work to repair the house, and bring it back to “rental” standard – no costings done yet.
Could get €750 to 800 pcm.
Selling:

agent advises not investing too do much work other than a deep clean, getting skip & addressing some of the obvious damage.
quoted 100-105K as market price in current condition
Agent says he can get a quick sale.

Thanks!


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## Clamball (15 Feb 2021)

I would recommend selling.  I know he does not need the cash, but he does not need the rental income either.  Sell up, pay the bills and enjoy the money.

I think the decision should be a balance between stress about looking after an asset and having cash in the bank with no stress, rather than which makes best financial sense.


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## AlbacoreA (16 Feb 2021)

Sell it.  remove the source of stress that he doesn't need.


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## Purple (16 Feb 2021)

Sell it. He's 86 with no children. Why on earth would he want the hassle?


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## LS400 (16 Feb 2021)

And do what with the money?, watch it sit there in the bank, buy a bigger car?

It probably gives him some comfort having these interests to mull over. If hes fit and healthy, there is no need to watch his money dwindle away in the bank. Sounds like hes not short of any income which would impede his life.

I would give it over to an agent.


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## NoRegretsCoyote (16 Feb 2021)

CGT is a consideration here. If he bought the house 40 years ago he'll have a bill in the tens of thousands.


If he holds on to it until death there is no CGT for the beneficiaries of his will. There is CAT of course.

I would say CGT shouldn't be his main consideration in the scheme of things.


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## Purple (16 Feb 2021)

LS400 said:


> And do what with the money?, watch it sit there in the bank, buy a bigger car?


He can spend it on drink and dancing girls if he likes. Why have the hassle and worry of being a landlord?


LS400 said:


> It probably gives him some comfort having these interests to mull over. If hes fit and healthy, there is no need to watch his money dwindle away in the bank. Sounds like hes not short of any income which would impede his life.
> 
> I would give it over to an agent.


I would probably give him some comfort having a big ball of cash in the bank. Old people are funny that way.


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## Buffet (16 Feb 2021)

Thanks for all the replies.

When he initially purchased the house to rent it, it was definitely an interest and gave him a focus, and got him out and about etc.
Now, with being older & slowed up, and with some health concerns compounded by Covid worries & isolation, it is no longer providing these benefits. 

For years, I have tried to encourage him to "live a little", and buy a newer/bigger car, go on the nice/expensive holiday, but they are just not his "thing" -his interests are more local and he contributes financially to his local community in his own way. 

However, he is still very much "with it" and doesn't want money depreciating in the bank (and what about negative interest etc).
He also would hate to make a decision that creates an avoidable tax bill. 
Having to pay a big CGT bill would actually really upset him, as he has invested a lot of time and energy into the property.
He says himself that he would like to leave something when he is gone - ( I know he has a will drawn up with a solicitor) - so not seeing much return on this house between costs of selling, and a tax bill would irk him. 

Thanks for pointing out about the CGT, as while_ it may not change a decision to sell_, he would need to know about it upfront. 
The house was bought approx 15 to 20 years ago - what would we need to estimate the size of the CGT bill?


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## RedOnion (16 Feb 2021)

Buffet said:


> The house was bought approx 15 to 20 years ago - what would we need to estimate the size of the CGT bill?


To give a very rough estimate, How much was it bought for? Including Stamp duty.


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## Thirsty (16 Feb 2021)

Purple said:


> He can spend it on...dancing girls if he likes.


This would be considered child abuse and not to be recommended.


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## Purple (16 Feb 2021)

Thirsty said:


> This would be considered child abuse and not to be recommended.


Dancing women then. Or dancing men; each to their own etc.


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## Pinoy adventure (16 Feb 2021)

Op if he does have his will in place,he might need too update it if he does sell the property.


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## Ravima (16 Feb 2021)

CGT is basically simple. There may be little tweaks to this calculation.

Subtract the selling price less all fees, from the purchase price plus all fees. The tax is then 30% of the profit, less a tiny exemption of  €1270. 

Having said that, selling is the preferred option. Why bother him with the duties of being a landlord? No point in you burdening yourself with them either.

