Rental income is arguably one of the best passive income sources if you are fortunate enough to be able to afford an investment property. When my salary was cut in half by my new contract in mid-2017 I needed to re-evaluate. I started looking at the biggest asset I own (the one with the biggest debt attached to it); my home.
Ireland has a very generous rent-a-room scheme which allows you to rent out one more more rooms in your primary principal residence tax free (learn more about rent-a-room from Revenue). The scheme was introduced in 2013 with an exemption cap of €10,000. Since then the housing crisis in Ireland has worsened (especially around Dublin). In 2018, the total amount you can earn through the scheme is €14,000. That figure is not too far away from my contracted salary at this moment in time.
What’s the Place Like?
I bought my home in 2012, right at the bottom of the market. I managed to purchase a 3 bedroom semi-detached house with a front garden, back garden and side entrance for €144,000. Details on this purchase can be found here. That sounds amazing but the area I bought in isn’t exactly up-market. We are talking north-west Dublin. The surrounding area has a high unemployment rate. However, the estate that I bought in is a cul-de-sac and most of the people on the road are either settled families or renting professionals. Since moving in I have had no problems.
The Difference Between a House and a Home
Since 2012, I have lived with my ex-partner, my best friend and my brother. Suffice to say some of these “tenants” were either paying well below the market value or not paying rent (or bills) at all. People tell me I am too nice. All of these have since moved on to their own accommodation. I had my home to myself! But my attitude needed to change. I had proudly considered my private home as a place just for me. When you start looking at it as an asset to generate rental income your mindset needs to change. Shared accommodation means just that, sharing.
How I Maximised Income with Being a Greedy Prick
Landlords do not have a good public image. In Ireland, they are often seen as greedy, money-grubbing, tightfisted a-holes (to put it mildly). So I never wanted to rip people off. My aim was to provide comfortable, clean and secure accommodation at a competitive price. I have three rooms in my house. Two are large double rooms and one is a small box room. So which one is mine? Yep, the small box room. Single man, single bed. What about all my stuff? Well… took care of that for me. I’m serious. I own very little stuff now all thanks to . Downsizing my life allowed me to move into the small box room and rent out the two larger rooms. This meant I could achieve my aim to provide comfortable, secure accomodation at a reasonable price.
How has this Passive Income Affect my Life?
The very first tenant I took in in May 2017 paid €450 per month including bills. Given the private rental market in Dublin in 2018 one my friends heard this and asked “Are you running a charity?”. At the time, the average rent in Dublin was much more. Upon reflection, this was probably too low a price. Since then, I have increased the rent to €500 per month including bills. Many people still deem this very reasonable. With two rooms rented out that’s €1,000 per month or €12,000 per year but that figure does not take into account vacancies or the bills. Without getting into details, the current setup has one major financial impact – I essentially live rent and bills free.
Has it all been a bed of roses? Generally yes, with some issues that you would reasonably expect. I go into the details in this post where I also give some information about Rent-a-Room Licencee Agreements.
Details of Rental Income
Rental Income 2017
Rental Income 2018
3 Months Vacancy in 2018
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