There’s a lot to consider when you take on a rental property but we are here to help you to understand the financial aspects, so don’t hesitate to run any questions by a qualified mortgage specialist in your local Bank of Ireland branch.
1. What are the key considerations when taking on an investment property?
- If you’re thinking of entering into property investment, here are some key things you should think about: Understand the rental market in your target area – for example, do a bit of research to identify typical renters (students, families, etc.), the most attractive property for rental purposes (apartments, houses, 2 beds or 3 beds, etc.), the average rental amount and the average time to letting when vacant. All of these questions can be answered by your local Estate Agent who can help guide you in your choice of property investment.
- Plan to run your venture like a business and keep careful record of your finances. It’s a good idea to open a separate bank account for your rental property income and out-goings so that you can manage your finances closely. If possible get your rent paid by standing order into the account and keep accurate records of your property income and expenses including all receipts.
- Make sure you make your tax return every year. Rental income is liable to income tax, PRSI and Universal Social Charge (USC) but you are allowed to offset certain expenses against your income tax. The Revenue Commissioners website has a useful `Revenue Guide to Rental Income’ for more information on this.
- It’s important to keep your mortgage payments up to date. If you ever find that you are having difficulty with your repayments, or if you expect that you might have difficulty - talk to your bank.
2. What kinds of expenses could you face when taking on an investment property?
Landlords are liable to pay Local Property Tax (LPT) where a property is rented under a lease of less than 20 years - check out www.revenue.ie for details.
- There may be management fees if your property is part of a complex or development.
- Try to build up a contingency fund to cover your costs when the property is empty or to pay for unexpected repairs and maintenance like replacing the heating boiler for example.
- If you decide to engage an agency to work on your behalf don’t forget to allow for agency fees.
3. Are there particular Insurance requirements for investment properties?
- Yes, you will need to have buildings cover in place before the mortgage can be drawn down. It’s also good practice to have Third Party Liability, Contents and Loss of Rent Cover in place for investment properties. When engaging with an insurance company, let them know that your property is a rental property. If you don’t do this there could be a problem if you ever need to make a claim.
- If your property is insured under an apartment block policy it may only cover liability arising from accidents in common areas i.e. the hall, stairs and landing. It may not cover accidents occurring inside the apartment but it’s worth checking this.
4. Is there more information available for potential investors?
- Yes, it’s worth doing some research to understand what it means to be a landlord. Things to consider include collecting rent, managing utilities like electricity, gas, water, etc., and ongoing maintenance and repairs. You should also have a look for information and tips on the likes of property presentation and furnishing, lease/tenancy agreements, tenant references and Building Energy Ratings (BER).
- Some good sources of information include the Irish Property Owners Association, the Private Residential Tenancies Board, Citizens Information and Threshold – check out their websites.
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