Buying 2014

MouseTail

Villa05 wrote: »

Rent prices have no correlation with the cost of the mortage. If it did there would be no, arrears in the btl sector

Most btl have no mortage

Fresh btl's would have been purchased with, cash or a very large cash deposit.

There absolutely is a correlation between interest rates and rent.

macnug

MouseTail wrote: »

i know it feels like a bubble at the coalface, crowds at viewings, disconnect between asking and selling costs, but it is not a bubble. The asset would need to be substantially overpriced based on fundamentals for it to be a bubble. The driver of the rises in Dublin is a fairly rapid economic recovery, chronic housing shortage and pent up demand. Not in bubble territory yet, and if you truly feel we are, you would be crazy to buy now.

It may not be the height of a bubble but it certainly is on its way, imo people are overpaying for houses is Dublin and will continue to do so for some time. Here is one economists definition of what an asset bubble is, and in it she lists low interest rates, an oversupply of money and perceived supply sortages as aggravators.

http://useconomy.about.com/od/glossary/g/asset_bubble.htm

dinnyirwin

MouseTail wrote: »

There absolutely is a correlation between interest rates and rent.

I agree.

I know if one of my mortgages went up by 1% say costing me an extra €40 per month that means im hit for about €30 a month.
So now I have to make this back plus about 50% tax, so I will have to raise the rent by about €60 at the next available opportunity if I want to cover that. So if I wasnt thinking of a rent review, an event like a rise in interest rates would certainly move a rent review to the top of my to do list.

The same could be said of interest rates falling, but in a rising market there is no need for LLs to decrease rent at all. And these days they will certainly just leave it and consider it advance planning for the next big tax/bill that the government decide to hit LLs with.

In a market where landlords can easily increase rents when expenses increase, the only person who will be hurt here are the tenants.

And someone was saying most buy to lets have no mortgage. Well what I do is I bid and buy with cash for the bargaining power. I then finance most of that property with good rates with the bank. So even though I bought without a mortgage, I do have a mortgage on the property after buying it.

Villa05

dinnyirwin wrote: »

I agree.

The same could be said of interest rates falling, but in a rising market there is no need for LLs to decrease rent at all.

So you agree and you disagree

The rent rises you are talking about are related to supply and have nothing to do with the cost of the mortgage. If the mortgage costs rise you will raise the rent if the market allows

marathonic

Villa05 wrote: »

If the mortgage costs rise you will raise the rent if the market allows

And if most landlords try to raise rents after a 1% rise in rates, then the market WILL allow it. What other option is there?

dinnyirwin

Villa05 wrote: »

So you agree and you disagree

The rent rises you are talking about are related to supply and have nothing to do with the cost of the mortgage. If the mortgage costs rise you will raise the rent if the market allows

Im not agreeing with you at all. I was agreeing with mousetail, not you. I am saying that your statement, that mousetail quoted and said was wrong, is indeed wrong. Both what you said about most BTLs not having no mortgage and what you said about interest rates having no effect on rents.

And rent rises are the norm and always have been, apart from a period of about 4 years. Maybe rents will go down again when we have our next global crisis - whenever that is. Until then its back to the normal cycle.

adam88

dinnyirwin wrote: »

I agree.

I know if one of my mortgages went up by 1% say costing me an extra €40 per month that means im hit for about €30 a month.
So now I have to make this back plus about 50% tax, so I will have to raise the rent by about €60 at the next available opportunity if I want to cover that. So if I wasnt thinking of a rent review, an event like a rise in interest rates would certainly move a rent review to the top of my to do list.

The same could be said of interest rates falling, but in a rising market there is no need for LLs to decrease rent at all. And these days they will certainly just leave it and consider it advance planning for the next big tax/bill that the government decide to hit LLs with.

In a market where landlords can easily increase rents when expenses increase, the only person who will be hurt here are the tenants.

And someone was saying most buy to lets have no mortgage. Well what I do is I bid and buy with cash for the bargaining power. I then finance most of that property with good rates with the bank. So even though I bought without a mortgage, I do have a mortgage on the property after buying it.

