Is the end of the road for landlords coming ?

Yourself isit

beauf wrote: »

Just like Tyrrelstown.

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

It doesn't have to be vulture funds. Long term pension investment is about cash flow, often as not. Even if It is about leveraged capital gains the gains are often realised after 20-30 years. Therefore long term investors don't care about upwardly only rent control or fixed term leases or selling with tenancy attached. They don't care about getting ownership of their property for little Tommy (or "little Tommy") either.

Of course to get there we need legislation that discombobulates small investors. The kind of guy who is investing or running a business but wants the property available and tenancy vacated when he decides.

I'd prefer a home owning democracy to a rental democracy but if the latter the German system is best. Or some modification of it.

_Jamie_

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.

My point is it might not be possible at all times to have a healthy margin. Market rate and the landlord's costs aren't linked. The market is indifferent to a landlord's costs, in fact. Things can be done to make it easier for landlords but you can't protect against every scenario that might mean a landlord will make a loss. Anyone hoping to become a landlord must consider a scenario where they won't even break even. I'm really surprised anyone hoping to become a landlord wouldn't plan for this. It's different from other businesses in that once the mortgage is paid off, greatly helped by having rent coming in, the landlord has an asset to do with as they wish. So it's not like by not quite breaking even, they are getting nothing out of it.

antoinolachtnai

beauf wrote: »

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.

The private sector operates the Luas, a lot of Expressway and the school bus system just fine.

How can you build houses without the private sector? You need contractors and materials. You need to bring in expertise. Scaling up local authorities would similarly require outsourcing. The local authorities just don't have anything like the management or the technical capability to do this.

The profit motive exists in the public sector too. Overpaid and overstaffed public services are just another form of rent taking.

Graham

_Jamie_ wrote: »

My point is it might not be possible at all times to have a healthy margin. Market rate and the landlord's costs aren't linked.

Hence my suggestion landlords should be making a healthy margin whenever possible because it may not always be possible.

There needs to be breathing room to take in changes in interest rates, changes in tax policy, rent caps.........

FishOnABike

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.

The comparison doesn't stand up. In each case you are paying for staff and services beyond just occupying a space.

Planes have a servicable life measured in decades, houses in centuries.

Hotels will often offer additional nights for free or minimal cost to make their profit in the restaurant on food and drink.

A night in hospital costs more than a night in a hotel or guest house because you are paying for additional services (your medical treatment).

If you want to factor in the cost of servicing the mortgage and spread it over the several hundred years expected life of a house it will count for very little addition to the cost of rent (even allowing for maintenance).

It is not realistic for a potential property investor to expect to build up equity in a valuable asset without contributing themselves. This means they should expect (and be able to cope with) negative cash flow for a period.

beauf

antoinolachtnai wrote: »

The private sector operates the Luas, a lot of Expressway and the school bus system just fine. ....

Really

Bus Éireann lost €5.6 million last year and is expecting similar losses this year, mainly due to the Expressway service.

http://www.rte.ie/news/2016/1206/836939-bus-eireann-transport/
http://www.irishtimes.com/news/ireland/irish-news/bus-%C3%A9ireann-staff-to-ballot-for-strike-action-over-expressway-plans-1.2800681

Record year - but Luas still posts loss

http://www.independent.ie/business/irish/record-year-but-luas-still-posts-loss-35289033.html

Graham

FishOnABike wrote: »

The comparison doesn't stand up. In each case you are paying for staff and services beyond just occupying a space.

Part of what you're paying for in most non-goods transactions is funding of the asset/s, provision of a service/services and profit.

_Jamie_

Graham wrote: »

Hence my suggestion landlords should be making a healthy margin whenever possible because it may not always be possible.

There needs to be breathing room to take in changes in interest rates, changes in tax policy, rent caps.........

Oh yeah, I see. Well, I agree, they should make hay. And things can be done to help landlords such as tax being calculated on profit, not income. But some suggestions I've seen on this forum are barmy, such as the capital repayment being an expense.

beauf

Yourself isit wrote: »

...Of course to get there we need legislation that discombobulates small investors. The kind of guy who is investing or running a business but wants the property available and tenancy vacated when he decides.

I'd prefer a home owning democracy to a rental democracy but if the latter the German system is best. Or some modification of it.

You'd prefer Germany...


https://www.bloomberg.com/news/articles/2015-06-03/berlin-s-landlords-rebelling-as-nonsense-law-threatens-returns

http://www.dw.com/en/berlins-rental-market-a-nightmare-to-many/a-19213690

http://www.radiospaetkauf.com/2016/07/british-investors-behind-unlawful-eviction-that-sparked-fiery-demonstrations-in-berlin/

https://global.handelsblatt.com/finance/germanys-unreal-estate-market-461741

antoinolachtnai

beauf wrote: »

Really



http://www.rte.ie/news/2016/1206/836939-bus-eireann-transport/
http://www.irishtimes.com/news/ireland/irish-news/bus-%C3%A9ireann-staff-to-ballot-for-strike-action-over-expressway-plans-1.2800681


http://www.independent.ie/business/irish/record-year-but-luas-still-posts-loss-35289033.html

So how come these undertakings keep operating, so?

