Landlords, what have you decided to do about the new amendments?

Lumen

Senator Palpatine wrote: »

But how does it help tenants to introduce rules which force good landlords to increase rents?

Once those rules are in place the tenants have more certainty about future rents.

Senator Palpatine

Lumen wrote: »

Once those rules are in place the tenants have more certainty about future rents.

My tenants were paying €1,200 a month and could have paid that as long as they want (which I understand would have been another two years).

Now they're paying €1,500 a month which they can barely afford.

How is that to their benefit?

Lumen

Senator Palpatine wrote: »

My tenants were paying €1,200 a month and could have paid that as long as they want (which I understand would have been another two years).

Now they're paying €1,500 a month which they can barely afford.

How is that to their benefit?

It's difficult to reconcile (a) landlords complaining that the new rules will prevent them from making their righteous profit by raising rents in future, (b) landlords complaining that the new rules will force them to raise rents now.

What is so special about this moment right now that you would prefer to forego rent increases? Do you want your profits or not?

Senator Palpatine

Lumen wrote: »

It's difficult to reconcile (a) landlords complaining that the new rules will prevent them from making their righteous profit by raising rents in future, (b) landlords complaining that the new rules will force them to raise rents now.

What is so special about this moment right now that you would prefer to forego rent increases? Do you want your profits or not?

No, I don't want my profit now actually.

I'd prefer to leave things as is, but avoid having the value of my asset devastated.

That's not possible, so against my will I had to increase my tenants' rent by €300 a month/25%.

robp

Lumen wrote: »

It's difficult to reconcile (a) landlords complaining that the new rules will prevent them from making their righteous profit by raising rents in future, (b) landlords complaining that the new rules will force them to raise rents now.

What is so special about this moment right now that you would prefer to forego rent increases? Do you want your profits or not?

Its not really when you consider that many people are only raising rents to mitigate losses from events down the line that reduce profits (for example tax increases). Or simply to avoid undercharging as rents surge upwards in the coming years. Making this a moral issue for landlords achieves nothing.

mel123

Ive been following this thread and reading all the posts, but im getting confused what the new amendment actually means in plain english, can someone explain please?

sublime1

mel123 wrote: »

Ive been following this thread and reading all the posts, but im getting confused what the new amendment actually means in plain english, can someone explain please?

They're explained here. Basically a 4% per annum cap on rental increases in Dublin and Cork, plus tenants can indefinitely renew the lease after 6 months. http://www.rtb.ie/media-research/news-centre/latest-news/2016/12/23/rental-predictability-measures-introduced

murphaph

I'm wondering what will define holiday letting in Ireland. Here in Berlin the law did not specify but said that a booking of days or weeks would be considered a holiday letting as the tenant would not have made Berlin the centre of their life. The received wisdom says over 2 months and you are safe from the airbnb ban. You now see 2 month minimum, 12 month maximum lettings on places like wunderflats.de. I wonder what minimum term you'll need to hit in Ireland to not be considered holiday letting.

Graham

murphaph wrote: »

I'm wondering what will define holiday letting in Ireland.

A letting with no RTB registration in any property with residential planning permission would be a reasonable starting point.

Not a perfect solution by any stretch but a start.

Dizzyblonde

We are reluctant landlords, having built a house just before the crash and been left unable to sell the old one. We've had the same tenants for three years and because they're good tenants we never raised the rent once even though it doesn't come close to covering the mortgage repayments.
Due to other stuff going on, we weren't aware of this rent strategy and had planned a small increase early this year (which would still leave the rent far below the norm). Now we've realised that we can only increase the rent by an absolute pittance. As usual, if you try to do the right thing in Ireland you're penalised.

newacc2015

Lumen wrote: »

Do you really mean that?

Yeah of course! If wages grow faster than productivity, it results in a loss of competitiveness. Have we all forgotten that was a massive issue when the celtic tiger collapsed? Irish wages were a lot more expensive than most of Europe without the extra productivity.

What do you think happens when wage growth exceeds productivity?

Lumen wrote: »

If you look at a gross-yielding rental of 6% with no mortgage, account for void periods, maintenance, marginal income tax and so on, you get an after-tax yield of about 2-3% with no mortgage. That's bad, but it's better than 0% from government bonds or savings accounts.

If you look at the same investment with 75% LTV and 80% interest relief, the net yield is zero. If you could get 100% interest relief it'd be more like 2.5%.

So the entire profit is swallowed by a combination of bank margins and taxes.

OTOH, it's not just landlording that's generating crap returns. ZIRP/NIRP/secular stagnation have driven down yields on everything. Stockmarket returns are coming entirely from price appreciation rather than dividends, and I'm not sure that tax-efficient reinvestment via buybacks can entirely explain this.

Whether it's worth sticking with landlording for possible capital gains or pulling out and sitting on an easy 0% from savings is something only the future can tell us, but history suggests that the times of most dismal sentiment often produce the best returns.

