Second home options

F

Frank

Registered User
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1,843
Hi all

I am fishing a little here.

I currently live in Arklow and commute to tallaght.
Originally from tallaght so still a few mates around.

I am considering options.
1. Buy a flat in tallaght rent the house in arklow.
2. Sell house in Arklow and buy in Tallaght.

As I stand I owe 145k house is worth 260k Flat in tallaght potetially 225k
Saving on fuel alone about 40 a week.
Plus 2 extra hours per day to do with as I please.
House should pay for itself then some.
Equity in house should allow me get a mortgage for new place in theory.

Any flaws in my logic?

Any notions from people out there who have done similiar maybe.
 
If you see yourself ever 'settling down'/having kids in the future, I'd be inclined to stay where you are. I know people in Dublin who spend more than 2hrs/day driving 3 or 4 miles to their workplace. And they don't usually get 'into town' any more often than I do, living in Limerick...

Could you rent a room in the Arklow house (i.e. to a tenant) and another in Tallaght (as a tenant), Mon.-Fri.?
 
I know the sensible instinct is to see rent as 'dead money', but between the fuel savings and the tax-free rent-a-room it mightn't cost as much as you think to split yourself between the two locations for a while, as and when, etc. You wouldn't be committing yourself (beyond the duration of the lease) and you could see how you got on...
 
If you rent the Arklow house within 5 years of purchase as an owner occupier then you will be liable for a clawback of stamp duty and CGT on some portion of the eventual resale gain as covered extensively elsewhere in this forum. You may also lose your owner occupier status and the benefits that go with that (e.g. mortgage interest relief). You will be liable for income tax on any rent that you take in (unless you can rent under the owner occupier rent a room scheme). You should think carefully about investing in property and not judge it on the savings in terms of commuting costs and time. If in doubt get independent, professional advice on the tax and investment aspects of such a strategy.
 
Hadn't though of those factors; Clubman's right (as usual ).

One detail, though - does that potential clawback of stamp duty/CGT exemption apply in the case of someone who owns their PPR for >5 years and then rents a room under the owner occupier rent a room scheme?
 
I was enquiring about this recently to the tax office as am considering renting my existing home when I purchase my new home. I believe you are allowed a year's grace on the CGT, i.e. you can rent the property for a year without being liable to CGT - is this true?

My current property has a value of 235k, outstanding loan of 45k - the property has increased by 85k since I purchased it in 2002. Would I be crazy to rent this property when I can come away with 85k tax-free profit (the only tax-free money I will ever make, somebody told me recently!)

Has anyone any thoughts? (thanks)
 
Nearly true - just one slight clarification - it is actually the final year of ownership of a house which is automatically deemed to be non-rental, regardless of whether it is actually rented or not. So you get a years grace, provided that your rental was the final 12 months of ownership.
See this thread which goes into that issue in some detail.
 
Hi that was so useful, RainyDay. Thanks a million. I think I've made up my mind to sell my first property - I don't see prices increasing much in my area. I could rent for the next 12 months and then sell, but then I could be exposed to clawback of stamp duty (even though I bought the property as an FTB?)
 
mobilegirl said:
I could rent for the next 12 months and then sell, but then I could be exposed to clawback of stamp duty (even though I bought the property as an FTB?)
Click to expand...
If you rent a property originally bought as an owner occupier PPR (principal private residence) within five years of purchase then the clawback of stamp duty applies.

If you are seriously thinking of retaining a former PPR for renting out as an investment property then you would want to look objectively at the whole opportunity, crunch the numbers, assess the viability or otherwise, and maybe get independent, professional advice on the tax and investment issues involved.
 
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