More landlords to sell up over taxes and cost of letting property

handlemaster

I agree with Brian ... The way some people talk its as if LL s are from another world. Their just people that put their money in property. Anyone can do the same if they want. Why all the hate. Its not magic save up and invest and give your property out at below market levels to keep yourself happy.

khamilto

Magnolia Enough Typographer wrote: »

Well isn't the the point of buying to let, covering the cost of buying it is surely the minimum and the intention would be to make money on top of that.

Person A takes out a 100% mortgage of €200,000 from Bank B to buy property C, with a total repayments over 20years of €450,000.

Cost of letting over 20 years is €100,000

Person B(C,D...N) pays €600,000 over 20 years in rent, and property is now worth €470,000.

Person A has made €50,000 'profit' (using your silly deluded definition) as well as an increase in equity of €470,000. Thus, their profit every year is €26,000, even though their unleveraged investment was €0.

What's wrong with expecting a rented property to pay for itself? If I were to buy somewhere to let the minimum I would expect was for the rent to cover the mortgage (after tax).

See above.

Your posts quite literally pain me at this stage.

draiochtanois

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khamilto

khamilto wrote: »

Your posts quite literally pain me at this stage.

Afraid of someone taking sense are you?

draiochtanois wrote: »

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I would say the absolute minimum that any investor would want is that the rent is covering the mortgage and all costs i.e. It's not costing them money to rent the place out. Ideally they would be making more money on top of this, i.e. Profit on the rent that they have for saving or spending etc.

Then when the property is paid off they can either sell it to cash in on it or keep renting it for an increased profit as there is no mortgage repayments.

RainyDay

Magnolia Enough Typographer wrote: »

I would say the absolute minimum that any investor would want is that the rent is covering the mortgage and all costs i.e. It's not costing them money to rent the place out. Ideally they would be making more money on top of this, i.e. Profit on the rent that they have for saving or spending etc.

What value does the investor/landlord add in this scenario? Why wouldn't the tenant just pay their own mortgage?

RainyDay

RainyDay wrote: »

What value does the investor/landlord add in this scenario? Why wouldn't the tenant just pay their own mortgage?

Why wouldn't they indeed, people don't call rent dead money for nothing. Obviously renting has its place before people decide where to settle down or for people who never intend to settle down and of course those who can't get enough money for a deposit etc. But as a long term thing many people (including myself) would consider it a waste for those who choose to rent over buying.

It shouldn't be a surprise that people are not renting out property out of the goodness of their hearts, they want to make money doing it.

khamilto

RainyDay wrote: »

What value does the investor/landlord add in this scenario? Why wouldn't the tenant just pay their own mortgage?

I'll answer on behalf of Nox:
I don't understand equity. I don't know what an investment is. What is profit, baby don't hurt me, don't hurt me no more. I don't understand the difference between interest repayments on a loan and principal repayments. I don't know what an asset is. Building a shed used for carrying on business activities is the same as buying a commercial property investment. Property purchases should be infinite profit based on anyone being able to take out an unleveraged loan or else it's unfair to landlords. Everyone should be able to AT LEAST invest zero money and make several hundred thousand euros in return.

keane2097

khamilto wrote: »

I'll answer on behalf of Nox:
I don't understand equity. I don't know what an investment is. What is profit, baby don't hurt me, don't hurt me no more. I don't understand the difference between interest repayments on a loan and principal repayments. I don't know what an asset is. Building a shed used for carrying on business activities is the same as buying a commercial property investment. Property purchases should be infinite profit based on anyone being able to take out an unleveraged loan or else it's unfair to landlords. Everyone should be able to AT LEAST invest zero money and make several hundred thousand euros in return.

Can you also post that again tomorrow and the following day in this and several other threads?

draiochtanois

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vandriver

Magnolia Enough Typographer wrote: »

Afraid of someone taking sense are you?



I would say the absolute minimum that any investor would want is that the rent is covering the mortgage and all costs i.e. It's not costing them money to rent the place out. Ideally they would be making more money on top of this, i.e. Profit on the rent that they have for saving or spending etc.

Then when the property is paid off they can either sell it to cash in on it or keep renting it for an increased profit as there is no mortgage repayments.

There is no increased profit after the final year's mortgage.There is a cash flow boost. You don't (or won't ) seem to understand the difference.

RainyDay

Magnolia Enough Typographer wrote: »

Why wouldn't they indeed, people don't call rent dead money for nothing. Obviously renting has its place before people decide where to settle down or for people who never intend to settle down and of course those who can't get enough money for a deposit etc. But as a long term thing many people (including myself) would consider it a waste for those who choose to rent over buying.