Are you finding it hard to finance these properties after you buy them. What LTV would you get. 50????

dinnyirwin

adam88 wrote: »

Are you finding it hard to finance these properties after you buy them. What LTV would you get. 50????

Financing is the easy part. Its getting them at the right price that takes the work.

I would generally go for an LTV of 80% now, but I have a mix of properties at different stages of mortgage, bought at different times at this stage.

lima

dinnyirwin wrote: »

I agree.

I know if one of my mortgages went up by 1% say costing me an extra €40 per month that means im hit for about €30 a month.
So now I have to make this back plus about 50% tax, so I will have to raise the rent by about €60 at the next available opportunity if I want to cover that. So if I wasnt thinking of a rent review, an event like a rise in interest rates would certainly move a rent review to the top of my to do list.

The same could be said of interest rates falling, but in a rising market there is no need for LLs to decrease rent at all. And these days they will certainly just leave it and consider it advance planning for the next big tax/bill that the government decide to hit LLs with.

In a market where landlords can easily increase rents when expenses increase, the only person who will be hurt here are the tenants.

And someone was saying most buy to lets have no mortgage. Well what I do is I bid and buy with cash for the bargaining power. I then finance most of that property with good rates with the bank. So even though I bought without a mortgage, I do have a mortgage on the property after buying it.

Such a bubble pusher attitude directly contributed to the boom. And it still goes on.

dinnyirwin

lima wrote: »

you'll probably just say 'It's business' but why should the cost always be passed to the tenant?

You own the property, so you have to pay Property Tax

The band charged you more interest rates, you have to pay.

You are a typical bubble pusher who directly contributed to the boom.

That being said, I despise this country so much myself, at this stage I'd probably do the same thing.

Love this place.

I think you've answered your own question.
Why am I in business? To make a profit.

How about you rent an apartment from me for normal market value, but I hand you €200 cash every month and hand revenue another €200 just for kicks. Thats whats happening when I rent it to you for €400 less than market value.

marathonic

dinnyirwin wrote: »

Financing is the easy part. Its getting them at the right price that takes the work.

I would generally go for an LTV of 80% now, but I have a mix of properties at different stages of mortgage, bought at different times at this stage.

I'd have thought that buying cash and then financing later would have made it difficult to prove to revenue that the finance was used to purchase the house and, therefore, difficult to claim 75% of the interest against rental profits when computing tax liability. Is this not the case?

dinnyirwin

marathonic wrote: »

I'd have thought that buying cash and then financing later would have made it difficult to prove to revenue that the finance was used to purchase the house and, therefore, difficult to claim 75% of the interest against rental profits when computing tax liability. Is this not the case?

My accountant looks after that so i dont know the ins and outs. There is all sorts of stuff about offsetting properties against each other and complicated stuff i pay him to deal with. But you dont need to prove something to revenue to claim it. You have to show it to them when they ask for it. But its not that hard for my accountant to show revenue the ins and outs of my business should they look for it. Thats what he does for a living.

marathonic

dinnyirwin wrote: »

My accountant looks after that so i dont know the ins and outs. There is all sorts of stuff about offsetting properties against each other and complicated stuff i pay him to deal with. But you dont need to prove something to revenue to claim it. You have to show it to them when they ask for it. But its not that hard for my accountant to show revenue the ins and outs of my business should they look for it. Thats what he does for a living.

Thanks dinnyirwin. I'd thought a little more about this since my post. I imagine that, although the finance is secured against the first purchase, it's used to fund the next purchase.

Therefore, it's probably a case of the finance was used to purchase property for your rental business - just not the actual property it's secured against. I know that the property that the bank take as security means nothing to revenue - you can even remortgage your own home on residential rates and claim 75% of the interest if there's an audit trail from raising the funds against your PPR and purchasing a new BTL.

lima

dinnyirwin wrote: »

I think you've answered your own question.
Why am I in business? To make a profit.