I don't disagree that we are in a period of low yields. But you can get a pretax yield of about 3.35% from Hibernia REIT. There is no risk in that. You can invest in highly diversified ETFs with yields of 3.5-4%. Plus there is capital appreciation. You can buy ETFs that dont pay out, but appreciate in capital gains for tax purposes.

When Benjamin Graham had that in mind. It wasn't a period of near non-stop intervention of the US Government in the market. I don't see how any one will benefit from this Government intervention. It is not rational and will hammer returns.

Landlord will sell up if they can't see a light at the end of the tunnel

Lumen

newacc2015 wrote: »

Yeah of course! If wages grow faster than productivity, it results in a loss of competitiveness. Have we all forgotten that was a massive issue when the celtic tiger collapsed? Irish wages were a lot more expensive than most of Europe without the extra productivity.

What do you think happens when wage growth exceeds productivity?

But you wrote:

newacc2015 wrote: »

We should desire wage growth that matches or exceeds productivity.

I assume that was an error.

newacc2015 wrote: »

I don't disagree that we are in a period of low yields. But you can get a pretax yield of about 3.35% from Hibernia REIT. There is no risk in that. You can invest in highly diversified ETFs with yields of 3.5-4%.

You really shouldn't make statements like "there is no risk", it's not just about the flow of income. The only investment typically considered risk-free is short-duration government bonds.

Irish REITs have a very short history, and I don't know enough about the way they're structured to judge the risk but here's a chart of the S&P U.S. REIT Index



2007 wasn't a great time to be heavily invested in US REITs.

Anyway, that's not to say REITs are a bad investment. I don't invest in them myself but only because I consider one house to be enough exposure to the property market, everything else is in shares, bonds and savings.

Irish landlords tend to suffer from classic amateur investment errors: massive concentration of risk, lack of diversification and home bias, but I'm no better than a dart throwing monkey myself.

The best reason to buy property is because it will satisfy some current or future personal housing need, e.g. apartment for kids when they're older, but even that isn't without risk. If the Dublin tax avoidance bubble bursts there won't be the job market to sustain even current prices and those kids may have a housing need in another country.

athtrasna

Mod note

PLEASE stay on topic. This is not a thread to discuss investments and shares

76544567

A friend who never puts up his rent for sitting g tenants was just telling me that he was looking at the calculations on the RTB website today and he thinks that now he is being forced to put it up after 24 months.
He says that the formula punishes someone who doesn't increase their rent straight away at the first opportunity when someone in living in the house less than two years. Because if he waited for 4 years or until after the tenant left to raise for the next tenant the formula punishes him for this. He is better of raising it after the two years and then every year after that.
Basically it will effect the value should he sell too. That's why he is worried.
He actually doesn't want to raise the rent after the two years are up, but the downside is for him if he doesn't.
I haven't checked the figures yet using the RTB published formula, but that's a but of an oversight.

Michael D Not Higgins

76544567 wrote: »

A friend who never puts up his rent for sitting g tenants was just telling me that he was looking at the calculations on the RTB website today and he thinks that now he is being forced to put it up after 24 months.
He says that the formula punishes someone who doesn't increase their rent straight away at the first opportunity when someone in living in the house less than two years. Because if he waited for 4 years or until after the tenant left to raise for the next tenant the formula punishes him for this. He is better of raising it after the two years and then every year after that.
Basically it will effect the value should he sell too. That's why he is worried.
He actually doesn't want to raise the rent after the two years are up, but the downside is for him if he doesn't.
I haven't checked the figures yet using the RTB published formula, but that's a but of an oversight.

I've copied the formula and text from the RTB below.

R x (1 + 0.04 x t/m)
*please note that you should do your calculations working from right to left
For tenancies that are already in existence a review is only permitted 24 months after the tenancy came in to existence or 24 months from the date the rent was last set.
R = The amount of rent last set under a tenancy for the dwelling (the current rent amount)
t = The number of months between the date the current rent came in to effect and the date the new rent amount will come in to effect.
m = the number of months since your last rent review – you must enter 24 OR 12
For tenancies that are already in existence a review is only permitted 24 months after the tenancy came in to existence or 24 months from the date the rent was last set. In this instance m = 24
Once this first rent review has taken place, all reviews thereafter are permitted every 12 months. In this instance m = 12

The salient bit is the value of m which must be 24 or 12. When I first read the formula it seemed like m was the number of months since the last review and t was the number of months between the rent increases, so if you waited 36 months it would still be 36/36, i.e. the same as if you waited the minimum 24 months 24/24.

However, it's actually a value of 24 for the first review and 12 for each one after so after three years it's 36/24. When going through it, you would get an increase of 6% at year three. Doing it in two reviews gets 4% at year two and another 4% at year three so a little over 8% total.

