Tuesday 21 May 2019

Home economics: Our property finance expert answers your questions


'Revenue will treat her differently than if she was an owner occupier' (Stock picture)
'Revenue will treat her differently than if she was an owner occupier' (Stock picture)
Sinead Ryan

Sinead Ryan

Q My daughter wants to get on the property ladder. She can only afford a small place and is aiming to get a one-bed apartment, which she intends to rent out for a few years. She will live with me and maybe work abroad for some time. I am concerned this will be seen as an investment by Revenue and not as her home. She needs to be sure that she will not have to pay unnecessary taxes. Can you advise on this?

A It will definitely be considered an investment, so Revenue will treat her differently than if she was an owner occupier. She is buying a home to rent out and therefore will become a landlord and, as such, her responsibilities and tax treatment is different.

Regarding the mortgage, lenders consider investment properties a riskier form of borrowing than private dwelling homes (PDHs). They will look for a higher deposit - perhaps 20pc, rather than the 10pc she would get buying for herself as a first-time buyer. They also may charge a higher interest rate and she will require a different type of house insurance, so she should check this out and run comparisons, or engage the services of a mortgage broker before deciding. There are two taxes she needs to be aware of: Income Tax is payable on all rental income, less some deductions for mortgage interest relief and capital expenditure such as wear and tear, letting fees, maintenance, initial furniture etc. This could mean that the net rental income in itself may not be enough to cover her mortgage, so she could end up propping it up financially.

Capital Gains Tax is payable on the sale of a property which is not a PDH, on the difference between the purchase price, or the valuation at the time of letting, and the eventual sale price; the tax is 33pc although there is a small mark-up allowed for inflation. Check out the Residential Tenancies Board website (rtb.ie), with whom she must register as a landlord, for advice.

Q My parents are elderly and very infirm, but fiercely independent. They want to remain at home as long as possible, but are finding the stairs a problem. There is room to move their bedroom downstairs, but there's only a small toilet on that floor. Are there any grants available to build a proper bathroom as they say it would be too expensive.

A There are two types of grant, but both are strictly means-tested, so you would need to check whether your parents qualify. The Housing Adaptation Grant is available up to €30,000 for adaptations to the home, e.g. to make it wheelchair accessible, or put in a mobility bathroom or stair lift. Administered by the local authority, it's granted firstly on medical need. There are three priority levels: Priority 1 - a person who is terminally ill, or fully dependent on family/carer where the adaptations would facilitate their discharge from hospital; Priority 2 - a person who is mobile, but needs assistance washing, toileting etc, and who cannot function independently without the adaptation; Priority 3 - a person who is independent, but where the adaptation would improve their quality of life.

You must supply two written quotes from contractors and the maximum grant (up to €30,000) is given for those whose household income is less than €30,000. Above that, it's on a sliding scale downwards, until income of €60,000 disqualifies.

There is a smaller Mobility Aids Grant for minor works such as grab rails, showers or access ramps. It is also means-tested and the maximum available is €6,000. Contact your parents' local authority or citizens information to see what they qualify for.

But you could also consider simply investing in a stair lift rather than rejig the entire downstairs. A good one would cost less than €4,000 and may do the job for them.

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