# Income & Expenditure of being a landlord



## airgead07 (4 Apr 2011)

I have been reading the threads but would really appreciate some comment on my own circumstances. Apologies for long thread and thank you in advance for comments.

Possible 1st time landlord. 3 Bed semi. Mortgage remaining balance €159,000. Tracker @ +0.95%. Pay tax at higher rate of 41%. Need to sell or rent house.

I wanted to do an income & expenses account if I have to rent out the property. Below is what I have come up with and some explanations and questions regarding the figures:

Comments on the figures, do they look reasonable?
Will still pay income tax despite costs being more than income.
Are there any other costs I am not considering?

*Income  *                                                                                €8,800.00              Note 1    

*Deductible Expenses                        *
Interest Relief                                       2,340.00                                               Note 2 
Wear & Tear                                         80.00                                                     Note 3
Landlord Insurance                            500.00                                                   Note 4
Advertising                                            50.00                                                     Note 5
Maintenance                                         500.00
Repairs                                                  1,000.00
BER                                                        150.00
PRTB                                                     90.00
Mortgage Protection Policy                168.00
NPPR                                                         -                                                          Note 6
Total                                                                                       4,878.00

Gross Profit                                                                          3,922.00

Income Tax @41%, PRSI 4%, USC 7%                          2,039.44                 Note 7

Net Profit                                                                               1,882.56

*Costs/Expenses*
Mortgage Repayments                       8,400.00                                                   Note 8
PRTB                                                     90.00
NPPR                                                     200.00
Landlord Insurance                            500.00                   
Advertising                                            50.00
Maintenance                                         1,000.00
BER                                                        150.00

*Total                                                       10,390.00*

Note 1    Income based on €800 x 11 months, allow month for unoccupancy

Note 2    Interest allowance 75% of interest

Note 3    Allowed €5000 * 12.5% / 8 yrs

Note 4    This is just an estimate, corrections welcomed

Note 5    Daft €25 x 2 if two lettings during the year. If I decided not to go with a Letting Agency

Note 6    Is the NPPR an allowable expense

Note 7    Are my PRSI and USC figures correct

Note 8    I have allowed for 1% increase in the ECB in the coming year, and also added back in the TRS I am currently receiving.


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## Gervan (4 Apr 2011)

Note 3. €5000 *12.5% = €625 estimated Wear & tear. I think you've divided by 8 years twice
Note 6 Revenue says NPPR not allowable expense


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## oldnick (4 Apr 2011)

Where does Revenue ( and I mean  Revenue ,not anyone else) say NPPR is not allowable expence ?


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## BazFitz (4 Apr 2011)

oldnick said:


> Where does Revenue ( and I mean Revenue ,not anyone else) say NPPR is not allowable expence ?


 
It's definitely not allowable.


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## oldnick (4 Apr 2011)

So sorry, BazFitz, but my question was ..

Where does Revenue (and I mean Revenue NOT ANYONE ELSE) say NPPR is not allowable expence ?


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## BazFitz (4 Apr 2011)

oldnick said:


> So sorry, BazFitz, but my question was ..
> 
> Where does Revenue (and I mean Revenue NOT ANYONE ELSE) say NPPR is not allowable expence ?


 
I read your question and answered it

The question is answered clearly on the Irish Taxation Institute's website - See the 10th FAQ.  The view of Revenue and the Department of Finance is cited.

I think the ITI can be trusted for guidance in relation to this matter.


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## airgead07 (5 Apr 2011)

thanks guys for comments above, based on figures above can anyone confirm that I will still have an income tax bill from renting?


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## Maybrick (5 Apr 2011)

Do I understand you to mean that you're prepared to pay almost 8,500 a year just to keep the place going? Are you really sure that's worth it?


