Purchasing Property - Son will use one room

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nickjohn

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Hi

Son is in Limerick in college and we are thinking of buying place there. Nothing concrete yet but scenario could be something like this:

Buy 3 bedroom house and son will have one bedroom.
We will rent other 2 bedrooms out at market rate for the rooms.
We will flip shortly after son and / or his siblings graduate so max 10 year investment.

Let's make some assumptions:

1. Rent previously was €1500 p.m. before our purchase.
2. We get €450 for each room rented = €900 p.m.
3. We will not charge son rent.
4. We will declare the income of €900 p.m. to Revenue.

Questions

1. What rent do we declare to Tenancy Board - €900 presumably?
2. When we go to sell are we not effectively devaluing the value of the house with a rent considerably lower than the market rent?
3. Is there anyway that we can still declare a rent to the Tenancy board of the true market rent i.e. €1500 and yet only declare the
real rent €900 to Revenue?
4. Are there any tax implications of allowing son have tax free rent?

Thoughts / advice welcome.

Thanks

Nick
 
Could you lend the money to son and siblings to buy the house?

1) Capital gains would be tax-free
2) Rent would tax-free under the Rent-a-Room Scheme.

Do up a full legal mortgage so that they can't sell it and drink the proceeds.

Tax implication would be an annual gift of the interest on the mortgage assuming you don't charge any interest.

Brendan
 
Just a few things to keep in mind, see below: :)

Will you get tenants yourself? If not there will be a cost.
Draw up a lease, vet tenants and comply with RTB rent review rules. Pay RTB fees.
Pay LPT. Insurance + public liability.
Furnish, buy contents for house, etc, and decorate, also re-decorate each year.
Collect rents, allow for vacant periods, maybe even non payment.
Pay PRSI, USC, and CGT when you sell if there's a profit..
DIY regularly.
Comply with all regulations.
Keep your bookwork up to date, or use an accountant.

There will be ongoing issues which you'll only find out when you become a so called landlord, but the above should get you started.
 
Roro999 said:
If parent(s) loaning the money and not getting a mortgage does son still lose first time buyer status ?
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I seem to remember the OP mentioning once before that he might be buying an investment property, that would be partly funded by selling shares. It might lead to issues in the suggested advice as mentioned. Then again, maybe not.
 
If you rent a property for €1500 but collect rent of only €900 that's ok too. You don't pay tax on income not received so set the rent at 1500 and collect 900. Away you go.
 
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I don't believe that you need to create a tenancy in this situation. Your son is living in the house, the two people sharing with him are sharing the house with a family member of the owner, they are living there under licence not as tenants.
 
As this would be your son's PPR for the next few years (or perhaps more) could he rent 2 rooms to other students @ €450 per room as suggested by the OP.
He does not need to be the home owner to rent rooms.
 
Black Sheep said:
As this would be your son's PPR for the next few years (or perhaps more) could he rent 2 rooms to other students @ €450 per room as suggested by the OP.
He does not need to be the home owner to rent rooms.
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If son is not home owner is rent from other two rooms tax free if under 14k ?
 
From reading a lot of the previous posts I wouldn't say there's any advice given on tax evasion, but I get the distinct impression that others are showing methods of tax avoidance. All well and good, but a touchy subject and no doubt someone will ask, "what the hell I'm on about". :cool:
 
Do you only have one son in Limerick so far? Are you 100% sure that the other children will go to college in Limerick? What happens if they end up going to college in another city?
 
noproblem said:
From reading a lot of the previous posts I wouldn't say there's any advice given on tax evasion, but I get the distinct impression that others are showing methods of tax avoidance. All well and good, but a touchy subject and no doubt someone will ask, "what the hell I'm on about". :cool:
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What the hell are you on about ?

There is a Revenue scheme called 'rent a room' where subject to certain conditions rental income is not subject to tax. The OPs plans may qualify under that scheme. As he is only 'thinking of buying a place' no one can say at this stage if that is relevant. It is certainly something he might consider as he develops his thinking.

Oh! I see, you were looking for a tax dodge. Thats just you, not the rest of us.
 
Brendan Burgess said:
Could you lend the money to son and siblings to buy the house?

1) Capital gains would be tax-free
2) Rent would tax-free under the Rent-a-Room Scheme.

Do up a full legal mortgage so that they can't sell it and drink the proceeds.

Tax implication would be an annual gift of the interest on the mortgage assuming you don't charge any interest.

Brendan
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How do I do a full legal mortgage?
 
Thirsty said:
Yes, but only if its paid to son & not handed up to parent.
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When it comes to studies, parents would easily be spending/giving 10k+

So probably easiest that son is using the house. Son is renting 2 rooms at approx €400 / €450 + bill share per month.

Son is then self sufficient as the circa 10-12k is tax free and he uses that and anything he gets from a part time job for college fees, books, food, travel and his share of bills.

If there's a little left over, he can buy a few beers too.

That's as tax efficient as you'll get.
 
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