Question about renting out my apartment

  • Thread starter jamesdoherty
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jamesdoherty

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Hi guys, this is my 1st post. what a fantastic forum. i just found it through google search. I just wanted to ask a question about renting out my apartment.

heres my scenario:

i bought an apartment almost 2 years ago as an owner occupier and just recently my financial situation has changed and i wish to rent out the apartment. When i bought it i didnt pay stamp duty so i understand that i have to wait till 2 years of ownership before i can rent out without being liable for stamp duty clawback, thats fine because its almost 2 years now anyway.

also i understand that i have to notify the revenue when i do rent it out so they can stop my TRS, again thats fine

from what ive read i have to then register with PRTB within a month which is fine too.

so basically i know alot of people avoid paying tax on rental income but i dont want to do this and i want to declare everything but i just rang the IPOA (irish property owners association) and a very nice girl on the phone informed me that when im renting out my home next month, the payments i make wont come off my loan and that it will only come off the interest that i owe and that my loan will stay the same which is quite a shock for me. can someone clarify this for me?

my current mortgage is 850(after rate cuts) and TRS is 138
so when TRS stops mortgage payment will be 988 but i will only get in the region of 800 for renting the apartment out so ill still have to put around 188 to the rent every month.

does anybody know if mortgage payments made when apartment is rented out only come off your interest?

hope somebody can clarify this

thanks guys

james
 
Re: Questionn about renting out my apartment

Have you been paying capital off the loan up to now or has it been interest only to now also ? SOme mortgages in early years can be set up as interest only to keep repayments lower.
 
Re: Questionn about renting out my apartment

hi graham,

i have been paying off capital on my loan

and the bank im with is first active
 
Re: Questionn about renting out my apartment

I don't see any reason why that should change just because the property goes from your PPR to an investment property. You need to ask the bank more about this.
 
Re: Questionn about renting out my apartment

jamesdoherty said:
so basically i know alot of people avoid paying tax on rental income
Click to expand...
I think you mean "evade"?
i just rang the IPOA (irish property owners association) and a very nice girl on the phone informed me that when im renting out my home next month, the payments i make wont come off my loan and that it will only come off the interest that i owe and that my loan will stay the same which is quite a shock for me. can someone clarify this for me?
Click to expand...
Perhaps it was a nice but dim girl? Or she was assuming that you were going interest only on the mortgage as some (many?) landlords do due to the tax issues (i.e. ability to offset 100% of mortgage interest against rental income)?
 
Re: Questionn about renting out my apartment

has anybody on AAM dome what im about to do and changed their status from owner occupier to investor

has the capital owed on your loan decreased?
 
Repayments will work as they currently do (apart from no TRS) - though if you tell the bank it's rented they may increase the interest rate.

Think what she was trying to say was that your profit for tax purposes is (loosely)

+ rent
- interest portion of mortgage repayment
- allowance expenses

and not

+ rent
- full mortgage repayment (interest + capital)
- allowed expenses
 
Re: Questionn about renting out my apartment

jamesdoherty said:
has anybody on AAM dome what im about to do and changed their status from owner occupier to investor
Click to expand...
Judging by the many threads/posts on this issue over the years lots of people have.
has the capital owed on your loan decreased?
Click to expand...
If you remain on a repayment/annuity loan then the capital will decrease. There is no rule whereby investors automatically must go on interest only or anything like that!
 
You will receive your rent from the tenant, you use this to pay back your mortgage which includes both interest and capital but there is a shortfall of 188 which you will have to pay along with other things like upkeep, maintenance, PRTB. Then annually you make your tax returns the calculation for this is rental income less mortgage interest, less expenditure to arrive at your profit. The profit (or it can be a loss) is taxable. That is what the girl was trying to explain to you. The interest only of the mortgage and not the capital is allowable against rental income. You should also search this site for lots of advice on renting properties and also revenue.ie for the taxation aspects. As I said yesterday being a landlord is not for the faint hearted so make sure you know what you are getting into. PS: If you are using your real name I suggest you change it, Ireland is quite small.
 
Re: Questionn about renting out my apartment

James, I did go from PPR to renting but (un??)fortunately our mortgage was paid. I would reckon the person was implying that a number of landlords opt for "interest only" as they are trying to keep payments down & are probably relying more on Capital Appriciation to make their profit rather than, over time, have the rent exceed the mortgage.

You should have no problem making capaital & interest payments, if you can afford them and the capital portion should come off the overall amount of your mortgage. But if money is tight & you just want to rent until the market picks up, you may want to stck with interest only.

Bear in mind, apartments will probably be the very last of the properties to return to their original value (depending on location etc)
 
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