If you're a landlord these days, you’ll know owning property to let isn’t a walk in the park despite the massive rent increases. John Lowe the Money Doctor takes a look from a landlord’s perspective at everything you need to know on:
● Residential Tenancies Board (formerly PRTB)
● Rental rules and regulations
● Offsetting expenses
● Mortgages (including ICS mortgages)
1. Residential Tenancies Board (RTB; formerly PRTB)
First things first: if you are a new landlord with a residential investment property, or are welcoming your first tenants, you need to ensure you are all registered with the RTB. You can do this online or by post: https://onestopshop.rtb.ie/register-a-tenancy/
Although it may seem like a lot of paperwork, it’s worth it (and legally required) to ensure that you do everything by the book according to the guidelines set out on the RTB’s site. Everything you could need to know is there, so use it: guidelines on property maintenance, insurance, issuing rent books to tenants, notices of termination, conflict resolution and mediation.
The RTB’s site is also a great reference to provide tenants when informing them of their responsibilities to the property, as well as their rights. This is particularly useful to first-time landlords, whose own responsibilities may not initially be known – for example, RTB registration costs; or inspection of a property only at a time and date arranged at the tenant’s convenience.
2. Rental rules and regulations
Whether renting out a room in your house or a whole building, you are a landlord and have obligations as well as rights. Remember that you:
● Must provide a lease to your tenant, stating the rent and when it is due; your rights and responsibilities as landlord; and the tenant’s rights and responsibilities.
● Should keep a copy of this lease yourself, as well as references from your tenant.
● Keep up regular, reasonable maintenance of the property.
● Have the right to end the tenancy at will within the first six months, after which certain criteria must be met.
● May set the rent at the rate you wish and increase every two years, bearing in mind the 4% yearly increase cap in designated Rent Pressure Zones.
● Must insure and tax the property yourself.
● Must provide the tenant with written notice of termination at the end of tenancy.
● Are entitled to require a deposit; and are required to return said deposit, less any reasonable losses.
When letting a residential property, you should ensure it meets certain standards, including:
● Providing a working kitchen, including four-ring hob, fridge, freezer, oven, microwave and laundry facilities.
● Being insulated, well-ventilated and free of damp.
● Being safe in terms of structure, engineering, wiring and fire safety (fire alarms, extinguishers, blankets; and windows that open sufficiently to allow escape, but have restrictors to prevent accidental falls).
● Providing carbon monoxide alarms.
● Providing hot and cold water, as well as a permanent heater in each bathroom.
3. Offsetting expense
Of course, you must pay tax on rental income. However, you can deduct certain expenses related to renting property from the tax you owe. These include:
● From January 2018, 85% mortgage interest relief while your property is rented; between tenancies (as long as the property is vacant during that time); and as long as you are registered with the RTB.
● 100% mortgage interest relief when renting for a minimum of three years to tenants in receipt of specific social housing benefits.
● Capital allowances/depreciation against furniture and fittings, at a rate of 12.5% per year for a maximum of eight years.
● Local authority rates and ground rents.
● Fire and public liability insurance, as well as some mortgage protection premiums.
● Necessary repairs, e.g. to doors or machinery.
● RTB registration costs.
● Necessary property maintenance.
● Management fees, including agency fees before your property is let.
Unless renting out a property you already own, as a landlord, you will typically buy with a Buy to Let mortgage. Typically, a maximum LTV (loan-to-value) ratio of 70% applies to this type of mortgage, as you are making a purchase as an investor, rather than as a prospective live-in homeowner.
The less you borrow, the less interest you will obviously pay – but in with a Buy to Let mortgage, this is also because interest rates are lower the less you borrow. For example, a 70% mortgage may carry a fixed interest rate of 5.3%; while a 50% mortgage may only come with an interest rate of 4.9%.
This type of mortgage is also different because you can borrow for more than one property at a time through the same mortgage application. However, there may also be different costs associated with such a loan – for example, a bank solicitor may be required for loan amounts over a certain figure.