How about you rent an apartment from me for normal market value, but I hand you €200 cash every month and hand revenue another €200 just for kicks. Thats whats happening when I rent it to you for €400 less than market value.

I know I know, but watching the 'market value' spiral out of control because landlords can ask for what they want because of the critical lack of housing in Dublin is crazy. The market rate becomes a collective result of every landlord asking for that little bit more.

Great for the landlords but really the overall situation is taking from the young/poor to give to the old/rich.

If the young didn't keep emigrating then they could lobby the govt to do something but such is the country it's happy days for some and tough luck for others.

dinnyirwin

lima wrote: »

I know I know, but watching the 'market value' spiral out of control because landlords can ask for what they want because of the critical lack of housing in Dublin is crazy. The market rate becomes a collective result of every landlord asking for that little bit more.

Great for the landlords but really the overall situation is taking from the young/poor to give to the old/rich.

If the young didn't keep emigrating then they could lobby the govt to do something but such is the country it's happy days for some and tough luck for others.

Every single time the government interfere in the property market they make it worse for everyone.
The last two times were reducing rent allowance and banning bedsits.
Bedsits at the price they were at actually suited some people. Now they cant afford one.
For a few years in my early 20s i lived in bedsits in Rathmines. They were perfect for me. I couldnt afford anything else. If it was now I dont know where I would live.

And all the extra charges and taxes just fired on landlords without a thought as to who was finally going to end up paying have now come home to roost. And the cleverest one of all was to make the landlord pay the property tax. That way they get the tax from the landlord plus the tax that he must also pass on to the tenant to recover this tax. All the while having people delighted that their landlords were getting fleeced. People should be calling for the government to get their dirty idiotic hands of the property market as all they do is hurt everyone involved.

Reducing rent allowance has just annoyed landlords so much with people trying to use the CWO as a threat to LLs and when they didnt have the rent they said "Go talk to the CWO, I cant pay anymore." Most LLs have now decided that RA isnt worth the hassle and will just not entertain anyone on RA.

Rents are cheaper now still than they were in 2002. I have one particular apartment that I have just re-let was getting €1100 pm in 2002 and the most I can charge for it today is €850. Rents were hit hard for a time and now they are rebounding.

For years people thought of apartments as toxic. While I was moving into apartments in Swords, Santry, City center, Dundrum, Sandyford, because they were cheap, people all around me were telling me apartments in Dublin are going down the toilet and to go for houses. Now every day on the radio they are complaining that there arent enough houses and apartments in Dublin. And we need higher density. You even have people looking to drive old people, who have paid for their houses out of their houses, so they can just move in and take them.

And the same people were quoting articles on emigration from Ireland being huge and nobody seemed to notice that an even bigger phenomenon that was emigration from rural Ireland to the cities was underway, so noone reported it.

But at the end of the day you cant complain about someone charging you the market rate. Same as i cant complain that i cant charge above the market rate. The market will find its own level.

gaius c

MouseTail wrote: »

and you don't think rents will rise in that case? Increased LL costs are passed onto tenants. Higher interest rates = higher housing costs for everyone.

MouseTail wrote: »

There absolutely is a correlation between interest rates and rent.

Really? Rates went up early 2011. Rents continued their downward slide until they settled around the end of that year.

This notion that landlords put the rent up because interest rates go up and they need to recover their costs is the biggest red herring ever. They put it up because they can and the market will support it. Likewise, if supply outstrips demand, prices will fall no matter what "costs" are.

dinnyirwin

gaius c wrote: »

Really? Rates went up early 2011. Rents continued their downward slide until they settled around the end of that year.

This notion that landlords put the rent up because interest rates go up and they need to recover their costs is the biggest red herring ever. They put it up because they can and the market will support it. Likewise, if supply outstrips demand, prices will fall no matter what "costs" are.