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## Luternau (5 Apr 2011)

You also pay the USC on gross income...and it then cannot be used to reduce your taxable income. (If I am wrong on USC, someone will correct me on that)
If you are not in Negative equity I would sell! Allowable interest may be restricted to 50% and the NPPR may increase.  Letting property is no longer an attractive option. And if you get bad tenants or tenants that stop paying you have additional vacant periods but your costs are fixed or may increase if there are additional repairs etc...


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## Gervan (5 Apr 2011)

Not sure what you mean by USC being charged on Gross income, Lutenau. It is charged on rental profit less capital allowances (wear and Tear).


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## Luternau (5 Apr 2011)

As I said 'someone will correct me if I am wrong'
I was referring to the fact that the income levy came off all income before allowances and was not certain that the same did not apply to the USC.


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## Bronte (6 Apr 2011)

You didn't add back all the real expenses in your total of 10,390 (missing repairs, life insurance and you changed the maintenance figure).  Maybe you could do the two lists in the same order as it would make it easier to read.  

The NPPR is not tax deductable.  But this doesn't mean revenue are incorrect in their interpretation of the rules.  Nothing stopping you putting it in as an expense then putting a note to them asking them to clarify it to you, which covers you.  

For many years term life insurance was not allowed but then the 'changed' their interpretation of the rules on that.


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## airgead07 (6 Apr 2011)

Apologies Bronte, put the figures in the same order now

*Costs/Expenses*
Mortgage                       €8,400.00
Landlord Insurance         €500.00
Advertising                    €50.00
Maintenance                  €500.00
Repairs                         €1,000.00
BER                             €150.00
PRTB                            €90.00
Life Asssurance             €168.00
NPPR                           €200.00
*Total                             €11,058.00*

I've put repairs in as €1,000 and changed maintenance to €500, same as allowable expenses.

Maybrick, it will be costing me over €9,000 (updated figures - Total expenses less net profit) but I would be receiving in €8800 in rent. So would I still have to pay the income tax?


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## Nige (6 Apr 2011)

airgead07 said:


> So would I still have to pay the income tax?


 
Yes, so you would be down about €4,300 a year.


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## Bronte (7 Apr 2011)

Thanks for redoing the list, it's an interesting exercise which shows the true costs of being a landlord.  Unfortunately you do have to pay income tax.  

The reduction of interest relief to 75% has been a real burden.  That along with dropping rents, and fear of property drops not to mention Labour's stated aim of abolishing interest relief altogether has made life a lot harder for landlords and would be landlords won't venture in.    

Don't think you've forgotton anything.  You'll have to make the decision yourself on whether to sell or not.  Don't underestime the difficulties of being a landlord, treat it professionally.  Have a look at the key posts on here about it, also I think RMCF had a few good posts as a newbie landlord, something similar to yourself if I recall correctly.


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## Butter (8 Apr 2011)

*Costs/Expenses*
Mortgage                       €8,400.00
Landlord Insurance         €500.00
Advertising                    €50.00
Maintenance                  €500.00
Repairs                         €1,000.00
BER                             €150.00
PRTB                            €90.00
Life Asssurance             €168.00
NPPR                           €200.00
*Total                             €11,058.00

**Interest Relief                                       2,340.00*

*Rental Income €8,000

*Hi Airgead07,Just to give you some thoughts...

Your expenses are €11,058 a year and your rental income is €8,800 a year.  First off you will have to add €2,258 from your own money to defray the costs of keeping the house as a rental property.

Secondly Revenue will treat you as making a profit even though you are technically not making a profit.  Why?
Cost of €11,058 - €8,400 + interest allowable of €2,340 = €4,998 of allowable deductable costs.
€8,800 - €4,998 = €3,802 "profit" according to Revenue
*
52% (income tax + prsi +usc) of €3802 = €1,977

So in total to keep this property it will cost you €2,258 + €1977 = €4235 a year (as Nige said)

*As a landlord - I can tell you that it is an expensive business to be in at the moment.  And likely to get more expensive too if nppr rates go up and mortage interest payment relief is reduced further.  Add in rising ecb rates too don't forget.  
I am just about breaking even when I take into account the reduction in the capital outstanding on my mortgages every year and I would rather hold tight than sell into the current market.  My mortgages are less than 50% of even current values of the properties though so it must be even more tricky if the mortgage is high.   I have also been helped by great tenants though and I dread to imagine the costs involved if I had messers as tenants.


