Key Post Is profitable property possible at the moment?

cremeegg said:
Property tax at €225 is included in the calculation of yield
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I read, at one stage, that property tax was going to be an allowable deductible tax expense when calculating your rental income tax liability. Is that not the case? thanks.
 
CiaranT said:
I read, at one stage, that property tax was going to be an allowable deductible tax expense when calculating your rental income tax liability. Is that not the case? thanks.
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Min Noonan initially said at a briefing that it would be allowable however revenue have not given a clear direction on this.

This is old ground for them as they dilly dallied for ages as to whether or not the NPPR was deductible.
 
Knuttell said:
Min Noonan initially said at a briefing that it would be allowable however revenue have not given a clear direction on this.

This is old ground for them as they dilly dallied for ages as to whether or not the NPPR was deductible.
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Property Tax has been included as a tax deductible expense in the table (post 10).

This seems to be the correct treatment.
 
The current situation is that LPT is not deductible. That will be the situation unless there is a change in the legislation. It should be deductible but we will have to wait and see
Part of Dail reply by Minister Noonan on the subject "The Thornhill Group recommended that the Local Property Tax paid in respect of a rented property should be deductible for income tax or corporation tax purposes, in a similar manner to commercial rates. This is not provided for in the Finance (Local Property Tax) Act 2012; it is the intention of the Government to introduce such a provision on a phased basis but the manner in which this will happen has not been decided. Such change would be provided for by primary legislation."
 
cremeegg said:
What expenses can you expect from letting property?

On initial rental
Furnishing
Kitchen equipment

Ongoing
Decoration & refurbishment
Repairs



Other expenses which you may have to pay
Management charge
Letting agent fee
Legal costs of lease
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You're missing insurances, life & house, accountants fee, gardner, water I'm assuming in the future will have to be paid by the tenant
 
Bronte said:
You're missing insurances, life & house, accountants fee, gardner, water I'm assuming in the future will have to be paid by the tenant
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In the table shown at post 10 Insurance is included at €500 pa, and other expenses at €1,000.
 
Also there should be an allowance for your time in managing a property. If you added mental anguish as a cost then you would have to be looking at a negative yield. Ask anyone with a property near the sea in Galway or by the Lee in Cork.
 
Marc said:
Also there should be an allowance for your time in managing a property. If you added mental anguish as a cost then you would have to be looking at a negative yield. Ask anyone with a property near the sea in Galway or by the Lee in Cork.
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Mental anguish not exclusive to property, many shareholders of Irish Banks have had their share over the past few years.
 
Kerry Gooner said:
Mental anguish not exclusive to property, many shareholders of Irish Banks have had their share over the past few years.
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True, but bank shareholders don't get calls at midnight about leaky pipes. The time put into managing residential property is substantial.
 
Jim2007 said:
As for considering this proposal as a business, it's a long time ago since I practice as an accountant, but I can never recall us advising anyone to take up a business in which the net margin was only a couple of percent! The risks and efforts versus the returns just do not lend merit to it.
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I accept this point fully a buy to let investment that returns less than 3% net is not worth the effort.
 
In my ongoing quest to find a property investment that offers a reasonable return I have come across the following property.

The property offers a relatively high gross rental yield i.e. it is going cheap. The reason is that it is in a "rough" neighbourhood. This does not bother me as I already own a property in the estate, which I have never had a problem renting.

The gross rental yield on the property is just over 8.5% if you dont allow for voids, also this is a house with no management charges applicable. In short I think it would be difficult to find a better investment property.

It just does not stack up.

In my opinion there are two reasons for this.

1 Tax
2 Rents are low.

When I first rented property the rent for a room in a shared house was £40 per week (just over €51). Today that would cost €60. In the meantime the take-home pay from a basic wage has risen from £120 per week to about €360.

These are the figures for the property

|Investment|||95,000
Rental Income|||7,425
No of months|11||
Rent per month|675||
||||
Prtb|90||
Property Ins|400||
Property Tax|225||
Advertising|100||
Other expenses|1000||
Total Projected Expenses||1,815|
||||
Gross return after expenses|||5610
USC|7%|393|
Income Tax|41%|2300|
PRSI|4%|224|
||||
Total Tax|||2917
Net Return||||2,693
||||
Net Return on investment||||2.83%
|||||
 
Brendan points out on another similar thread recently

"the horrors of a tenant who just refuses to pay the rent and just plain refuses to leave should not be underestimated. "

While this has never happened to me, it would be a real concern. The law seems to leave a landlord totally exposed here.
 