It does benefit the landlord to do a review at every earliest opportunity.

Edit: taking it to the extreme, if a review is due now and the measures are only in for three years. Doing reviews at earliest opportunity each year gets nearly 17% increase at the end v 10% if you do one review in three years time.

Jayesdiem

Hi all. Quick question over a confusing issue and would appreciate some help. My brother lives abroad and recently put his house on the market at a higher rent than previous (i.e. > 4%) as it was well below market rate. The deposit was paid by the tenant and the lease was signed off prior to the introduction of the new legislation with the contract starting on 28th Dec, after the legislation was brought in. Is he in breach of the new laws? We are getting conflicting views from the PRTB who say he is and a solicitor who says he is ok because all contracts were signed before the legislation was brought in, making them binding. Any help appreciated!

Earl Woods

That's perfectly fine.

Jayesdiem

That's great, many thanks.

April 73

Jayesdiem wrote: »

Hi all. Quick question over a confusing issue and would appreciate some help. My brother lives abroad and recently put his house on the market at a higher rent than previous (i.e. > 4%) as it was well below market rate. The deposit was paid by the tenant and the lease was signed off prior to the introduction of the new legislation with the contract starting on 28th Dec, after the legislation was brought in. Is he in breach of the new laws? We are getting conflicting views from the PRTB who say he is and a solicitor who says he is ok because all contracts were signed before the legislation was brought in, making them binding. Any help appreciated!

Who asked the RTB this question?
If everything was done & signed prior to the change how can anyone be a mind reader to know what's going to happen in the future? If this is the response from the RTB I despair.

Jayesdiem

That did occur to me! I think they just give any old answer to fob you off?

4ensic15

Normally they refuse to give advice at all.

athtrasna

Mod note

Any discussion of non compliance with the law will not be tolerated on this forum. Thanks

mdebets

Michael D Not Higgins wrote: »

I've copied the formula and text from the RTB below.



The salient bit is the value of m which must be 24 or 12. When I first read the formula it seemed like m was the number of months since the last review and t was the number of months between the rent increases, so if you waited 36 months it would still be 36/36, i.e. the same as if you waited the minimum 24 months 24/24.

However, it's actually a value of 24 for the first review and 12 for each one after so after three years it's 36/24. When going through it, you would get an increase of 6% at year three. Doing it in two reviews gets 4% at year two and another 4% at year three so a little over 8% total.

It does benefit the landlord to do a review at every earliest opportunity.

Edit: taking it to the extreme, if a review is due now and the measures are only in for three years. Doing reviews at earliest opportunity each year gets nearly 17% increase at the end v 10% if you do one review in three years time.

Could someone please explain this formula to me. How can t (= months between rent effective dates) and m (=time between rent reviews) be different?

Michael D Not Higgins

mdebets wrote: »

Could someone please explain this formula to me. How can t (= months between rent effective dates) and m (=time between rent reviews) be different?

It's badly worded. I had to read over it a few times to understand. m isn't actually time between rent reviews, it's 24 or 12 depending on which review it is.

The Ging and I

I don't live in Ireland but have a very rentable (2200 a month)place. I had one great tenant there (450 pm) as I was essentially renting him a room. Im back about 6 weeks a year. This suited both of us and we got on very well. Unfortunately for me he got a job abroad.
I don't have the time to try find a house share and by the time I pay all the taxes accountant etc I don't have the financial inclination to bother.
Simple solution leave it empty until the capitol gains drops and flog it.

76544567

Last week notice went out that I am selling and the required notice periods were given.
I think next week.
Decided over the last few days to sell the remaining one too, so notice going out next week.
If they sell they sell.
If they don't they don't and I'll do airbnb or something like it until they do sell.

I was going to wait til i heard anything from the ipoa, but I really don't think they are more than a couple of guys happy to run a website. Now that it's time to act I don't think they'll be up to it.

GGTrek

Have you tried to call IPOA? I shall try tomorrow morning.

76544567

GGTrek wrote: »

Have you tried to call IPOA? I shall try tomorrow morning.

Sent several emails and no answer.
I haven't tried to call.
Decided I'm out anyway at this stage.
This country is totally against property investment unless you are a REIT.
And even then it's been regulated to death.

It's all one sided and against the investor.
Only option left is to sell, and they are already talking about removing that option too.

mdebets

Michael D Not Higgins wrote: »

It's badly worded. I had to read over it a few times to understand. m isn't actually time between rent reviews, it's 24 or 12 depending on which review it is.

But wouldn't that still be the same? If the last rent review was 24 month ago, so wouldn't be the last rent raise be 24 months ago as well and the same for 12 month, so leading in both case to the result of 1?

handlemaster

Would be interested to hear what landlords will be doing for this year and next regarding holding on, buying or selling. And the reasons why. It looks like there are lot of uncertainies going forward.