When you make the decision to move abroad, renting out your home can be a great way to generate additional income. However, there are a number of factors, both financial and otherwise, that you will need to consider before you take the plunge. Here is a complete guide to renting your home as an expat.
Letting Irish Property While You Are Abroad
If you rent out a property in Ireland but are living as an expat elsewhere, you are considered a non-resident landlord. One of the key differences between a non-resident and resident landlord is that there are certain tax implications you must be aware of.
Just like landlords living in Ireland, expats are required to declare all of their Irish rental income and submit an annual tax return. However, the method for doing so is slightly different.
While resident landlords can simply manage their taxes themselves online, expats need someone to deal with taxes on their behalf. This must either be the tenant living in the property or a collection agent. Let’s take a closer look at these two options.
The standard practice is that the tenant will withhold the standard 20% income tax from their rent each month and pay it to Revenue on your behalf. The money paid by the tenant on your behalf stands as a credit against your ultimate tax liability. At the end of the year, the tenant will provide you with a R185 form outlining how much tax has been withheld.
Rather than ask your tenant to withhold taxes, you can appoint a collection agent to submit your tax return and pay the bill on your behalf. The collection agent must be a resident in Ireland and can either be someone you trust , like a friend or relative, but is usually a professional such as a property manager or lettings agent.
The collection agent should be set up under a new Personal Public Service number. If the tax bill is not paid, then it is considered the collection agent’s responsibility rather than the landlord’s.
Which Option Should You Choose?
Generally speaking, unless you are renting to a trusted friend or family member, using a collection agent will be much more convenient.
Regular tenants may not want the burden of dealing with your taxes, and you’ll have no way of knowing if your tax is being handled properly in your absence. It may even put potential tenants off, who would rather deal with a standard tenancy without the extra responsibility. If you do not have 100% faith in your tenant then this method can be risky, and with significant penalties for a late or incorrect tax return you may not feel that it’s worth it.
Using a collection agent, particularly via a property management company, can offer you more security that your responsibilities are being taken care of. This is often the preferable option for landlords who have little contact with their tenants, own multiple rental properties, or who simply want extra peace of mind that they are complying with Irish tax laws.
Tax Tip: Don’t forget that along with income tax, non-resident landlords are also subject to Local Property Tax and potentially USC (if your Irish income, including rental income, is more than €13,000 a year).
If you’re planning on moving abroad and renting out your property in Ireland, it’s important that you inform your mortgage provider. Not doing so could see you in breach of your original loan agreement. In worst case scenarios could even result in your property being repossessed.
You should be aware that choosing to rent out your home may have implications on the type of mortgage you have and the interest that you pay. However, any extra costs you incur will pale in comparison to the consequences of being found out if you don’t tell your mortgage provider.
Even if you do have to pay higher rates, remember that as a landlord you are allowed to claim the interest portion of your mortgage against your rental income.
Currency And Foreign Exchange
If you want to move to a country that doesn’t use Euros as its currency, then you will also need to consider how to manage your money. Often, the best choice is to use a dedicated currency exchange company in Ireland as opposed to your regular bank. This way, you will often get a better exchange rate and lower fees (plus, the service is usually quicker).
There is no legal obligation to get landlord insurance when renting out a property in Ireland. However, for non-resident landlords it’s always a wise choice. Dedicated landlord insurance should cover everything from damage to the building and injury to your tenants to rent arrears and associated legal costs.
As you will not be physically present to keep tabs on the property yourself, having good insurance in place can give you extra peace of mind that your investment is protected. Of course, you should always read the fine print of the policy to make sure you have adequate cover.
- Making sure the property meets the minimum standards
- Arranging for repairs and maintenance when needed
- Providing your tenant with a rent book or a statement of rent paid
- Insuring the property
- Providing all the proper paperwork (e.g. a tenancy agreement, notice of a rent review)
- Returning your tenant’s deposit money promptly
Should You Manage The Property Yourself?If you live in a country close enough that taking semi-regular trips won’t inconvenience you, it is possible to manage the property yourself. However, while this may save you money, it can be very stressful. There is a lot to deal with when renting out any home, and doing so from abroad presents its own set of challenges. Communication with tenants, finding reliable tradesmen and dealing with any legal issues are just a few problems you might face trying to manage the property on your own. Getting a friend or family member to manage the property for you is an option. However, it is a huge responsibility, and there’s a chance that it may cause a strain on your relationship. Unless they have previous experience, you may also find that they aren’t managing the property as effectively as you’d like. The third option is to use a property management company. This is by far the most convenient way to look after your property in Ireland, with a dedicated team always on hand to take care of any issues as well as the day-to-day management. It’s also worth remembering that the cost of any property management service can be claimed as an expense against your rental income. Non-resident landlords are entitled to the same tax relief as landlords living in Ireland, so there is plenty of opportunity to lower your tax bill.
Renting out a property from abroad can be a fantastic option, but it also comes with some unique challenges that you must be aware of. It is highly recommended that you seek expert advice to avoid any problems and make the whole process as smooth and stress-free as possible.
At SCK Group, we have vast experience working with non-resident landlords with property in Ireland. Along with chartered accountants, we have in-house property experts and can look after everything a non-resident landlord needs including letting, management, tax collection and tax returns. If you have any questions or concerns, we would love to help. Head over to our contact form to arrange your free consultation, and we will get back to you as soon as we can.