It shouldn't be a surprise that people are not renting out property out of the goodness of their hearts, they want to make money doing it.

So the answer then is 'none' - the landlord adds no value to the business?

Or maybe a small amount of value by allowing people to live in areas/locations that they aren't ready to commit to yet?

Is that really it? And you wonder why landlords are struggling?

gaius c

borderlinemeath wrote: »

Off you go and save 20% deposit for a house. Even to buy a cheap* house at €150K you're looking at investing at least 40K of your own capital between deposit, fees and furnishings. That's if it doesn't need refurbishing.

*I'm well aware that property can be purchased at under €150k, but an investor will want to buy in an area that's near a city/big town or has good transport links to them.

The real headline should be "property prices are too high to allow investors make a reasonable return".

draiochtanois

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handlemaster

gaius c wrote: »

The real headline should be "property prices are too high to allow investors make a reasonable return".

Going by dafts figures investors would be making a loss at todays prices

Tarzana2

Magnolia Enough Typographer wrote: »

I would say the absolute minimum that any investor would want is that the rent is covering the mortgage and all costs i.e. It's not costing them money to rent the place out.

Well, this depends on the market. Currently, this will be fulfilled as it's a hard market for renters. But in a soft market, the rent might not cover the mortgage even, never mind costs. All investments are a risk and the investor doesn't always get what they might want.

Even if the rent isn't completely covering the mortgage, the investor is still getting help towards paying for an asset.

vandriver

vandriver wrote: »

There is no increased profit after the final year's mortgage.There is a cash flow boost. You don't (or won't ) seem to understand the difference.

There is increased profit as the major cost (paying the mortgage) is gone.

I don't consider building equity as making an ongoing profit from your rental business. Covering your repayments (and other costs) is breaking even.

RainyDay

gaius c wrote: »

The real headline should be "property prices are too high to allow investors make a reasonable return".

Or perhaps "property prices are too high to allow investors have their tenants pay their mortgages for them"?

Magnolia Enough Typographer wrote: »

I don't consider building equity as making an ongoing profit from your rental business.

Basic maths and basic accounting would disagree with you.

duskyjoe

Big problem now is that landlords that bought in the boom are now having to pay capital and interest plus no offset of interest against tax, all property tax investment vehicles just cleavered by the government , increase in service charges etc. Leaves very little room for actual maintenance on the units. Banks won't negoiate with landlords so the rot sets in. Not looking for a violin but the govt are screwing property owners and it's a mugs game to be in now unless your a pro.

RainyDay

RainyDay wrote: »

Basic maths and basic accounting would disagree with you.

An asset is not profit until it's sold. You can't do your shopping with the increased equity in an asset or you can't put it in a savings account.

It's only realised when/if it's sold. The business of renting is to make an ongoing profit hopefully after covering all costs including the mortgage. Selling the property at a later date I would not be taking into account during my day to day operating of the business.

Having an investment property is definitely something I consider having but I wouldn't do it unless I was having my mortgage and all costs completely covered by the rent and preferably I'd be making profit every month on top of that also.

This is of course very difficult to achieve which is why I would only do it if (a) I lived in the place for a few years first and then rented it out when moving to where I planned to stay living for good or (b) the right circumstances (money to invest, low mortgage, fairer tax treatment for LLs etc) meant that it was possible for an ongoing profit (i.e. additional monetary income) to be made every year.

draiochtanois

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draiochtanois

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RainyDay

duskyjoe wrote: »

Big problem now is that landlords that bought in the boom are now having to pay capital and interest plus no offset of interest against tax

Apart from the 75% of your interest that you can offset against tax, right?

Magnolia Enough Typographer wrote: »

An asset is not profit until it's sold. You can't do your shopping with the increased equity in an asset or you can't put it in a savings account.

Actually, you can do your shopping, if you borrow against your equity, as many did - or if you avoid repaying capital to maximise your interest relief and use your 'equity' for current spending, as many do.

Magnolia Enough Typographer wrote: »

It's only realised when/if it's sold. The business of renting is to make an ongoing profit hopefully after covering all costs including the mortgage.

Any business can only survive it if offers value to the customers. You need to think about what value you are offering here.

draiochtanois

draiochtanois wrote: »

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Well it's how I would see how the business should operate and I doubt too many would disagree with me.

