Is the end of the road for landlords coming ?

beauf

I think the PRTB were massively under-resourced. The legislation has very little in for LL. So the PRTB is a symptom of govt policy and legislation and its narrow remit.

_Jamie_

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.

No tenant is going to pay more than they need to so that a landlord can completely cover their make their payments. If market rate is less than all the landlord's expenses, why would any tenant pay more than that? What would be in it for them to do so? In a tenant's market, they'll just rent the similar property that is charging less rent. In the same way that no landlord should subsidise a tenant in a market where market rate exceeds their costs and they can make a profit. It works both ways. Like it or not, renting property differs from other businesses in this way. There is no getting away from that. And again, I cannot believe any prospective landlord wouldn't consider this before getting into the business. Mortgage repayments and rent levels aren't linked.

"Hey, prospective tenant, gimme €200 per month extra so I can profit, even though that similar property you've been offered is charging even less still!"
"Erm... no?"

Landlords should be able to make hay for a while yet as the supply issue won't resolve itself quickly, but it would be foolhardy to not plan for a day when costs exceed market rate.

antoinolachtnai

The problem is that without certainty on future returns, nobody is going to invest in residential rental property.

listermint

antoinolachtnai wrote: »

The problem is that without certainty on future returns, nobody is going to invest in residential rental property.

Fine. We need the supply for the sale market anyway presently

_Jamie_

antoinolachtnai wrote: »

The problem is that without certainty on future returns, nobody is going to invest in residential rental property.

It was always the way though. Profit on rentals was never a guarantee. What's different now?

listermint

_Jamie_ wrote: »

It was always the way though. Profit on rentals was never a guarantee. What's different now?

Well it appears most investors are looking at what happened for the banks in 2008 and basically want a non risk investment. Of which there isn't such a thing.

antoinolachtnai

listermint wrote: »

Fine. We need the supply for the sale market anyway presently

We also need supply for rental.

It isn't an either-or situation.

There are already measures in place to increase supply for sale.

listermint

antoinolachtnai wrote: »

We also need supply for rental.

It isn't an either-or situation.

There are already measures in place to increase supply for sale.

There isn't enough to fulfil both so one has to take a back seat for the moment doesn't have to be permanent. There are other more appropriate investments property isn't the only game in town.

Graham

_Jamie_ wrote: »

No tenant is going to pay more than they need to so that a landlord can completely cover their make their payments. If market rate is less than all the landlord's expenses, why would any tenant pay more than that? What would be in it for them to do so? In a tenant's market, they'll just rent the similar property that is charging less rent. In the same way that no landlord should subsidise a tenant in a market where market rate exceeds their costs and they can make a profit. It works both ways. Like it or not, renting property differs from other businesses in this way. There is no getting away from that. And again, I cannot believe any prospective landlord wouldn't consider this before getting into the business. Mortgage repayments and rent levels aren't linked.

"Hey, prospective tenant, gimme €200 per month extra so I can profit, even though that similar property you've been offered is charging even less still!"
"Erm... no?"

Landlords should be able to make hay for a while yet as the supply issue won't resolve itself quickly, but it would be foolhardy to not plan for a day when costs exceed market rate.

Excellent, read back through the thread. Looks like you're agreeing with everything I've already said.

Rhinohippo

antoinolachtnai wrote: »

The problem is that without certainty on future returns, nobody is going to invest in residential rental property.

I have heard of a number of people who had one rental property and they have said it's not worth the hassle. I'm not sure how it is for people with multiple properties but those I have heard of with one rental, want to sell up.

_Jamie_

Graham wrote: »

Excellent, read back through the thread. Looks like you're agreeing with everything I've already said.

You said that it is bizarre that landlords should be expected to run at a loss. I certainly don't agree with that.

Graham

_Jamie_ wrote: »

You said that it is bizarre that landlords should be expected to run at a loss. I certainly don't agree with that.

I said it's bizarre that landlords should be expected to run cashflow negative until their mortgage is paid off. Not once did I suggest there won't be swings between positive/negative cashflows. In fact I specifically suggested landlords account for such swings when the rental market is buoyant.

