Is the end of the road for landlords coming ?

beauf

Graham wrote: »

There are plenty of threads that directly or indirectly discuss the housing shortage. Most of them are started from the perspective of one of the symptoms of the housing shortage as experienced by a prospective-homeowner, landlord, or tenant.

There really isn't. Indirectly, means it isn't. They are all about tenants and landlords. Almost nothing about the low numbers of housing being built. All are figured are focused on the symptoms not the cause.

newacc2015

Yourself isit wrote: »

As for corporations paying 12.5%. Set one up. You can set up a single director company in Ireland now afar as I know. I did that in the UK as an IT company. It was a mistake.

That 12.5% (it was 20% in the UK) is company profits not your profit. if you then pay yourself dividends you pay the "50% marginal" as the money is leaving the company and entering your bank account. That's payment. In that case the marginal tax would be 62%. Better to pay it as wages where the wages are expensed. But then you are back to the same tax on wages as the rest of us.

If it was that simple why doesnt every landlord have an LTD? Because it is not that simple. I have yet to hear of a bank giving a landlord a mortgage for a residential property within a LTD company.

If you have a mortgage less property and you want to put it into a LTD company, you have to pay CGT on any appreciation when moving it into the LTD.

There is the fact you have to employers PRSI. So as well as paying the PRSI, PAYE and USC like everyone. You have to pay an employers PRSI at around 11%. There are very few benefits to owning property within a LTD in Ireland. So most accountants would advise against having a LTD for owning property.

If you were a wealthy individual you could set up an REIT to own a decent amount of property. Another example of Government policy which benefits the more wealthy in society

FishOnABike

antoinolachtnai wrote: »

Add another 5k or 10k of capital repayments and you are underwater pretty quickly.

Capital paydown affects cashflow not profit. Property needs to be viewed as a long term investment with a negative cash flow during the term of the investment (much as a savings plan or pension).

The investment appreciates during the investment term but the profit is only realised when cashed in at the end of the investment term.

Expecting a positive cash flow from rent on a property while trying to pay down the capital on it is like expecting to get more out of a pension scheme than you are contributing to it while you are working and still expecting to have all your pension contributions in the pot for when you retire.

Unless a landlord already owns the property (or already has significant debt free equity in it) renting needs to be viewed as an investment, not a source of income.

beauf

FishOnABike wrote: »

... Property needs to be viewed as a long term investment with a negative cash flow during the term of the investment..

Why?

FishOnABike

beauf wrote: »

Why?

The comparison I made to contributing to a pension should explain why.

I wouldn't expect to earn an income now from paying pension contributions, I would expect a future income when I retire.

Similarly I shouldn't expect to be able to take out a mortgage to buy a property and rent it out for more than my monthly mortgage repayment (capital plus interest). I would hope to make a worthwhile long term profit (through capital appreciation or when I have acquired some debt free equity in the property) but in the short term I might be out of pocket.

Graham

FishOnABike wrote: »

Property needs to be viewed as a long term investment with a negative cash flow during the term of the investment

beauf wrote: »

Why?

Bizarre isn't it. I can't think of any other business that's expected to run at a zero/negative cash flow for a couple of decades.

By the same logic, airlines/hotels/hospitals shouldn't charge more than their loan/mortgage/lease payments until they own their assets outright.

FishOnABike

FishOnABike wrote: »

The comparison I made to contributing to a pension should explain why.

I wouldn't expect to earn an income now from paying pension contributions, I would expect a future income when I retire.

Similarly I shouldn't expect to be able to take out a mortgage to buy a property and rent it out for more than my monthly mortgage repayment (capital plus interest). I would hope to make a worthwhile long term profit (through capital appreciation or when I have acquired some debt free equity in the property) but in the short term I might be out of pocket.

I don't think you will find many if any people getting into the renting business with your outlook as it would be madness if you went in with this plan.

The idea is at the absolute minimum to cover mortgage, interest and all other costs from rent (including tax). you should be using no income from other sources to top up or run your rental business. In reality though you should be aiming to clear profit every month thus supplementing your other income.

There are a hand full of people with this insane opinion that a property you rent out should be expected to cost you money, I'd advise them to stay well clear of any form business. It defies logic.

Yourself isit

newacc2015 wrote: »

If it was that simple why doesnt every landlord have an LTD? Because it is not that simple. I have yet to hear of a bank giving a landlord a mortgage for a residential property within a LTD company.

If you have a mortgage less property and you want to put it into a LTD company, you have to pay CGT on any appreciation when moving it into the LTD.

There is the fact you have to employers PRSI. So as well as paying the PRSI, PAYE and USC like everyone. You have to pay an employers PRSI at around 11%. There are very few benefits to owning property within a LTD in Ireland. So most accountants would advise against having a LTD for owning property.

