# Is it worth renting out a property?



## elainem (5 Apr 2014)

I have a 3 bedroomed detached property, which was my mothers house, which I rent out. There is about one quarter acre garden attached to the house. The property is in Limerick. I feel now that it is now better to leave the property vacant than rent it - and just wondered if anyone else had felt this in relation to their own rental properties. I get e800 per month for the property, there is no mortgage on it - this is really the top rent for this type of house in the area. The management fee is 98 per month as I live about 120km from the property. I pay tax at almost 50 per cent as I am in the higher tax bracket due to my job, this together with a gardener who costs 600 per year and maintenance, USC, PRSI etc. makes it uneconomical to rent out the house - I calculated that after all the taxes were paid, maintenance done etc, I have about e100 per month from the house for loads of headache and grief. I have thought about selling the property, but the property would now not make what my mother bought it for in 2002.  Any advice/comment would be really welcome.


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## elainem (5 Apr 2014)

*Is it worth renting out my house?*

Hi! Cashier, thanks for your reply. Yes, I don't think it's worth renting out either. Everybody says it's a shame to leave it there, but I don't think they see how uneconomical in terms of tax bills and profits it is to rent. I have just repainted it - tenants had never put the heat on, but closed the vents and there was mould covering the whole of one room, in another room the tenants had gone off with the blinds, and in the sitting room someone had taken the plaster off about three feet of wall in the sitting room. They had also not paid the last month's rent to the letting agent, leaving me with no deposit to cover the bills. 

However, I'm just wondering about house insurance if I don't rent it out, will it invalidate it, and how soon do I need to say it to the insurance company? l was wondering if I could get holiday home insurance on it - I have lots of friends and family who are up and down to Limerick and stay over there quite a lot, and I go down every three weeks. Do you know if it is possible to get holiday home insurance like this rather than vacant property insurance?

The other option is to sell the property - it is about 40K in negative equity. Is it better to have the money in the bank though there is so much tax on that also, or is it better to just keep the property - the house is appreciating again, but very slowly - not like in Dublin.

Would really welcome advice/comment from others.


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## Brendan Burgess (5 Apr 2014)

Hi Elaine 



> it is about 40K in negative equity.


Negative equity  means that the mortgage is €40k higher than the property is worth. I  presume that there is no mortgage on this property and that you mean  that it's worth €40k less than your mother paid for it? 

The price your mother paid for this house in 2002 is completely irrelevant. 

The only relevant issue is how much it is worth today.  Let's say it's worth €100k. If you have €100k cash today, would you buy a house in Limerick to occupy occasionally? 


If you and your family need somewhere to stay in Limerick, would you not be better off in an apartment? So sell the property and buy an apartment.


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## ronaldo (5 Apr 2014)

elainem said:


> I calculated that after all the taxes were paid, maintenance done etc, I have about e100 per month from the house for loads of headache and grief. I have thought about selling the property, but the property would now not make what my mother bought it for in 2002.  Any advice/comment would be really welcome.



As Brendan stated above, the value in 2002 is irrelevant. 

Also, you do realise that a vacant property will still cost you money - insurance, maintenance, property tax, etc. are still all payable.

In my opinion, having a property earning you €100 per month is much better than a vacant property costing you upwards on €100 per month (it might be higher or lower than this).

In my opinion, your option should be between renting it out, hopefully to a tenant that won't give you any headache or grief, or selling it.

My mother had a vacant property a few years ago during the time of 'the big freeze'. She ended up having to pay all the costs associated with a burst pipe and the kitchen roof coming down. The insurance didn't pay up because the property was vacant longer than their maximum allowed term (normally 30 days but some policies offer 60).


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## twofor1 (5 Apr 2014)

I had a similar predicament, between tax, frequent 140 Km round trips, troublesome tenants, maintenance, redecorating between lettings and all the other landlord headaches, it just was not worth it for the monthly rent that I would probably only get for 10 months of the year.

When the last tenants left 2 years ago, I redecorated and put it up for sale, only selling recently.

I agree, it does still cost money to leave empty, but to me, it was worth it.


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## Protocol (6 Apr 2014)

elainem said:


> The other option is to sell the property - it is about 40K in negative equity.
> 
> Would really welcome advice/comment from others.




As there is no mortgage on this house, then negative equity is impossible.

I'd say you mean a capital loss.