Fol20

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.



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.

If a ll is intending to sell or live in the property, then they should be able to terminate the lease. Besides that. As long as the tenant is paying rent and not damaging the property. They should be able to stay in the house for as long as they want

antoinolachtnai

beauf wrote: »

Really



http://www.rte.ie/news/2016/1206/836939-bus-eireann-transport/
http://www.irishtimes.com/news/ireland/irish-news/bus-%C3%A9ireann-staff-to-ballot-for-strike-action-over-expressway-plans-1.2800681


http://www.independent.ie/business/irish/record-year-but-luas-still-posts-loss-35289033.html

So how come these undertakings keep operating, so?

antoinolachtnai

beauf wrote: »

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.

The private sector operates the Luas, a lot of Expressway and the school bus system just fine.

How can you build houses without the private sector? You need contractors and materials. You need to bring in expertise. Scaling up local authorities would similarly require outsourcing. The local authorities just don't have anything like the management or the technical capability to do this.

The profit motive exists in the public sector too. Overpaid and overstaffed public services are just another form of rent taking.

beauf

They used to do it. Since they stopped we have a housing crisis.

A private LL cannot run at a loss. You can if its publicly funded. Very different.

Yourself isit

beauf wrote: »

You'd prefer Germany...


https://www.bloomberg.com/news/articles/2015-06-03/berlin-s-landlords-rebelling-as-nonsense-law-threatens-returns

http://www.dw.com/en/berlins-rental-market-a-nightmare-to-many/a-19213690

http://www.radiospaetkauf.com/2016/07/british-investors-behind-unlawful-eviction-that-sparked-fiery-demonstrations-in-berlin/

https://global.handelsblatt.com/finance/germanys-unreal-estate-market-461741

The landlords (one of them with 27k apartments) are protesting a new law that reduces rent and supporting an older law that capped rent but kept it upwardly mobile.

That makes sense.

Yourself isit

beauf wrote: »

They used to do it. Since they stopped we have a housing crisis.

A private LL cannot run at a loss. You can if its publicly funded. Very different.

Of course private landlords can run at a loss if they have a secondary (or really primary) income.

And many Irish landlords do.

Why are landlord finances more worrying in 2016 rather than 2012? Why the poor mouth after 40% increases? Not buying it.

amcalester

FishOnABike wrote: »

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

Even if the rent covers the mortgage this doesnt equate to a free house.

Graham

Yourself isit wrote: »

Of course private landlords can run at a loss if they have a secondary (or really primary) income.

Any business can run at a loss.

That doesn't make it a good idea.

beauf

Yourself isit wrote: »

Of course private landlords can run at a loss if they have a secondary (or really primary) income.

And many Irish landlords do.

Why are landlord finances more worrying in 2016 rather than 2012? Why the poor mouth after 40% increases? Not buying it.

The intent is that they will eventually be able to run at a profit. I doubt many planned to top-up the rent to meet costs as long term plan. Now they have even less control, protection and less ability to get out of these top ups. if they want to make money at the end of 30yrs there are easier ways to do that, than rental.

If there is no problem as you are suggesting, then there will be no problem with supply as enough new LLs will enter the market.

Fol20

Fol20 wrote: »

If a ll is intending to sell or live in the property, then they should be able to terminate the lease. Besides that. As long as the tenant is paying rent and not damaging the property. They should be able to stay in the house for as long as they want

Why, why should a person who is renting a property and taken no risk have more or less total control over the property? The 4 year thing as it stands it's too bad as at least every 4 years a LL can move on the tenants if he wants to. No way should he be stuck with people in his property indefinitely, his property.

A rule of indefinite part 4 is just going to make LLs choose their tenants much more wisely, more choosing to rent by the room and picking young professionals, post grad students or even students all of whom won't stay very long and enable them to retain control of their property.

Yourself isit wrote: »

Of course private landlords can run at a loss if they have a secondary (or really primary) income.

And many Irish landlords do.

Why are landlord finances more worrying in 2016 rather than 2012? Why the poor mouth after 40% increases? Not buying it.

Go ahead of you wish and operate a loss making business but it ain't for me nor most people who are doing it to make money and not in 30 years time. Property very much interests me as a side businsss and I'd like to have a house or two rented out in the future but I will be doing it in a way that I'm making money from day 1 along with talking all the precautions possible so as not to get stuck with tenants indefinitely. If I can't make money or at the absolute minimum break even I won't do it (excluding initial investment for the deposit). However I've done the sums on many places and if you are shrewd there are opportunities to cover all costs and make a profit each month.

FishOnABike

Graham wrote: »

Part of what you're paying for in most non-goods transactions is funding of the asset/s, provision of a service/services and profit.

The mortgage interest on a rental property is part of the cost of funding thye asset. It is reasonable to have this cost, together with other ongoing costs, e.g. RTB registration, taxes, maintenance etc. to be covered on an ongoing basis by rental income.