If you were a wealthy individual you could set up an REIT to own a decent amount of property. Another example of Government policy which benefits the more wealthy in society

I wasn't disputing any of that. I was pointing out that people pay tax when money is moved from a company to a personal account. So comparing the personal tax that small landlords pay to the corporate tax that corporate landlords is misleading.

Your answer verifies mine.

Yourself isit

Graham wrote: »

Bizarre isn't it. I can't think of any other business that's expected to run at a zero/negative cash flow for a couple of decades.

By the same logic, airlines/hotels/hospitals shouldn't charge more than their loan/mortgage/lease payments until they own their assets outright.

He gave a specific form of rental type - one used for a pension. It's up to the landlord to make an ongoing profit from income or not - society is disinterested.

Buy for cash, or mostly cash, if you don't want mortgage payments to be higher than rent. That's your decision.

Yourself isit

Ethan Rough Saber wrote: »

I don't think you will find many if any people getting into the renting business with your outlook as it would be madness if you went in with this plan.

The idea is at the absolute minimum to cover mortgage, interest and all other costs from rent (including tax). you should be using no income from other sources to top up or run your rental business. In reality though you should be aiming to clear profit every month thus supplementing your other income.

There are a hand full of people with this insane opinion that a property you rent out should be expected to cost you money, I'd advise them to stay well clear of any form business. It defies logic.

It's perfectly logical in fact if it is seen as a pension. However if you do make a loss per month while gaining capital then less whining.

Graham

Yourself isit wrote: »

if you don't want mortgage payments to be higher than rent.

Charge more rent.

Alternatively encourage your elected representatives to address the supply issues thus reducing mortgage payments/rent.

Yourself isit

Graham wrote: »

Charge more rent.

That's market dependant.

Alternatively encourage your elected representatives to address the supply issues thus reducing mortgage payments/rent.

Not going to help existing landlords. Not that I'm buying the poor mouth. Except for accidental landlords who are in the rental sector themselves the recent trend has obviously been in favour of landlords. And yet - nothing but angst.

Graham

Yourself isit wrote: »

That's market dependant.

Well apart from the whole 2yr, 4% thing.

Browney7

Ethan Rough Saber wrote: »

I don't think you will find many if any people getting into the renting business with your outlook as it would be madness if you went in with this plan.

The idea is at the absolute minimum to cover mortgage, interest and all other costs from rent (including tax). you should be using no income from other sources to top up or run your rental business. In reality though you should be aiming to clear profit every month thus supplementing your other income.

There are a hand full of people with this insane opinion that a property you rent out should be expected to cost you money, I'd advise them to stay well clear of any form business. It defies logic.

So we should give mortgages to everyone by this logic to buy property and rent out and it won't cost you a penny?

Graham

Browney7 wrote: »

So we should give mortgages to everyone by this logic to buy property and rent out and it won't cost you a penny?

Nobody suggested that, don't pretend otherwise.

It's a business, with associated risks/rewards just like most other businesses.

beauf

FishOnABike wrote: »

The comparison I made to contributing to a pension should explain why.

I wouldn't expect to earn an income now from paying pension contributions, I would expect a future income when I retire.

Similarly I shouldn't expect to be able to take out a mortgage to buy a property and rent it out for more than my monthly mortgage repayment (capital plus interest). I would hope to make a worthwhile long term profit (through capital appreciation or when I have acquired some debt free equity in the property) but in the short term I might be out of pocket.

It didn't make sense. Two identical properties, one is allowed to make income from rent, the other isn't. How can you make money on it as a pension, if an identical property has much lower rent, you can't charge more for the other. So then its no use as income/pension.

The only reason you are suggesting this, is because you want cheaper rent. The solution to that is to increase supply. Not to redefine property as a pension. The the problem with that is the Govt seems to be doing its best to restrict supply.

In all cases no matter how you artificially control the rent. It just leads to a whole range of back door payments to get around it. Just like the top up payments for RA.

All you are doing is distorting the market.

thierry14

Browney7 wrote: »

So we should give mortgages to everyone by this logic to buy property and rent out and it won't cost you a penny?

Would be plenty of places to rent then, if you could make money.

Opposite now, know money in it unless you own a load of properties and can avoid tax.

Why would anyone want to be a landlord in Ireland?

Until they fix that, will remain a rental crisis

Loads of houses to buy, nothing to rent

beauf

Graham wrote: »

Nobody suggested that, don't pretend otherwise.

It's a business, with associated risks/rewards just like most other businesses.

Great hopefully we will see the Govt intervening, in car & medical insurance and a range of things, to reduce the cost.