Another factor to take into account, is  - has be been paying property tax, the dreaded NPPR, is tenancy registered with TB and is he declaring the income to Revenue?


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## Buffet (16 Feb 2021)

Pinoy adventure said:


> Op if he does have his will in place,he might need too update it if he does sell the property.


Thanks, I will raise that with him. If he does sell, he would more than likely use the same solicitor, so that bit should be relatively simple if it is needed. He has an enduring POA in place as well, with myself as one of two relatives nominated to be POA if required.


Ravima said:


> Another factor to take into account, is - has be been paying property tax, the dreaded NPPR, is tenancy registered with TB and is he declaring the income to Revenue?


I will check about the LPT & NPPR, as I don't recall these as being part of any conversation over the years. 
The tenancy is registered with the TB. 
When I asked him (years ago) if he needed help with tax returns, he said he had an accountant and I took that to mean that all was covered, but again worth checking. 

But thanks for pointing these out, as it gives him/us time to get going with these items.




Ravima said:


> Having said that, selling is the preferred option. Why bother him with the duties of being a landlord? No point in you burdening yourself with them either.


Agree, that is the main objective - to use the opportunity of the house being vacated to make the correct decision that removes this burden. 
If he does decide that he doesn't want to sell, it would most likely fall to myself to be the point of contact for the property management company, to help him out.
But this is not an ideal situation for anyone. While the other house is not causing any immediate worries or stress ("low maintenance" tenants), I would hope to at the least move it under the care of the property management fairly soon after this one is sorted.


In terms of CGT calculation, I am not 100% sure of these facts, but this is what I have:

House was purchased in the mid 1990s
For approx 50,000 punts
As it was an investment property, would it have had stamp duty?   

Thanks all for helping me compile the information that he needs to be aware of.


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## NoRegretsCoyote (16 Feb 2021)

Ravima said:


> The tax is then 30% of the profit, less a tiny exemption of €1270.


33%, no?



Buffet said:


> As it was an investment property, would it have had stamp duty?


It's not relevant to his decision to sell.


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## RedOnion (16 Feb 2021)

Back of an envelope CGT, using estimates:

It cost EUR. 64,500
Stamp duty should have been 4% I think, but you'd need to check.  Brings it to 66,000  
If there are records of legal fees, etc, they all get added in.

As it was purchased prior to 2003, there is some indexation relief.  
If it was bought in the tax year 1996/97 for example the indexation factor would be 1.251, grossing the cost up to 82,600

Say it sells leaving 100k, after legal & estate agent fees.

That's 17,400
Less personal exemption 1,270
CGT @33% 5,320

You'd need to check if there have been any other capital expenditures on the property that would be allowed for CGT.
And the exact year of purchase would determine the indexation factor.


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## Autofill (16 Feb 2021)

The gentleman is 86, no children so his residence, 2 rental properties, farm and I assume cash will be left to nieces/nephews or non relatives when he dies.  Thresholds in any of these cases isn’t too high and once they go above threshold pay tax at 33%. 
I know having a conversation about what he intends to do might be arkward but he could gift 6000 to any couple and 3000 to each of their children tax free per annum.
so basically selling now and gifting money to whoever he intends to leave it to would save most tax long term. 
 If however he was to end up in a nursing home the cash he gave away in the 5 years before death would be included as part of his assets and he would also be assessed at 7.5% of that as well.


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## Bronte (17 Feb 2021)

It's clear the CGT is irrelevant here. It will be lower than the above calculations due to the Solicior's cost on buying, also indexed, any capital expenditure (say a new roof), solicitors costs on selling and Auctioneer costs.  

Based on all info Buffet has provided he should most definitely sell.  Use the money to either give away money tax free to his nieces/nephews annually.  Use some of it to do any work on his own house to make it useable to him if he has older person needs, wheelchair friendly, downstairs bedroom, suitable bathroom.  Then maybe use a certain amount annually to augment his income. In addition he might consider that money in the bank might be helpful to help pay a carer to come in and clean the place for him, that kind of thing.  

