The business of being a landlord

mrawkward

At the outset, let me be clear, I have no personal axe to grind here. I do have a commercial property rental business. I could never, and still cannot, make any financial sense of being an investor in residential property. I saw many friends and peers jump in during the boom, apparently blinded by the capital appreciation that went with the loopy property price inflation of the tiger era.

I have great sympathy for the majority of decent landlords in the private residential sector. Many with BTL mortgages are in dire financial straits and the tax system futher screws them with non-deductible interest and RPT. Those in negative equity have nowhere to turn and no way out.

The rent cap proposals have brought out the screaming masses of bleeding hearts and of course the hallowed "most vulnerable in society". Typically inept (ignorant) political response is to attempt to deal with the symptoms rather than the actual cause.

The simple reality is that new housing is too expensive, the total state take from each new residential unit in terms of VAT, stamp duties, construction workers PAYE, levies, CGT on land sales and even CPT are circa 40% of sales prices. Big source of juicy cash for the state.

Social housing policy is, and has been, a joke. The majority of these local authority properties built in the 30 years since 1950 to provide social housing have been sold off on the cheap to the former tenants as a political expediency. They should have had properly means tested rents and the stock maintained and rotated for those most in need. The subsidy costs of the Part V social housing element in private developments were effectively passed on to the private buyers in those self same schemes.

It is a great pity that the sainted RPTB does not research and publish the real numbers for the costs incurred by landlords in instances where tenants do not pay rents due, trash properties and are legally facilitated by the state to prolong the cost burden incurred by the private sector.

Perhaps one of our think tanks could do proper research for once and establish the economic rent needed to fund a €250K rental property investment including service charges, insurance, RPT, letting fees, mortgage interest, repairs and renewals, unlet periods and still give a modest after tax return to the investor. The answer I fear would not be politically accpeptable, so hammering the landlord is the easy way out. We still need to grow up and start dealing with the core issues not the symptoms.

tradingwizz

I have a 2-bed apartment worth €240,000 in Dublin city and I have to sub it by €3,500 per year, or €7,000 after tax income. Not much investment joy here (rent is €1400).
A large cause for the rental increases in Dublin are from the likes of Kennedy Wilson, who charge high rents for 1 and 2-bed apartments. Also impacting the market are short-term lets and AirBNB as well as landlords who sublet to AirBNB agents.

mrawkward

tradingwizz wrote: »

I have a 2-bed apartment worth €240,000 in Dublin city and I have to sub it by €3,500 per year, or €7,000 after tax income. Not much investment joy here (rent is €1400).
A large cause for the rental increases in Dublin are from the likes of Kennedy Wilson, who charge high rents for 1 and 2-bed apartments. Also impacting the market are short-term lets and AirBNB as well as landlords who sublet to AirBNB agents.

Thus you would need about €2000 per month in rent just to break even. €2400 per month would give you a 1% return after tax!! A very harsh reality but pretty much what I expected, sadly.