Well except those who think LLs are a charity there to provide housing for those who want to rent and shouldn't be making a profit or At a minimum expect their mortgage to be covered.

gaius c

Magnolia Enough Typographer wrote: »

An asset is not profit until it's sold. You can't do your shopping with the increased equity in an asset or you can't put it in a savings account.

It's only realised when/if it's sold. The business of renting is to make an ongoing profit hopefully after covering all costs including the mortgage. Selling the property at a later date I would not be taking into account during my day to day operating of the business.

Having an investment property is definitely something I consider having but I wouldn't do it unless I was having my mortgage and all costs completely covered by the rent and preferably I'd be making profit every month on top of that also.

This is of course very difficult to achieve which is why I would only do it if (a) I lived in the place for a few years first and then rented it out when moving to where I planned to stay living for good or (b) the right circumstances (money to invest, low mortgage, fairer tax treatment for LLs etc) meant that it was possible for an ongoing profit (i.e. additional monetary income) to be made every year.

You want positive cash flow for the entire lifetime of the mortgage and then have an extremely valuable asset unemcumbered at the end of it?
Oh and you want it via a taxpayer subsidy of your adult decision to take on debt.

Sure I'm going to write to my employer to tell him he needs to pay for my petrol to and from work as well as the clothes I wear because I have negative cashflow thanks to my car and home loans.

Tarzana2

Magnolia Enough Typographer wrote: »

Well it's how I would see how the business should operate and I doubt too many would disagree with me.

Well except those who think LLs are a charity there to provide housing for those who want to rent and shouldn't be making a profit or At a minimum expect their mortgage to be covered.

It's not a charity but the market rate might not cover all you want it to. There's not much you can do about that. Currently it probably would cover it all but it might not always remain that way, especially if supply eventually increases. There is no guarantee that rent will always cover your mortgage repayments. It's an investment and therefore there are risks attached.

Tarzana2

Tarzana2 wrote: »

It's not a charity but the market rate might not cover all you want it to. There's not much you can do about that. Currently it probably would cover it all but it might not always remain that way, especially if supply eventually increases. There is no guarantee that rent will always cover your mortgage repayments. It's an investment and therefore there are risks attached.

Of course I understand that. There is risk but with proper planning and understanding of where things are and what might happen that can be minimised. But from the outset the aim should be to be in a positive cash flow situation, where as some posters appear think this is not how someone investing in property should expect to operate.

Things may go up and down but someone would be mad to invest in a rental property where from the start they are not covering the mortgage and costs from the rent (obviously accidental LLs are different).

gaius c wrote: »

You want positive cash flow for the entire lifetime of the mortgage and then have an extremely valuable asset unemcumbered at the end of it?
Oh and you want it via a taxpayer subsidy of your adult decision to take on debt.

Yes, that's the idea of it. You appear to have an issue with it though. This is the aim of anyone investing in property.

gaius c wrote: »

Sure I'm going to write to my employer to tell him he needs to pay for my petrol to and from work as well as the clothes I wear because I have negative cashflow thanks to my car and home loans.

I know people who's employer provide fuel cards for private use and also people who get clothes allowances for work clothes. So not really a great example.

handlemaster

gaius c wrote: »

You want positive cash flow for the entire lifetime of the mortgage and then have an extremely valuable asset unemcumbered at the end of it?
Oh and you want it via a taxpayer subsidy of your adult decision to take on debt.

Sure I'm going to write to my employer to tell him he needs to pay for my petrol to and from work as well as the clothes I wear because I have negative cashflow thanks to my car and home loans.

Thats called investing. Make no apologies for that. Whats the anger about ?

draiochtanois

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gaius c

Nope. It's overleveraged speculators who didn't understand the rules of the game they signed up for.

Consider that cash investors are seriously disadvantaged by such rules. Why should that be the case?
Every other class of small-time investing requires you to put your own money up front.

RainyDay

Magnolia Enough Typographer wrote: »

I know people who's employer provide fuel cards for private use

If they do, they pay BIK on this benefit.

gaius c

gaius c wrote: »

Nope. It's overleveraged speculators who didn't understand the rules of the game they signed up for.

Consider that cash investors are seriously disadvantaged by such rules. Why should that be the case?
Every other class of small-time investing requires you to put your own money up front.

It does require cash upfront, BTL mortgages require a 30% deposit and if you are plan to rent out the house you are living in and buy another you are no longer a FTB so you require 20% cash upfront for your next house.

So yes considerable cash up front is required, most likely just as much cash as that which people invest in other things.