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## airgead07 (8 Apr 2011)

thansk for your thoughts Butter, good to hear from current landlords. Just as a matter of interest how would I calculate the reduction in capital outstanding on the mortgage and subsequently take this into account?


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## Butter (8 Apr 2011)

airgead07 said:


> thansk for your thoughts Butter, good to hear from current landlords. Just as a matter of interest how would I calculate the reduction in capital outstanding on the mortgage and subsequently take this into account?


 
I just look at my outstanding capital at Jan 1st and then see what it is on Dec 31st at the end of the year.  The difference is what your capital has reduced by. This is on the end of year statement from your mortgage provider.
In the good old days no-one really minded if they had to add to the costs of an investment property as prices were rising and it felt like a nest egg.  Nowadays with prices still falling it's a different story.   But, I still feel that with the sorry state of my private pension that I need to have other irons in the fire, so to speak!

Have you looked at selling? And what position this would leave you in?  Of course your decision to sell or rent hinges on so many variables it is impossible to advise anyone what to do really without the full story.


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## cremeegg (13 Apr 2011)

airgead07 said:


> thansk for your thoughts Butter, good to hear from current landlords. Just as a matter of interest how would I calculate the reduction in capital outstanding on the mortgage and subsequently take this into account?



Firstly let me congratulate you on putting together a very good projected profit and loss account for your proposed rental business.

Then let me say that the posters on the thread seem completely unable to understand it. 

Your original post clearly shows that you have a projected after tax profit of €1880. This is the correct reading of the figures. 

My comment would be that your €1,500 for repairs and maintenance seems high (does it include service fee?).

In addition you will have to make capital repayments on your mortgage, this is not a cost. You will have to pay your mortgage whether you rent or sell


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## airgead07 (13 Apr 2011)

hi cremeegg, repairs and maintence were only estimates, they do seem a bit on the high side but was kind of averaging them over a few years, say for example tenants moved out after a few years and I hadto spend a few thousand on repairs etc.

Are my figures correct in that I would make an after tax profit of €1882 but when you factor in all the associated costs of renting the property, it would be costing me circa €4k a year?


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## cremeegg (14 Apr 2011)

airgead07 said:


> hi cremeegg, repairs and maintence were only estimates, they do seem a bit on the high side but was kind of averaging them over a few years, say for example tenants moved out after a few years and I hadto spend a few thousand on repairs etc.
> 
> Are my figures correct in that I would make an after tax profit of €1882 but when you factor in all the associated costs of renting the property, it would be costing me circa €4k a year?



Based on your figures which seem reasonable to me, your profit from renting will be €1882. 

What do you mean by associated costs? If they are costs, put them in the costs and they will be reflected in the €1882, otherwise forget them.

From a cashflow point of view you will have to make capital repayments on your mortgage. This has nothing to do with the rent or sell decision as these have to be paid in any case.


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## Butter (14 Apr 2011)

airgead07 said:


> hi cremeegg, repairs and maintence were only estimates, they do seem a bit on the high side but was kind of averaging them over a few years, say for example tenants moved out after a few years and I hadto spend a few thousand on repairs etc.
> 
> Are my figures correct in that I would make an after tax profit of €1882 but when you factor in all the associated costs of renting the property, it would be costing me circa €4k a year?



airgead07 - it will cost you about €4,000 from your own pocket to rent out the house assuming all your figures are correct.  But this includes the capital repayments on your mortgage.(For what it's worth I also think your repairs and maintenance figures are over-estimated).

Another way of looking at it is from cremeegg's angle.  Your profit will be €1882 but you will have to pay the capital portion payments of the mortgage yourself (unless you can get an IO mortgage).


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