Renting PPR while abroad?

B

ButtermilkJa

Registered User
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660
Ok, I was reading a few threads on this a while back but can't find them anymore.

Anyway, just a quick question...

I am planning on heading over to Canada in a year to work - not through my company or anything, but just me and a few mates getting out of here for a while. I have got around €120k in equity built up in my 2-bed apt now, maybe more by the time we head off in 12 months, but was wondering if anyone could shed light on the following.

I was thinking of selling and banking/investing the money. I would take say €15k/€20k out to head off and then leave the rest behind. My thinking was that with rates rising and (supposedly ;) ) property gains falling, I would be better earning a high savings interest rate rather than having the hassle of renting and trying to cover the increasing shortfall between rent and mortgage that rising interest rates would eventually bring.

However, one of my friends was told that you can avoid stamp duty clawback if you rent the whole apt while you go abroad. Now, I'm pretty sure this is not the case. The reason being, if revenue class my apt as PPR for CGT purposes (I don't have to pay CGT if I sell now), then I'm pretty sure they'll class it as PPR as well if I decide to rent.

So, my question is, as I will be moving abroad (for at least 12 months) then do I have to pay SD if I hold on to the apt and rent it out? In other words, is there any 'special' clause for people who are not in the country and renting their PPR temporarily?

Thanks!
 
ButtermilkJa said:
So, my question is, as I will be moving abroad (for at least 12 months) then do I have to pay SD if I hold on to the apt and rent it out?
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yes unless you have own it for more than 5 years. Otherwise SD clawback applies ( and i can never remember it is proportional to period of occupation as PPR or not)

ButtermilkJa said:
In other words, is there any 'special' clause for people who are not in the country and renting their PPR temporarily?
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no.
There is a special clause which allows you to rent for less than 12months, but i wonder if it is not only in the case you are changing your PPR and for CGT calculation purposes
 
Rent for less than 12 months......only for capital gains tax purposes. There is some leeway for people who are obliged to travel for work. Otherwise it's a no I'm afraid.
 
SD clawback has to be paid on the date the property that was formally your PPD was let.

From revenue
Clawback

A clawback arises if rent is obtained from the letting of the house or apartment for a period of 5 years from the date of the conveyance or transfer, other than under the rent-a-room scheme. The clawback amounts to the difference between the higher stamp duty rates and the duty paid and it becomes payable on the date that rent is first received from the property. A clawback will not arise where the property is sold to an unrelated third party during the 5-year period.
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In relation to CGT if you sell the property within 12 months of letting it or return to live in it within 12 months, the porperty becomes your PPR again no CGT is payable on the eventual sale (say in 5 years time)
If you rent the property out while abroad, I think you will be classed as a non resident landlord
See here
especially
"How are non-resident landlords taxed?" and "How are foreign rents taxed?"
You also have to do a tax computation for maybe 2 years
You can offset interest paid on your mortgage and other expenses against your rental income
See above link for what expenses is allowed and how to do a return.
You also have to register with theshold before you can claim the interest paid on your mortgage.

Posts crossed with bacchus and liteweight
 
That's what I figured alright, that's great thanks.

Also, how would I go about calculating SD? I paid €266k in February 2005. Mortgage was €248,500, and is now around €245k. I just got it valued for €360k. So let's say I change it to a rental property and decide to pay SD, how do I figure out what to pay.
The clawback amounts to the difference between the higher stamp duty rates and the duty paid and it becomes payable on the date that rent is first received from the property.
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...This is just throwing me off a bit. Obviously the duty I paid was €0. But is the 'higher rate' charged on €360 or what it would have been initially charged on €266k?
 
Have you checked if there are exemptions if you are required to go abroad for work? Some of the info in this thread (received from Revenue) may be of interest.
 
Yes, I think there are some exemptions but I'm not required to travel for work. It's my own choice. I'm leaving my job and just going travelling abroad.
 
I think, but I'm not sure, that the clawback is based on the original price. The only change is that it's at an investor's rate, which is higher. Some new properties do have a stamp duty liability, due to size etc., even if they are owner occupied. Therefore they have to cover all case scenarios in the literature, i.e. even though you were a FTB you may already have paid a reduced stamp duty.
 
Why on earth would you rent the place and pay as much in stamp duty as you could possibly receive in rent? This beggers belief.

You're prepared to potentially make a substantial loss if the place isn't rented for the entire 12 months or indeed is wrecked when you get back. This is before you factor in the hassle, PRTB, tax on income. Why would you do such a thing? So you can tell everyone how smart you've been and that you've someone else paying your mortgage whilst you're away?
 
Howitzer said:
Why on earth would you rent the place and pay as much in stamp duty as you could possibly receive in rent? This beggers belief.

You're prepared to potentially make a substantial loss if the place isn't rented for the entire 12 months or indeed is wrecked when you get back. This is before you factor in the hassle, PRTB, tax on income. Why would you do such a thing? So you can tell everyone how smart you've been and that you've someone else paying your mortgage whilst you're away?
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I agree with this. Also Buttermilk, from other threads you've started, I think this has been on your mind for a while...to sell or not to sell. If you sell now, you're free and clear, go away, come back or stay away. You will not pay CGT on your PPR. However, I think you might have an idealised view of being an absentee landlord. You will have to pay higher premiums on your insurance, pay an agent to act on your behalf while you're away. If you just ask the tenants to pay into your bank account, for example, they are obliged, by law, to keep a percentage of rental income and forward it to the Revenue. A lot more research on your situation is needed, methinks!:)
 
Cheers liteweight, I didn't pay anything at the start and the area is below 125sqm so I guess I would be paying 5% then on €266k which is €13,300.