They shouldn't be inferring with the private rental market. They should be providing social housing and affordable housing.

antoinolachtnai

beauf wrote: »

Great hopefully we will see the Govt intervening, in car & medical insurance and a range of things, to reduce the cost.

They shouldn't be inferring with the private rental market. They should be providing social housing and affordable housing.

Building social or affordable housing is just another way of interfering with the market.

The reason the government don't do that is because it's a more capital Intensive and expensive way of providing accommodation compared to having the private sector do it.

Graham

beauf wrote: »

Great hopefully we will see the Govt intervening, in car & medical insurance and a range of things, to reduce the cost.

Can't see that ending well based on the success in the property market.

beauf wrote: »

They shouldn't be inferring with the private rental market. They should be providing social housing and affordable housing.

Agreed

Fol20

Speaking from a landlords point of view. Any time a deal is made, it should feel like both parties are getting something out of it. Not just one party and for the past few years tenants are getting all the benefits yet I don't see anything bar the extra expensing of interest for mortgages. Yes rents are increasing but that isn't the landlords fault. They charge a price that tenants are willing to pay and if the demand wasn't there. The price would be lower. The major and only issue here is supply.

In an ideal world, I think a rental property should be unfurnished so that landlords don't have to buy cheap crappy stuff that tenants hate. At least this way tenants get their own stuff and keep good care of it and there is less wear and tear crap for landlords.

If a landlord has a non paying tenant. They should be able to be turfed out in a max of 3 months.

Tenants should be held fully liable for any damage that is done and not a crappy service where they pay 10e a month for the next x years if the ll even gets that.

Prtb should hold a 3 month deposit with an inspection of the property performed by prtb before they move in. This is paid for using the interest earned by prtb keeping the deposit.

There should an indefinite period for tenants to stay in a place and not just 4-6years or whatever the new law will bring in.

When a tenant leaves, ll should be able to charge whatever they want be it 1million or 100e a month. The government shouldn't dictate this because in any other business, the market sets the price.

Rental increases should be linked to inflation plus one or two pc

The prtb should have a review based system where both parties can leave a review. Reviews can only be made if prtb has been registered and could be a very handy deterrent for both bad landlords and tenants. I know slanderous stuff may pop up here so you could have a rule where negative feedback needs to be approved by prtb first.

Anyways that's my 2 cent anyway. I'm biased here. But personally I prefer the mon and pop version of anything compared the the big corporate companies. Yes there are some cowboy landlords out there, but at the end of the day a mom and pop shop is more personal and not just a straight money driven exercise. With big corporate companies, it's all about the profit and they will try and gauge out as much money as possible. I know a few lls and they haven't increased the rent too much over the past few years because both parties appreciate a good tenant ll relationship. Everyone seems to think but big agencies are the way to go but from my own personal experience when I rented, they always increased rent when the rent review came, and any time I had issues they were not the most fourthcoming to resolving the issue compared to the mom and pop places.

Yourself isit

beauf wrote: »

Great hopefully we will see the Govt intervening, in car & medical insurance and a range of things, to reduce the cost.

They shouldn't be inferring with the private rental market. They should be providing social housing and affordable housing.

Which will interfere with the private rental market. If successful.

FishOnABike

Ethan Rough Saber wrote: »

I don't think you will find many if any people getting into the renting business with your outlook as it would be madness if you went in with this plan.

The idea is at the absolute minimum to cover mortgage, interest and all other costs from rent (including tax). you should be using no income from other sources to top up or run your rental business. In reality though you should be aiming to clear profit every month thus supplementing your other income.

There are a hand full of people with this insane opinion that a property you rent out should be expected to cost you money, I'd advise them to stay well clear of any form business. It defies logic.

Which is why I don't do it. I have realistic expectations. I think it is madness to expect anything else. Lots of investments cost and have a negative cash flow until they are cashed in.

Anything else would simply be a license to print free money from nothing. If it was so reasonable to have an ongoing nett profit from current rental income by starting from nothing and taking out a mortgage to buy property everybody would do it and leverage themselves to the hilt as the more properties the more free money they can earn from nothing.

It is reasonable to have a short term positive cash flow and a nett rental income on an interest only mortgage property.

For a standard (interest + capital mortgage repayment) it is reasonable to expect to operate at a negative cash flow for some time (much as any startup business). This is still not a loss as equity is being built up in the property. Positive cash flow should only be expected after some time e.g. -

• rent inflation has raised the rent above the mortgage repayment (which tends to be relatively static in comparison)
• an initial debt free capital investment (substantial cash buyer) giving arental property with a low or no mortgage repayment
• the mortgage on the property has been repaid or substantially repaid and the balance remortgaged over a longer term to reduce the monthly mortgage repayment to below the nett rental income

Part of the current housing and rental crisis is due to too many small investors with unrealistic expectations being sold a pup and lured by the promise of free money.