Also LLs fulfil a vital role in providing housing so it's a bit different to buying shares etc.
<MOD SNIP >

handlemaster

gaius c wrote: »

Nope. It's overleveraged speculators who didn't understand the rules of the game they signed up for.

Consider that cash investors are seriously disadvantaged by such rules. Why should that be the case?
Every other class of small-time investing requires you to put your own money up front.

Pension funds get a tax break

You can invest in stocks using CFD

Blured

Magnolia Enough Typographer wrote: »

It does require cash upfront, BTL mortgages require a 30% deposit and if you are plan to rent out the house you are living in and buy another you are no longer a FTB so you require 20% cash upfront for your next house.

So yes considerable cash up front is required, most likely just as much cash as that which people invest in other things.

This is just pie in the sky stuff and I say this as a LL. You think the Government should allow capital repayments as a deductible againts Rental Income? Paying you to borrow money in essence, its just never going to happen.

At most, we should be looking to get 100% of Mortgage Interest as a tax relief and LPT as a tax deductible. These I think are sensible suggestions, which should help out landlords and reduce the tax burden

Blured

Blured wrote: »

At most, we should be looking to get 100% of Mortgage Interest as a tax relief and LPT as a tax deductible. These I think are sensible suggestions, which should help out landlords and reduce the tax burden

These would both be a big step in the right direction.

I Am The Law

handlemaster wrote: »

Thats called investing. Make no apologies for that. Whats the anger about ?

Those who normally invest are aware of this risk of losing money. BTL "investors" from the celtic tiger era are not willing to except that. Someone has to except the loss and it won't be the banks. This IMO is leading to a sortage of stock as BTL "investors" cling on to dream but reality will have to be faced at some stage.

handlemaster

I Am The Law wrote: »

Those who normally invest are aware of this risk of losing money. BTL "investors" from the celtic tiger era are not willing to except that. Someone has to except the loss and it won't be the banks. This IMO is leading to a sortage of stock as BTL "investors" cling on to dream but reality will have to be faced at some stage.

Its not that. Now with prices as they are confirmed in daft report its not and investment to ne made now for BTL investors. With high taxes and mortgage payments higher than rent its not an investment.

gizmo555

handlemaster wrote: »

Its not that. Now with prices as they are confirmed in daft report its not and investment to ne made now for BTL investors. With high taxes and mortgage payments higher than rent its not an investment.

Plus the fear that there will be further market interference by government in the form of extensions to rent controls, or whatever other brainwave Alan Kelly comes up with next.

RainyDay

gizmo555 wrote: »

Plus the fear that there will be further market interference by government in the form of extensions to rent controls, or whatever other brainwave Alan Kelly comes up with next.

Just for curiousity - do you consider the €400m spend on rent supplements that goes to landlords to be 'market interference by government'?

Blured wrote: »

At most, we should be looking to get 100% of Mortgage Interest as a tax relief and LPT as a tax deductible. These I think are sensible suggestions, which should help out landlords and reduce the tax burden

I actually wouldn't object to 100% of mortgage interest as tax relief, based on a standard 20 year repayment schedule. I do object to a 100% or indeed 75% for every, which incentives the landlord to stay interest-only on their mortgage and put any spare cash they have on deposit, instead of reducing the capital owed.
<MOD SNIP >

gizmo555

RainyDay wrote: »

Just for curiousity - do you consider the €500m spend on rent supplements that goes to landlords to be 'market interference by government'?

How much does the state spend on social welfare payments that go to Tesco or the ESB? Does that put up the price of food or electricity?

People who can't otherwise afford the basic necessities of life, including food, fuel and shelter, get payments from the state to assist them. Do you think that private sector landlords should provide social housing free of charge? Maybe rent supplements should be abolished - that would bring down rents, wouldn't it?

Anyway, the point still stands that prospective investors in rental property will be deterred by the government's actions and fears that there may be more in the same vein. Which in turn will reduce the supply of private rental accomodation, which in turn will increase rents . . .

athtrasna

Mod note:
This thread isn't about fuel cards. Off topic posts deleted.

RainyDay

gizmo555 wrote: »

How much does the state spend on social welfare payments that go to Tesco or the ESB? Does that put up the price of food or electricity?

Yes, that is true - though rent supplement is quite different, as it is solely paid for rent, and the recipient has no control over it. It is money spent by the State entirely to private landlords for rent.

gizmo555 wrote: »

Anyway, the point still stands that prospective investors in rental property will be deterred by the government's actions and fears that there may be more in the same vein. Which in turn will reduce the supply of private rental accomodation, which in turn will increase rents . . .