Howitzer, I'm planning on staying away for a while. At least 12 months but if things go ok, then I may stay longer, a few years maybe. So I'm just weighing up my options to see if it makes it worthwhile to hold on to for when I come back or not. That's why I'm here at AAM asking questions.

Rent in my area is appx €1,100 p/m for a 2-bed apt so that makes €13,200 p/yr. If I want to keep it I will have to pay SD and there's nothing I can do about that.

...So you can tell everyone how smart you've been and that you've someone else paying your mortgage whilst you're away?
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A little less of that wouldn't break your back.;)
 
liteweight said:
I agree with this. Also Buttermilk, from other threads you've started, I think this has been on your mind for a while...to sell or not to sell... However, I think you might have an idealised view of being an absentee landlord.
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Sure I understand what you're saying, and I know I've been back and forth with this for a while (and thanks for all the advice so far!!), but like I said in the other threads being a landlord is not something I'm aiming for. It would be more of a side-effect of my overall plan. You never know when go away what will happen. What if I need to come back suddenly for family reasons or if I just hate it away and am homesick. I'm just wondering whether it would be beneficial to be 'on the ladder' so to speak or come back as a cash buyer?

I'm haven't got any views on being a landlord, idealised or not. I'm not a show-off type of person that will go around telling people "I have a property portfolio" or "I've got someone else paying my mortgage". That's not me at all, believe me.
 
ButtermilkJa said:
If I want to keep it I will have to pay SD and there's nothing I can do about that.
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Leave it empty and you don't have to pay a penny.
Allow a relative to stay there rent free and you don't have to pay a penny.

Or rent it out and pay, up front, as much as you could possibly make in a year in rent before expenses and hassle and extra taxes and risk.

I dunno, maybe I'm just thick.
 
From personal experience, I am more than happy to be living abroad without the hassle of owning an Irish property. Now is as good a time as any to sell, so if I were you, I'd strongly consider it. You won't have to repay any stamp duty, deal with tenants, tax returns, insurance, management companies, etc, and you'll be completely free to either stay abroad or return home and in the meantime, probably have the time of your life.
 
Howitzer said:
Leave it empty and you don't have to pay a penny.
Allow a relative to stay there rent free and you don't have to pay a penny.

Or rent it out and pay, up front, as much as you could possibly make in a year in rent before expenses and hassle and extra taxes and risk.

I dunno, maybe I'm just thick.
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Not at all :D, everyone's view is important to me, but I think you need to realise that I'm looking at this from the point of view of when (if) I return. I just want to be sure I've weighed up everything and that's what your advice is for. Like liteweight says, a lot of research is needed when making a decision like this.
 
budapest said:
From personal experience, I am more than happy to be living abroad without the hassle of owning an Irish property. Now is as good a time as any to sell, so if I were you, I'd strongly consider it. You won't have to repay any stamp duty, deal with tenants, tax returns, insurance, management companies, etc, and you'll be completely free to either stay abroad or return home and in the meantime, probably have the time of your life.
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That's more what I'm leaning to alright, but being the ultra cautious person I am, and with my family and everyone else telling I'd be mad to sell I just have to look at all options.
 
Howitzer said:
Leave it empty and you don't have to pay a penny.
Allow a relative to stay there rent free and you don't have to pay a penny.
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I'm not sure that this is the case. In any event he'll have to pay the mortgage, he might as well try to make a few bob. Living in Canada with the responsibility of paying the mortgage at home wouldn't be much fun.

Or rent it out and pay, up front, as much as you could possibly make in a year in rent before expenses and hassle and extra taxes and risk.
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If he stays away for more than the year, this will balance itself out. Who knows, he might make his fortune abroad, come home to buy a bigger PPR and have an investment property all ready set up and running!



I dunno, maybe I'm just thick.
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Not normally the case!!:D
 
liteweight said:
I'm not sure that this is the case. In any event he'll have to pay the mortgage, he might as well try to make a few bob. Living in Canada with the responsibility of paying the mortgage at home wouldn't be much fun.



If he stays away for more than the year, this will balance itself out. Who knows, he might make his fortune abroad, come home to buy a bigger PPR and have an investment property all ready set up and running!
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But BM will be the paying the Stamp duty clawback up front, BEFORE ANY rent is achieved. The first year will be one massive loss. The 2nd may be better but then CGT becomes liable which would knock out any gains there. And all the while interest rates will, probably, be increasing. PRTB registration must be done for each tenancy and the likelihood is that managing tenants from afar would become so much hassle that a management company would be needed, makings years 2, 3 and 4 write offs. And by write off I mean the OP would have done as well to leave the place completely empty.

SELL THE PLACE! The numbers just don't work and no combination of things, bar the completely false economy of being non tax compliant, will make them work.
 
For what it's worth, I agree with you Howitzer. I'd sell and bank/invest as much of the profit as possible.
 
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