I am closing the purchase on the following rental property (Swords) in a few days time. This will probably be flipped in the summer, but I might consider holding on to it.

Without Borrowing
Investment 122,500
GrossRental Yield 9.80%
Rental Income 12,000
Number of months expecting rent 12 (in 10 years with multiple properties I have had less than 1 week unlet/year)
Rental Income per month 1,000 (minimum and increasing)

USC on Gross 7%
Management fees 600
PRTB 90
Property Insurance 0
Property Tax 225
Advertising 75 (daft premium ad)
Repairs 400
furnishings after capital allowances approx. 400
Total Projected Expenses 1,790

Gross Return after expenses 10,210

USC on Gross7% 715
Tax on Gross41% 4,186
PRSI On Rental Profit4% 408
Income Tax and PRSI 5,309
Net Return 4,901

Net Return on Investment PA 4.00%

rough estimate of profit if sold today 20,000 Gross. (am hoping the market might pick up somewhat in the summer?)
 
landlord said:
This will probably be flipped in the summer, but I might consider holding on to it.
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That's a bold statement. You've posted rental figures, but it would be more accurate to post figures for CGT purposes. So entry and exit costs etc.
 
Bronte said:
That's a bold statement. You've posted rental figures, but it would be more accurate to post figures for CGT purposes. So entry and exit costs etc.
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This is the first time I have sold an investment property so forgive me if the maths isn't perfect....

Purchase costs:
Property cost 122500 (plenty of sellers desperate to sell to cash purchasers!!)
Solicitor fees and Stamp duty 3000
Total 125500

Selling costs:
Property value now 150,000 (conservative)
(one v. recently sold for 153,000, hoping for perhaps a bit more come summer time though)
Solicitor...guessing as never sold a property....1,500?????
Estate agent again guessing....2,000????
Total= 150,000 - 1,500 - 2,000 = 146,500

Profit is 146,500 - 125,500 = 21,000
Is this how you work out capital gains tax?
"The first €1,270 of taxable gains in a tax year are exempt from CGT"
21,000 - 1,270 = 19730 at 33% = 6,511

Net Profit if sell today 21,000 - 6,511 = 14,489

Can you offset anything else against Capital Gains Tax?
 
landlord said:
Can you offset anything else against Capital Gains Tax?
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As far as I'm aware, you can just write off the acquisition costs and selling costs as well as the cost of any capital outlay, such as fitting a new kitchen.

You can also carry forward past losses. For this reason, if you have multiple investment properties, one or more of which is in negative equity, you may be better selling the property in negative equity instead.

This would crystalise a loss for Capital Gains Tax purposes which can be carried forward indefinately (under current rules) and wrote off against the potential profit when you sell other, more profitable, properties.
 
landlord said:
Selling costs:
Property value now 150,000 (conservative)
(one v. recently sold for 153,000, hoping for perhaps a bit more come summer time though)

Can you offset anything else against Capital Gains Tax?
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So you believe Dublin prices will rise by 20% in the next 6 months, (I won't discuss this). I heard Lisney on the radio today and they said that last year, where they operate in Dublin property rose 19%.

I don't get how you think you can buy now for 122K if one sold recently for 153K? You think becaue your a cash buyer that it will work?

You have other property, so you ought to look at whether it is a good idea to sell one of those as per Ronaldo's comment. There is a thread on AAM about this. I think Burgess started it, it might be a key post but I'm not sure.
 
Bronte said:
So you believe Dublin prices will rise by 20% in the next 6 months, (I won't discuss this). I heard Lisney on the radio today and they said that last year, where they operate in Dublin property rose 19%.

I don't get how you think you can buy now for 122K if one sold recently for 153K? You think becaue your a cash buyer that it will work?

You have other property, so you ought to look at whether it is a good idea to sell one of those as per Ronaldo's comment. There is a thread on AAM about this. I think Burgess started it, it might be a key post but I'm not sure.
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I didn't say I expected prices to rise in 6 months I said. that I hoped prices would pick up some what in the summer when I potentially might sell it.
I am confused when you say "I don't get how you think you can buy now for 122K if one sold recently for 153K?"
I have already bought this property.....3 months ago, from a very distressed and heavily indebted seller.

Ronaldo/Bronte.....Thank you I will run a search and see if I can find that post and more info on selling one of my other properties that's in negative equity.

Quick question ......I bought my previous home in 2002 (250,000 approx.), moved out and rented it in 2007 (at the peak of the market value 400,000). In terms of "when" it became a rental property (at its peak value) does this have any bearing on maximising the Capital Gains Loss? (value now 200,000 approx.)
 
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