Buy to Let - Net cost , and expenses to consider

F

figrolls

Registered User
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Hello,

I am looking at figures to purchase a Buy to Let property.
Background - property is in north Dublin, decent area, 3 bed terrace. V rentable . Worth about €430K. Considering a mortgage of €165K over 10 years and trying to work out the figures.

I would appreciate advice on whether the figures below are correct ?

And some questions ?
Are you allowed deduct 10% of rent as tax free expenses?
Do you need receipts for expenses?
What other costs should we consider... property tax? House insurance? Repairs etc ? Mortgage protection ? Any others?



Assumptions

Buy to let mortgage interest rate of 5.5% . LTV of < 70%.
Monthly Mortgage repayments of €1790
No significant periods where house is not rented
We pay the higher rate of tax on rent
Rental income of 2500 a month
Rental income will not decrease
Mortgage term of 10 years
Mortgage
€165,000.00​
Monthly rent
€2,500.00​
annual rent (monthly x 12)
€30,000.00​
Allowed tax free rent - Expenses @ 10%
€3,000.00​
Monthly mortgage repayments
€1,790.00​
Annual Mortgage (monthly * 12)
€21,480.00​
Year1
Allowed tax free interest on mortgage year 1
€8,757.00​
Taxable rent (Annual Rent - 10% - mortgage interest )
€18,243.00​
Tax on rent
€8,756.64​
Tax free rent (annual reant - tax on rent)
€21,243.36​
Annual Cost to us (mortgage repayments - tax free rent)
€236.64​
Year2
Allowed tax free interest on mortgage year 2
€8,039.00​
Taxable rent (Annual Rent - 10% - mortgage interest )
€18,961.00​
Tax on rent
€9,101.28​
Tax free rent (annual rent - tax on rent)
€20,898.72​
Annual Cost to us (mortgage repayments - tax free rent)
€344.64​
Year3
Allowed tax free interest on mortgage year 3
€7,280.00​
Taxable rent (Annual Rent - 10% - mortgage interest )
€19,720.00​
Tax on rent
€9,465.60​
Tax free rent (annual rent - tax on rent)
€20,534.40​
Annual Cost to us (mortgage repayments - tax free rent)
€364.32​
etc etc for each subsequent year





I got interest and capital costs on the mortgage from Mortgages.ie

Below is a summary of interest payments on a typical 10-year mortgage of €165,000 at 5.5%.
Monthly payment: €1,790.68.

Year Opening Balance Annual Interest Charged Capital Repayment
1 €165,000 €8,757 €12,731
2 €152,269 €8,039 €13,449
3 €138,820 €7,280 €14,208
4 €124,612 €6,479 €15,009
5 €109,603 €5,632 €15,856
6 €93,747 €4,738 €16,750
7 €76,997 €3,793 €17,695
8 €59,302 €2,795 €18,693
9 €40,609 €1,741 €19,748
10 €20,861 €627 €20,862
 
Last edited:
The 10% tax free is not a thing.

Yes you need receipts for expenses.

I have included €500 per month expenses, you can chase the detail, but you are just guessing. €500 per month is a fair estimate.

Do your sums monthly or annually mixing them together is just confusing. You need to look at cash flow, then profit.

Cashflow

Rent 2500
Tax. 1000
Repayments 1790

Cashflow negative €290 per month. Is that acceptable.

Profit

Rent 2500
Tax. 1000
Interest 756

Profit €744 per month

Which is €8,928 per annum on €265k invested or 3.3%. That's a poor investment.

The property is far too expensive for the rent. If you look you could probably find something for half the price with a similar rent.
 
Thanks , much apreciated. Where do you get your figure of €265K invested?.. Ah ok, it's our own funds , you dont count the mortgage as invested

Sorry - new to this! :rolleyes:
 
figrolls said:
Sorry - new to this! :rolleyes:
Click to expand...
Why do you think that property investment is the right and most appropriate option for you?

Maybe you should do a Money Makeover post to get better and more targeted feedback?

Key Post - Basic information required for the "Money Makeover" forum

It can be difficult, but please try to use a meaningful title in your thread For example "27 year old with mortgage arrears". You will get a much better and much more coherent answer if you give as much information as possible in your first post. For example, if you give your mortgage rate, it...
www.askaboutmoney.com
 
You mentioned no significant period when the property will not be rented. Yes, finding a renter is easy at the moment. However there is often work to be done between rentals, meeting with prospective tenants... Of course, according to how you organise, you might be able to minimise these. But it's not always feasible to avoid them. Renters don't always leave when you are available to manage a changeover. In terms of expenses, annual service, annual rtb charge, advertising cost (if applicable). It might also depend what you decide to do yourself. Will you use an accountant? Will you use an agent to manage your rental?
In North Dublin, you are in a rpz zone. So rents follow inflation only up to 2 per cent. Any period when the inflation is above 2 per cent diminish your relative income and you are never able to rebalance. They are temporary for nearly 9 years. It has a real 'negative impact that you should not underestimate.
 
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