_Jamie_

Graham wrote: »

I said it's bizarre that landlords should be expected to run cashflow negative until their mortgage is paid off. Not once did I suggest there won't be swings between positive/negative cashflows. In fact I specifically suggested landlords account for such swings when the rental market is buoyant.

How is it bizarre? Even with buoyant times, overall a landlord may never profit from renting property separately from having the asset at the end. There may be times of profit yet but overall over the lifetime of paying off the property, there might be a shortfall and to try to combat that might be to ask your tenants to subsidise you. Profit is not guaranteed from renting property and it is not the same as businesses where profits are needed to survive. Some landlords will overall handsomely profit from their property but nobody should expect that it will happen.

Graham

_Jamie_ wrote: »

overall a landlord may never profit from renting property separately from having the asset at the end.

Graham wrote: »

Not once did I suggest there won't be swings between positive/negative cashflows.

I'm not sure what sort of yield you'd be working at to never be cashflow positive. The only answer I can come up with is 'the wrong one'.

_Jamie_

Graham wrote: »

I'm not sure what sort of yield you'd be working at to never be cashflow positive. The only answer I can come up with is 'the wrong one'.

Yes, you'll have physical money coming in as a landlord. I'm not sure why that poster worded it like there would be no money coming in. But I guess if costs exceed rent, that money will be flowing out almost as quickly as it comes in so that's probably what they mean.

Anyway, I'm repeating myself on this thread so I'll just say, a prospective landlord hoping to always have clear profit will most likely be disappointed. Over the lifetime of the property there may be a shortfall and people should plan for that scenario.

And this how it always was, there is nothing new in this at all.

murphaph

_Jamie_ wrote: »

Over the lifetime of the property there may be a shortfall

Wut? Most properties will outlast all of us.

_Jamie_

murphaph wrote: »

Wut? Most properties will outlast all of us.

I mean there might be a shortfall on mortgage payments from rental income that the landlord may need to make up themselves.

Rhinohippo

My suspicion is that like everything, those who are in the know and have good accountants have ways of ensuring they make a profits from renting out multiples properties but those who don't, won't make much profit.

PeadarCo

_Jamie_ wrote:

I mean there might be a shortfall on mortgage payments from rental income that the landlord may need to make up themselves.

You do understand no sane person would ever invest in property if they weren't going to make money on it. Property is very illiquid and if you want to tie up your money for 20/25 years there are far less risky products and which will give a positive cashflow over their entire period to maturity.

Your describing what happens when someone buys a home or becomes an accidental landlord not a person(full time)/business actively involved in the long-term renting of property. Your making the very big assumption that landlords/companies have alternative scources of income that will offset losses that arise when financing costs exceed rental income.

_Jamie_

PeadarCo wrote: »

You do understand no sane person would ever invest in property if they weren't going to make money on it. Property is very illiquid and if you want to tie up your money for 20/25 years there are far less risky products and which will give a positive cashflow over their entire period to maturity.

Then why on earth do people elect to do it then? I am very bemused. Not making profit on rental income is a very likely scenario for some of the time you are paying off the mortgage. This is how it has always been, it's not something new. You say no sane person would do it knowing there might not always be profit in it. But people always have done. What's so different now? If renting properties is one's only form of income then I don't really know what they do at times when it's a tenant's market.

Graham

_Jamie_ wrote: »

Then why on earth do people elect to do it then? I am very bemused. Not making profit on rental income is a very likely scenario for some of the time you are paying off the mortgage.

I can't think of any professional landlord that's ever gone into a property thinking they're going to have to subsidise it for a few years.

I will agree there were plenty of people who did it during the boom when capital appreciation on the property offset the short-term negative cashflows.

PeadarCo

_Jamie_ wrote:

Then why on earth do people elect to do it then? I am very bemused. Not making profit on rental income is a very likely scenario for some of the time you are paying off the mortgage. This is how it has always been, it's not something new. You say no sane person would do it knowing there might not always be profit in it. But people always have done. What's so different now? If renting properties is one's only form of income then I don't really know what they do at times when it's a tenant's market.