Without deep enough reserves to weather the initial negative cash flow start up years and compounded by the property crash and negative equity leaving no get out option, many have come unstuck. Some to the extent of losing their primary residence in the fallout.

The need of such small investors to pay their investment property mortgage in full, and then some, from current rental income has lead to unrealistic and unsustainable rent costs and rent inflation, adding further to the problems caused by lack of supply.

A serious shake up is needed to have an ecenomically and socially sustainable property sector, certainly more than the current government tinkering about the edges.

Browney7

Browney7 wrote: »

So we should give mortgages to everyone by this logic to buy property and rent out and it won't cost you a penny?

I'm obviously excluding the initial investment (i.e.the deposit) when I say shouldn't cost you a penny. The operation of the business should be not only breaking even but also clearing net profit.

Fol20 wrote: »

There should an indefinite period for tenants to stay in a place and not just 4-6years or whatever the new law will bring in.

No way, why on earth do you think a property owner should lose control I find their property indefinitely? 4 years is already a long period of time where there are very limited reasons for a LL to have his property vacated.

_Jamie_

Ethan Rough Saber wrote: »

I'm obviously excluding the initial investment (i.e.the deposit) when I say shouldn't cost you a penny. The operation of the business should be not only breaking even but also clearing net profit.

If market rate is lower than your costs, you can't expect to clear a profit. At the moment, landlords can expect to have clear profit in the current market but it won't remain that way, as these things are cyclical. Anyone who wants to become a landlord needs to plan for times when market rate < cost of business. Just because you *want* to clear profit, doesn't mean you *will*.

Graham

_Jamie_ wrote: »

If market rate is lower than your costs, you can't expect to clear a profit. At the moment, landlords can expect to have clear profit in the current market but it won't remain that way, as these things are cyclical. Anyone who wants to become a landlord needs to plan for times when market rate < cost of business.

One of the reasons why a landlord should be aiming for a rent that leaves a healthy margin. A landlord operating on razor-thin margins isn't good for a tenants security.

Yourself isit

Graham wrote: »

One of the reasons why a landlord should be aiming for a rent that leaves a healthy margin. A landlord operating on razor-thin margins isn't good for a tenants security.

Which is why we should welcome large scale fully capitalised landlords.

beauf

Yourself isit wrote: »

Which will interfere with the private rental market. If successful.

antoinolachtnai wrote: »

Building social or affordable housing is just another way of interfering with the market.

The reason the government don't do that is because it's a more capital Intensive and expensive way of providing accommodation compared to having the private sector do it.

Exactly the govt want to off load the cost of social and affordable housing to the private sector who are only interest in profit. They just don't want that business.

In the same way if you want the private sector to run public transport to a marginal area. They just won't do it.

beauf

Yourself isit wrote: »

Which is why we should welcome large scale fully capitalised landlords.

Just like Tyrrelstown.

They even had to legislate to avoid the obvious problems what will cause. Mass evictions.

FishOnABike

beauf wrote: »

It didn't make sense. Two identical properties, one is allowed to make income from rent, the other isn't. How can you make money on it as a pension, if an identical property has much lower rent, you can't charge more for the other. So then its no use as income/pension.

The only reason you are suggesting this, is because you want cheaper rent. The solution to that is to increase supply. Not to redefine property as a pension. The the problem with that is the Govt seems to be doing its best to restrict supply.

In all cases no matter how you artificially control the rent. It just leads to a whole range of back door payments to get around it. Just like the top up payments for RA.

All you are doing is distorting the market.

It makes perfect sense. See post #144.

If you look at another way. An investor has €300,000 to invest. They can

• put it under the mattress, earning nothing
• put it in a bank, earning little more than nothing
• Put it in shares, getting an average long term return of about 7% per annum (€21,000 per annum)
• buy a house and get a similar return renting it for €21,000 per annum (€1,750 per month)

Someone taking out a mortgage to buy a property to rent out and expecting to make a similar return before they have paid their mortgage in full would have to charge nearly double the rent. That's not sensible or sustainable.



If a property investor is not prepared to take a long term view and be content with 25 to 30 years building equity in an asset but making little day to day income they are in the wrong business. The profit in that period is in their growing equity in the property and capital appreciation.



Significant day to day positive cash flow is only achieved once the property is largely paid for. Expecting significantly more from day one is expecting someone else (their tennants) to buy a house for them while they put none of their own money into it. That doesn't make sense and in any case could not compete with a cash investor.



I don't expect a free house, neither should a property investor.