Yes, you're probably correct to say that individual private investors will be deterred. From what I'm hearing, professional investors - the guys who buy a block, not an apartment - seem to be a bit happier about the direction that things are going. So maybe we'll see a trend towards professional investors instead of amateurs.

borderlinemeath

RainyDay wrote: »

Yes, that is true - though rent supplement is quite different, as it is solely paid for rent, and the recipient has no control over it. It is money spent by the State entirely to private landlords for rent.

Not quite true. Plenty of RA tenants, for some bizarre reason still receive the RA cheque directly and pass it on to the landlord. The last RA tenant I had, the cheque was made out in her name, to lodge and do as she wished with it. Thankfully, she always lodged the rent into my a/c but there's always horror stories about the tenants that don't.

Yes, you're probably correct to say that individual private investors will be deterred. From what I'm hearing, professional investors - the guys who buy a block, not an apartment - seem to be a bit happier about the direction that things are going. So maybe we'll see a trend towards professional investors instead of amateurs.

REITs and the larger scale investors who buy a block will always win. They will effectively control the "market rate" for that block that they own and manage. It will be a part Wal-mart effect, where the smaller investor is squeezed from the market, and while it might streamline rents, it won't stabilize them or make them drop, that is purely dependent on supply. There will be no leeway for late payments (even by a day) and below market rate rents for long term good tenants will cease to exist.

handlemaster

RainyDay wrote: »

Just for curiousity - do you consider the €400m spend on rent supplements that goes to landlords to be 'market interference by government'?


I actually wouldn't object to 100% of mortgage interest as tax relief, based on a standard 20 year repayment schedule. I do object to a 100% or indeed 75% for every, which incentives the landlord to stay interest-only on their mortgage and put any spare cash they have on deposit, instead of reducing the capital owed.
<MOD SNIP >

How much of that rent supplement that goes to landlords for providing accomodation to tenants who the government themselves dont want to house actually goes back to the government in tax ?

draiochtanois

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borderlinemeath

draiochtanois wrote: »

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From a tenants point of view it's very much "be careful what you wish for". They will complain about amateur/greedy landlords or what have you, and think the grass is greener on the other side. More often than not they'll realise that the advantages to having a landlord that only has one or a few properties are far better in the long run. Tenants need to realise that to have a professional management company as your landlord means there's no leeway for negotiations on rent and zero leeway on late payments or withholding rent in lieu of deposit. Professionalism works both ways.

RainyDay

draiochtanois wrote: »

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They can only do this;

1) In line with the lease provisions - typically 12 monthly increases before this
2) If the market will bear it - if there are other blocks in the area at a lower price, they'll soon find themselves out of business.

borderlinemeath

RainyDay wrote: »

They can only do this;

1) In line with the lease provisions - typically 12 monthly increases before this
2) If the market will bear it - if there are other blocks in the area at a lower price, they'll soon find themselves out of business.

But now, thanks to the latest measures, EVERY landlord, big and small will be aware of market rents and the 24 month review. Unless a large supply comes on the market - which in the short to medium term is not going to happen - prices will only go one way. And certainly a REIT is not going to look for lower rents when full occupancy is practically guaranteed.

draiochtanois

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RainyDay

RainyDay wrote: »

Yes, you're probably correct to say that individual private investors will be deterred. From what I'm hearing, professional investors - the guys who buy a block, not an apartment - seem to be a bit happier about the direction that things are going. So maybe we'll see a trend towards professional investors instead of amateurs.

Personally I think smaller private LLs are much better than faceless corporations renting out lots of places.

If for nothing else its nicer to be dealing with the owner directly than some dogsbody that works for the property company. Its a more relaxed and personal experience. You can build up a relationship with your LL also and this can have advantages.

gaius c

borderlinemeath wrote: »

[/B]

But now, thanks to the latest measures, EVERY landlord, big and small will be aware of market rents and the 24 month review. Unless a large supply comes on the market - which in the short to medium term is not going to happen - prices will only go one way. And certainly a REIT is not going to look for lower rents when full occupancy is practically guaranteed.

Magnolia Enough Typographer wrote: »

Personally I think smaller private LLs are much better than faceless corporations renting out lots of places.

If for nothing else its nicer to be dealing with the owner directly than some dogsbody that works for the property company. Its a more relaxed and personal experience. You can build up a relationship with your LL also and this can have advantages.

With the greatest of respect, small private landlords are hardly going to say anything different.