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## elainem (6 Apr 2014)

*Is it worth renting out property?*

Hi! Thanks to all of you again for your replies. Yes, I mean a capital loss. My mother bought the house in 2002 for 285k. I would probably get 250k for it now. I hate losing money, but renting it out is losing money, more than just keeping it vacant. I kept it so long because I thought one day we might move back, but that is very unlikely now. Thanks also for the info re Pike Insurances for insuring holiday homes/vacant properties. 

With the current shortage of rental properties (even in parts of Limerick), I wonder how many Landlords are like some of us here and just don't want to rent out the property because of the hassle associated with it, especially when the profit margin is so small, particularly on houses down the country. I also read an article yesterday - can't remember which newspaper - that the government are now seriously looking at rent controls - I guess that will mean the exit of a lot more landlords!


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## STEINER (6 Apr 2014)

elainem said:


> The management fee is 98 per month - *Does this not take care of the headache and grief?* this together with a gardener who costs 600 per year - *nearly a month's gross rent on this*and maintenance, USC, PRSI etc. makes it uneconomical to rent out the house - I calculated that after all the taxes were paid, maintenance done etc, I have about e100 per month from the house for loads of headache and grief. I have thought about selling the property, but the property would now not make what my mother bought it for in 2002.



I think you should eliminate this source of stress in your life.  The permanent way is to sell it.  Nobody likes losing money, but you are not losing money if you sell it, as it was your mother who bought it at a certain price 12 years ago and this was not your cost.  Presumably there would be CGT of 30% on your gain.....


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## ronaldo (6 Apr 2014)

STEINER said:


> Presumably there would be CGT of 30% on your gain.....



That would be 33% and it would depend on the valuation used at the time the OP inherited it - not the price paid for it. Chances are it'll be a loss-maker and no CGT will be due.

Also, I'm failing to see the logic behind the OP's statement that "renting it out is losing money, more than just keeping it vacant". Surely, if the OP is making €100 per month after all expenses, keeping it vacant will remove this €100 per month profit and most of the expenses will remain.

Using simplified figures to illustrate my point, if the expenses/tax are €400 per month and the rent is €500 per month, the OP is making €100 per month. If the OP leaves the house vacant, the expenses might, for example, reduce to €150 per month.

Therefore, the options to me look like either sell the property, keep it rented or leave it vacant which, if the above figures held true, would cost the OP €250 per month - the €150 in expenses that remain and the €100 in lost profit.

I've been renting a property for 5.5 years and can honestly say that there has been no heartache or grief. In that time, I've had about half a dozen phone calls from the tenant - so an average of about 1 per year. Examples of such calls include a request to have a repair man look at the oven and a request for a replacement fire grate. Maybe the OP has just been unlucky in the choice of tenant.


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## STEINER (6 Apr 2014)

yes sorry 33%, REVENUE still need to update their faqs

[broken link removed]


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## serotoninsid (6 Apr 2014)

Perhaps you can raise the bar with regard to tenant selection? i.e. If you can't be doing with some of the hassle you have experienced (re. blinds and damage to walls), perhaps you continue on with the rental but for your own sanity, be prepared to accept (if necessary) longer periods between tenants - so as to find a better quality of tenant?  If you come across someone like ronaldo has above - who rents for 5+ years with little hassle, then your outlook may be completely different?

With regard to the 'gardening', can a deal be done with a prospective tenant for them to take ownership of this?


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## T McGibney (7 Apr 2014)

ronaldo said:


> That would be 33% and it would depend on the valuation used at the time the OP inherited it - not the price paid for it.



Being rather pedantic here, but the CGT depends actually on the open market value at the time the OP inherited it. If the valuation used did not reflect the true OMV, the latter takes precedence and must be reflected in the CGT computation.



ronaldo said:


> Chances are it'll be a loss-maker and no CGT will be due.


+1


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## Bronte (7 Apr 2014)

Rent: 9600
Management: 1176
Gardener: 600
Maintenance: 1000
Insurance: 400

Profit: 6424

Property Tax: ?

Tax: 50% easily so 3212, less property tax so profit of about 3K, makes 250 monthly. And that's without voids, problems tenants, and the stress and bother of it. 

Just shows you that it's very hard to make money as a landlord with all the costs associated with it. And people wonder why there are so many vacant houses and why rents are going nuts in Dublin. The killers in recent years are a) mortgage interst at 75% b) property taxes like NPPR not being deductable c) usc/prsi d) no incentive to refurbish e) PRTB lacking teeth. 

Selling the house is the best option. The fact it is worth less than when inherited is irrelevant. 

The only reason to keep it is if one thinks that property prices are going to rise. A lot.  OP is going to have to weight that up against what they can do with the cash if they sell.  Can she buy again where it will get a good return.


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