Oh really. You dont think that landlords couldnt do this until the market turned, but when it did it did not factor in them all moving to recover those costs when the opportunity arises. Do you think they forgot that they were being crucified and must make that money back when they can. Look around you. What you have is one after the other taking that opportunity. Enabling the next one to take his opportunity. Of course it didnt happen straight away. Basic economics would tell you that markets lag.

gaius c

So on your logic, a landlord with low costs would never put up the rent?

It's nonsensical. Rents are going up because there's a shortage of stock to satisfy the increased demand, not because of property tax (just to take one of the excuses proffered) and even if property tax was done away with in the morning, there would still be pressure on rents.

You appear to place a high premium on "emotion" (taking notes on when your customers contacted you and taking almost personal affront at expenses) in your business decision making.

cookie1977

gaius c wrote: »

So on your logic, a landlord with low costs would never put up the rent?

It's nonsensical. Rents are going up because there's a shortage of stock to satisfy the increased demand, not because of property tax (just to take one of the excuses proffered) and even if property tax was done away with in the morning, there would still be pressure on rents.

You appear to place a high premium on "emotion" (taking notes on when your customers contacted you and taking almost personal affront at expenses) in your business decision making.

A good tenant is worth so much to a good landlord. For every euro I put up the rent I will pay a significant amount of that euro as tax so there are multiple incentives for landlords not to maximise the rent they can get.

There's nothing wrong with emotion either. Stress of being a landlord is huge for a lot of us. And relieving that stress through keeping good tenants happy by lower rents is again worth its weight in gold.

dinnyirwin

gaius c wrote: »

So on your logic, a landlord with low costs would never put up the rent?

It's nonsensical. Rents are going up because there's a shortage of stock to satisfy the increased demand, not because of property tax (just to take one of the excuses proffered) and even if property tax was done away with in the morning, there would still be pressure on rents.

You appear to place a high premium on "emotion" (taking notes on when your customers contacted you and taking almost personal affront at expenses) in your business decision making.

There would be no downward pressure because its the result of previous hikes. Landlords wont put down rents because they dont want to leave themselves open to get stung again. Do you think if property taxes went up in the morning that rents wouldnt go up a few months after? Of course they would. ITs all related. Economics is not black or white you know.

gaius c

cookie1977 wrote: »

A good tenant is worth so much to a good landlord. For every euro I put up the rent I will pay a significant amount of that euro as tax so there are multiple incentives for landlords not to maximise the rent they can get.

There's nothing wrong with emotion either. Stress of being a landlord is huge for a lot of us. And relieving that stress through keeping good tenants happy by lower rents is again worth its weight in gold.

I'd put it to you that if you're so bothered by your customers calling you that you penalise them financially, your business model might work when demand for your product is high but it'll put you under pressure when demand is slacker.

Save the emotion for the tenants who skip paying rent and leave the place in a state, costing you actual money rather than a few hours of your time to keep you up to date on the condition of your valuable asset.

We have it all the time with suppliers who act high hat in times of plenty versus suppliers who take the time to look after you. Once demand for their product goes a bit slack, you're going to look after the guy who looked after you not the guy who mis-used his position of strength.

cookie1977

Getting back to the point of the thread (re incentives to help with purchases) I'm at the stage now (with what I've learned and read on here and elsewhere) where I really think we need to go back to thinking of property (as in pdh's/ppr's) as a "good" and not an "asset".

When prices of goods rise demand usually falls unlike when prices of assets rise demand normally rises. So how do we convince the public at large (both those now looking and those in the future looking at buying) that their home is a good and not an asset?

gaius c

You know there's something freakily wrong when the Evening Hysteria sounds sensible & balanced.
http://www.herald.ie/opinion/house-sale-figures-prove-little-except-recovery-is-way-off-30030327.html

dinnyirwin

gaius c wrote: »

I'd put it to you that if you're so bothered by your customers calling you that you penalise them financially, your business model might work when demand for your product is high but it'll put you under pressure when demand is slacker.

Save the emotion for the tenants who skip paying rent and leave the place in a state, costing you actual money rather than a few hours of your time to keep you up to date on the condition of your valuable asset.

