How much will we lose if we rent out apt?

Hi,

This is probably a very basic question but I just can't seem to get my head around it. We have had to move out of our 2 bed apt due to family size. We are now going to rent it and are currently renting a bigger property with the hope of buying in the near future.

Our mortgage repayments are approx 1000 euro/month and we would expect to get approx 900/month in rent. It appears that we can keep our tracker mortgage as no mention of it being removed in T&C. I am aware that we need to register with the PRTB and also that we will loose out tax relief. Can anyone make a rough estimate of how much we would be down every month i.e is rent taxed at 41% like additional income? How can I work out what we may be able to save in interest? Any other costs apart from maintenance etc?
We have had no choice but to move so just looking for the figures!!!!
Thanks so much for your help

You won't lose your tax relief. You are entitled to offset 75% of interest on the loan against your rental income. You can also offset other costs should as wear & tear On fixtures/fittings and any cost associated with rent collection from the RI. Net rental income will be subject to tax at your marginal rate.

You will lose your owner occupier mortgage interest tax relief (aka TRS) when it ceases to be your home (PPR - Principal Private Residence) but as 44brendan says you can write off 75% of mortgage interest when doing your rental income tax return.

You need to familiarise yourself with the tax and other implications of renting out your former PPR - e.g.:

http://www.revenue.ie/en/tax/it/leaflets/it70.html

[FONT=&quot]Rough example spreadsheet of records for year - Note purely an example but approximate enough

General[/FONT][FONT=&quot] :[/FONT]
[FONT=&quot]Management fees 850.00[/FONT]
[FONT=&quot]*W&T (below) 387.50[/FONT]
[FONT=&quot]Life Insurance 293.88[/FONT]

[FONT=&quot] ---------[/FONT]
[FONT=&quot]Total (1) 1531.38[/FONT]


[FONT=&quot]Wear and tear[/FONT]
[FONT=&quot]Couch 500[/FONT]
[FONT=&quot]Washing machine 400[/FONT]
[FONT=&quot]Fridge 300[/FONT]
[FONT=&quot]Bed 300[/FONT]
[FONT=&quot]Table 200 [/FONT]
[FONT=&quot]Other 300[/FONT] (nppr, prtb etc)
[FONT=&quot]Blinds 100[/FONT]
[FONT=&quot]Kitchen 1000[/FONT]
[FONT=&quot] ----------[/FONT]
[FONT=&quot]Total 3,100.00[/FONT]
[FONT=&quot] ---------[/FONT]
[FONT=&quot]*12,5% (2) 387.50[/FONT]

[FONT=&quot]Others total 1 & 2 1918.88[/FONT]

[FONT=&quot]Repairs[/FONT][FONT=&quot] :[/FONT]
[FONT=&quot]Paints/etc 154.17[/FONT]
[FONT=&quot]Window broken 130.00[/FONT]

[FONT=&quot] ---------[/FONT]
[FONT=&quot]Total (3) 284.17[/FONT]


[FONT=&quot]Interest[/FONT][FONT=&quot] Annually (4) 3734.58[/FONT] (75% of total yearly interest paid - this could vary greatly)
[FONT=&quot] ----------[/FONT]
[FONT=&quot]Total expense (1,2,3,4)[/FONT]
[FONT=&quot] 5937.63[/FONT]

[FONT=&quot]Rental[/FONT]
[FONT=&quot] ----------[/FONT]
[FONT=&quot]Total Rent 10800.00 (900 x 12)[/FONT]

[FONT=&quot]Rent – Expense 4919.00[/FONT] - Tax due on this at about 50% = 2.5k

I am probably missing something else but I'm sure the good people here will remind me.
-----------
So given that you have to pay the rent anyway your total costs will be 1,2,3 plus the tax which is about 4.5k. You rent gets you 10.6k so you will gain about 6k over the year. Your mortgage repayments are 12k so renting out will efectively cost you about 6k. Bear in mind that you will also be chipping away at the amount owed so youi need to weigh up the loss you take annually for the moment and whether the value rises or drops or even stays still.


*Disclaimer - I have no idea what your figures are so this is a very general example and figures are very approximate.

Thank you so much -especially elcato- That makes so much more sense now that I have something to visualise

Guys,

Based on the above am I correct in saying that (assuming you have other taxable income) it doesn't make sense to pay off a mortgage on a rental property as from then on all the rent will be fully taxable?

I'm in the situation whereby I have a primary home and a rental apartment. The mortgage on both is similar and I could in theory pay off one of these from savings and selling off another non-property investment. The interest rate on the rental property mortgage is higher as I have a tracker on my home mortgage.

Thanks,

Henry

Yes HenryC if you have a choice to repay either mortgage (assuming they are similiar products with similiar interest rates) then it makes no sence to pay off the mortgage on your investment. Pay off your home

Thanks Macstuff - that confirms what I thought. It's a strange situation that it makes no sense to pay back your debt.

The "problem" with paying off my house mortgage is that I'm on a very good tracker and I get mortgage interest relief.

I'll probably keep my money on deposit (and where I decide to put that is another story much discussed on here).

Thanks again.

Henry

Elcato

just a small point-
Have you counted W&T twice in total expenses at the bottom?

Yep - Looks like I did. As I say this was just a quick example I made out a few years ago.