I would not include paying off the capital portion of the mortgage as a cost of funding the asset. Our tax regime reflects this in only allowing mortgage interest to be expensed and not capital repayments. This was the principle on which the interest only mortgage to let schemes operated.

Any excess rental income over the cost of interest repayments and other operating costs can be taken out as current income or invested in growing equity in the property but it should not be expected that rental income will fully cover interest repayments, capital repayments and operating expenses on a fully mortgaged rental property and leave a monthly nett cash flow for the investor.

As the example in post #144 points out, this would essentially be expecting the renter to buy the property for the investor with no financial outlay by the investor and would be entirely uncompetitive with a cash investor.

FishOnABike

Graham wrote: »

Any business can run at a loss.

That doesn't make it a good idea.

Most startups run at a loss and depend on investor funding for a number of years until they start to turn a profit. It can then take several years more before the seed investors make back their initial investment and see a nett gain. Why should the property industry be any different ?

antoinolachtnai

FishOnABike wrote: »

Most startups run at a loss and depend on investor funding for a number of years until they start to turn a profit. It can then take several years more before the seed investors make back their initial investment and see a nett gain. Why should the property industry be any different ?

Because the returns are far lower.

murphaph

I see vast swathes of small time landlords like myself withdrawing property from the rental market and letting it through airbnb etc. This may be in breach of planning law but for houses it will be very hard to enforce any restrictions on the owner in this regard. First of all you'd need someone to actually notice and be bothered lodging a complaint with the planning department and people are too busy keeping themselves to themselves mostly. In an apartment situation it's different as it's a nuisance on the full time residents. Even here in Berlin where airbnb is actually banned, there is still availability of short term lets on a plethora of facebook groups. I doubt the ban brought more than a handful of properties into the long term letting market.

The big REITs obviously won't be able to take these measures to sidestep the new rules.

I'll quite likely end my RAS agreement when it runs its course next summer and then let my brother take up "occupation" of the house which he can then let via airbnb for at least 2 years to have formally extinguished the "rental" tag on the house. Then it can either be returned to the long term market at the appropriate rate or just stay in the airbnb realm.

If the state isn't prepared to make my life easier too with all the legislative changes of late then I will have to make my own luck.

Lux23

Why should the state make your life easier? The entitlement...

And why would it be easier to rent your property on Airbnb to potentially dozens of tenants every year over one?

murphaph

Lux23 wrote: »

Why should the state make your life easier? The entitlement...

It's called give and take. Introduce rent controls, ok, but anything for landlords? It's been a one way street of pro-tenant legislative changes. Why should the state make tenants' lives easier? The entitlement....

Lux23 wrote: »

And why would it be easier to rent your property on Airbnb to potentially dozens of tenants every year over one?

Because they can be chucked out the door for so much as smoking inside a no smoking property. A tenant can put a hammer through every wall in the place and it'll still take over a year to remove him/her!

You also don't have to have it rented all the time as the day rate is much higher than a rental.

Eddie2008

We decided to sell up our one rental after the tax bill this year, just cant do it anymore. We weren't 'accidental' as such, we thought at the time it could be a good investment. The rent more than covers the mortgage, but doesn't cover the other extras like the 5k annual tax bill, the unexpected repairs (often after breakages) and when a tenant leaves usually having to spend 1k/2k to get it back up to standard.

Find it hilarious in Ireland that when tenants choose their property they want it perfect - ship shape but when they live in it, they have simply no respect - filthy. We only had one lovely couple from <snip> who treated it and us with respect among 6 sets of tenants. We never knew it would be so stressful; the tenant demands, being continuously lied to, wondering if the rent would be paid, the government enforcing more and more rules, being called the 'greedy' landlord and that heart wrenching feeling when inspecting the property that the tenants have yet again turned it into a hovel. Any spare cash we had year on year seemed to go in to the black hole of the rental property.

We were always fair; repaired things quickly, gave the deposit back when we shouldn't and charged below market rates in the hope someone would take it on long term and look after it - never happened.

We have our own family and are going to invest our energy into that and our own home from now on.

Graham

FishOnABike wrote: »

Most startups run at a loss and depend on investor funding for a number of years until they start to turn a profit. It can then take several years more before the seed investors make back their initial investment and see a nett gain. Why should the property industry be any different ?

Most startups are self-financed.

FishOnABike

Graham wrote: »

Most startups are self-financed.

Whether it is self financed or via angel investors is immaterial, the point being made remains the same. Most startups rely on an initial cash injection and take a number of years to start earning and more time to repay the initial investment.

Why should property investment be an exception ? It needs to be viewed as a long term investment with the main return achieved when the investment matures.

A cash investor can expect a reasonable return on their investment from day 1 but a mortgage to let investor needs to view it as a long term investment and their margins might be slim to non-existant at times.

Graham

FishOnABike wrote: »

Whether it is self financed or via angel investors is immaterial, the point being made remains the same. Most startups rely on an initial cash injection and take a number of years to start earning and more time to repay the initial investment.

Most startups need to be cashflow positive fairly quickly.

Buy-to-let landlords relying on mortgage finance which currently requires a 30% deposit. That sounds like a fairly substantial cash injection to me.