Its a risky anyone takes when setting up a business but everyone does so with the idea they will make a living out of it.

There are numerous ways of getting.through periods of low demand for landlords like anyother business

1 charge enough during the good times that you build up sufficient reserves to cope with the bad times.

2 Look at changing the terms of your financing to lower costs.

3 Cut down on expenditure to the bar minimum required to keep you in business.

Those points could apply to any business not just rental. If you are investing in property location is everything. There are certain locations in Dublin that there will always be demand.

_Jamie_

PeadarCo wrote: »

Its a risky anyone takes when setting up a business but everyone does so with the idea they will make a living out of it.

There are numerous ways of getting.through periods of low demand for landlords like anyother business

1 charge enough during the good times that you build up sufficient reserves to cope with the bad times.

Even this one might is subject to limit. You can't charge what you like, you are still bound by market rate. Even in Dublin where you'd be guaranteed occupancy, it might not be enough as the rent would fluctuate.

_Jamie_

_Jamie_ wrote: »

Then why on earth do people elect to do it then?................

Amateur landlords see it as low risk.

Buy a €200k property when they have a €40k deposit.
The "investment" may require €6k or so per annum all going well.

After 20/25 years you have an asset (mortgage paid off) worth hopefully more than €200k and it's after costing you €40k + other intial costs + €6k/annum.

_Jamie_

Augeo wrote: »

Amateur landlords see it as low risk.

Buy a €200k property when they have a €40k deposit.
The "investment" may require €6k or so per annum all going well.

After 20/25 years you have an asset (mortgage paid off) worth hopefully more than €200k and it's after costing you €40k + other intial costs + €6k/annum.

Well, yeah, that's how I'd see it. What I don't understand is why people expect to clear profit on top of that. If they do, good and well, but if not, they still have got a house very cheaply that they can sell for a lot more than it cost them, as rent would have made up the majority of the mortgage payments.

Graham

Augeo wrote: »

Buy a €200k property when they have a €40k deposit.

a €200k BTL property would generally require a €60k deposit.

Augeo

Augeo wrote: »

Amateur landlords see it as low risk.

Buy a €200k property when they have a €40k deposit.
The "investment" may require €6k or so per annum all going well.

After 20/25 years you have an asset (mortgage paid off) worth hopefully more than €200k and it's after costing you €40k + other intial costs + €6k/annum.

No LL amateur or otherwise goes into it planning to spend anything to subsidise the rental if at all possible never mind 6k per year. Even in bad times of low rent when rent may not cover everything no way should it be anything close to 6k per year (and in times like now rent should be kept up at absolute max and decent profit being made). It would be madness to go into it like that absolute madness, absolute and utter minimum should be breaking even (i.e. No money from other sources being used to run your rental business).

Graham

_Jamie_ wrote: »

Well, yeah, that's how I'd see it. What I don't understand is why people expect to clear profit on top of that.

Most investments would be made on the basis of income and preservation of capital.

If you invested €200,000 stocks/bonds you would reasonably expect to receive income in the form of dividends and your capital (hopefully increased) back whenever you decided to sell.

murphaph

When the government are finished forcing small time landlords out, tenants can rest assured the big corporate landlords won't use their size and weight to influence the government of the day.

Ethan Rough Saber

Ethan Rough Saber wrote: »

No LL amateur or otherwise goes into it planning to spend anything to subsidise the rental if at all possible never mind 6k per year. Even in bad times of low rent when rent may not cover everything no way should it be anything close to 6k per year (and in times like now rent should be kept up at absolute max and decent profit being made). It would be madness to go into it like that absolute madness, absolute and utter minimum should be breaking even (i.e. No money from other sources being used to run your rental business).

The celtic tiger says hello.

€200k ish properties were €850 ish / month to rent.

Even now you'd require a mortgage of less than €100k over 25 years to break even with €1200/month rental income, do the sums, it ain't happening without some additional money being thrown in.