He needs to be frank with you and discuss all of this with proper figures. Such as his rental returns.  But not all older people want to do that.


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## Buffet (17 Feb 2021)

Thanks all for your inputs. 

Selling does seem like the best option overall.
Along with encouragement to use the money to make improvements that will assist him remaining in his own home. He has lived alone for almost 50 years in an isolated area, is used to being totally independent, and is extremely private to the point that I don't think anybody has been inside the home in decades. The fact that he is reaching out for help now means that he is feeling vulnerable. 

I will see if it is appropriate to mention gifting to whomever his beneficiaries are - but that would definitely be a sensitive matter!

Thanks again.


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## Stitcher (18 Feb 2021)

Conversations around   finding out what charities that might interest him to leave some money to, if he hasn't already, particularly if he has been interested in contributing to his community.


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## Bronte (18 Feb 2021)

Buffet said:


> Along with encouragement to use the money to make improvements that will assist him remaining in his own home. He has lived alone for almost 50 years in an isolated area, is used to being totally independent, and is extremely private to the point that I don't think anybody has been inside the home in decades. The fact that he is reaching out for help now means that he is feeling vulnerable.
> 
> I will see if it is appropriate to mention gifting to whomever his beneficiaries are - but that would definitely be a sensitive matter!
> 
> Thanks again.


So his home does need upgrading. In light of that I wouldn't mention gifting yet.  Do the quick clean up, skip, lick of paint, sell.  Then decide the next steps.  Are you allowed inside his home?  Does he keep himself clean, well fed and heated in comfortable surroundings.  Those would be the important things to consider.


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## Silvius (29 Apr 2021)

I'm offering a slightly different perspective here: he may like the feeling of having money in bricks and mortar - many older people love the psychological security of this - especially if he is sufficiently clued in to be concerned about negative interest rates in the bank. That is a real concern, as is inflation. He sounds like he's in good health and so could live for another 10 or so years....can he afford to sell and have money depreciating in the bank? 

The best-case scenario if he keeps the property is that the refurbishment work will be carried out quickly and without much hassle and that a good and reliable agent finds a good and reliable tenant, allowing him to put off the decision to sell for another while and hopefully increasing the re-sale value of his property. This could work out very well and often does, despite the scare-stories we're all familiar with. We all know what the worst-case scenario looks like with rental properties, as a landlord I'm all too aware of what can go wrong, but it seems to me that keeping the property for now is a real option to be considered and I wouldn't dismiss it out of hand. 

Does he have an accountant to file his annual return and keep on top of the tax side of things, LPT payment etc.?

If he's feeling a bit vulnerable and has had a tough time with lockdown isolation it might not be a good time for him to make the big decision to sell the house. He could regret it, especially if he faces a big CGT bill and is worried about his money rotting in the bank. 

He sounds like someone I helped recently in a very similar situation - an elderly and extremely independent man who lived alone and managed all his own affairs privately until his health suddenly broke down. It's very hard for someone like that to let people in and to give up control so I would tread very softly and respectfully no matter what you decide to do. If he does put off the decision I would encourage him to revisit it and make plans when he's feeling stronger, it's much worse when ill-health forces a total loss of control over one's affairs. Best of luck.


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## jpd (29 Apr 2021)

Stitcher said:


> Conversations around   finding out what charities that might interest him to leave some money to, if he hasn't already, particularly if he has been interested in contributing to his community.


Maybe not Bóthar


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## noproblem (29 Apr 2021)

Autofill said:


> If however he was to end up in a nursing home the cash he gave away in the 5 years before death would be included as part of his assets and he would also be assessed at 7.5% of that as well.


The nursing home situation was the first thing that crossed my mind. Maybe there's someone that will care for him if needs be, otherwise it's important to talk about it with him and thankfully he seems to have a good person in Buffet to advise him and also place his trust in.  Percentage wise that's a great return on the property but over time it's going to need money spent on it. Has he health insurance or any underlying health problems? This time of his life he needs to know he's safe and sound. Fair play to you and the other person for being there for him Buffet.


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