We have it all the time with suppliers who act high hat in times of plenty versus suppliers who take the time to look after you. Once demand for their product goes a bit slack, you're going to look after the guy who looked after you not the guy who mis-used his position of strength.

Another economics lesson for you. Businesses adapt to changing circumstances all the time. When the landscape changes business models change too. I'll change mine to suit, as i have always done.

And with that. Im out.

cookie1977

gaius c wrote: »

I'd put it to you that if you're so bothered by your customers calling you that you penalise them financially, your business model might work when demand for your product is high but it'll put you under pressure when demand is slacker.

Save the emotion for the tenants who skip paying rent and leave the place in a state, costing you actual money rather than a few hours of your time to keep you up to date on the condition of your valuable asset.

We have it all the time with suppliers who act high hat in times of plenty versus suppliers who take the time to look after you. Once demand for their product goes a bit slack, you're going to look after the guy who looked after you not the guy who mis-used his position of strength.

Slight exaggeration there on your part I'm afraid. I queried why a tenant would need me (their landlord) to change a light bulb, that is all. I'm delighted when tenants contact me with issues that significantly affect my asset and in fact encourage it.

cookie1977

Tip of the hat and wag of the finger for the last two posts (excl mine)

Balmed Out

gaius c wrote: »

You know there's something freakily wrong when the Evening Hysteria sounds sensible & balanced.
http://www.herald.ie/opinion/house-sale-figures-prove-little-except-recovery-is-way-off-30030327.html

When I read about the level of cash sales in the market I cant help but wonder about the make up of the mortgage sector.
I know of quite a few people who felt prices were too high in the bubble. Some have bought since and others not but they all would have gotten mortgage approval easily due to large deposits and low LTV's.

MouseTail

macnug wrote: »

It may not be the height of a bubble but it certainly is on its way, imo people are overpaying for houses is Dublin and will continue to do so for some time. Here is one economists definition of what an asset bubble is, and in it she lists low interest rates, an oversupply of money and perceived supply sortages as aggravators.

http://useconomy.about.com/od/glossary/g/asset_bubble.htm

Here is an article more or less correlating with my view on why the recent price surge is not a bubble.
http://www.independent.ie/irish-news/here-we-go-again-no-rising-prices-alone-do-not-a-bubble-make-30033169.html

Glenbhoy

MouseTail wrote: »

Here is an article more or less correlating with my view on why the recent price surge is not a bubble.
http://www.independent.ie/irish-news/here-we-go-again-no-rising-prices-alone-do-not-a-bubble-make-30033169.html

Dan's move to the Sindo has certainly seen a downturn in standards, regurgitating Ronan Lyons' article of several months ago.

Very lazy piece.

http://businessetc.thejournal.ie/house-prices-1108109-Oct2013/

Villa05

MouseTail wrote: »

Here is an article more or less correlating with my view on why the recent price surge is not a bubble.
http://www.independent.ie/irish-news/here-we-go-again-no-rising-prices-alone-do-not-a-bubble-make-30033169.html

Does this sound familiar and do you think it was driven by the availability of credit

Over the next several decades tulips became a fad among the rich of Holland, and prices began to mount. Soon even ordinary bulbs were selling for extraordinary prices, and the actually rare bulbs were astronomical. A single Viceroy tulip bulb would sell for 2500 florins a value roughly equivalent to $1,250 in current American dollars, while a rarer Semper Augustus bulb could easily go for twice that. One particularly amusing exchange showed the goods traded for one bulb – the lengthy list includes among other things: a bed, a complete suit of clothes, and a thousand pounds of cheese. At the height of the mania, in what seems a complete loss of sanity, the bulbs were deemed too valuable to risk planting by their (formerly) wealthy purchasers, and it became popular to display the plain ungrown bulbs. In at least one instance the plan for safety backfired when a visiting sailor mistook a tulip bulb for an onion, and proceeded to eat it for breakfast.

http://www.damninteresting.com/the-dutch-tulip-bubble-of-1637/