House Purchase - Rent Caps

paulo6891

Hi,

I plan on buying a new apartment soon, and have a question about the rent cap.

The apartment was previously rented out well under the market value. As a new owner, how long am I subject to that lower rental yield (+4%)? If I live in it for X years, can I put it back on the market at fair price? (And if so, what is X!)

Also, it is quite an old apartment, and needs a complete overhaul. If I do such a big job on it, would that effect the price at which I can put it back on the market?

It's not a buy to let - I am just curious and would rather know before I go through with the purchase.

Thanks in advance

Claw Hammer

paulo6891 wrote: »

Hi,

I plan on buying a new apartment soon, and have a question about the rent cap.

The apartment was previously rented out well under the market value. As a new owner, how long am I subject to that lower rental yield (+4%)? If I live in it for X years, can I put it back on the market at fair price? (And if so, what is X!)

Also, it is quite an old apartment, and needs a complete overhaul. If I do such a big job on it, would that effect the price at which I can put it back on the market?

It's not a buy to let - I am just curious and would rather know before I go through with the purchase.

Thanks in advance

You can't break the rent cap other than buy altering the character of the apartment. Doing work which a landlord is obliged to do anyway does not break the rent cap.

4ensic15

The_Conductor wrote: »

You could remove the property from the rental market- for example by living in it, for a period of not less than 2 years, to extinguish the previous rent associated with the property.

That wouldn't take itr out from the rent cap. The rent cap applies to every property which was let in the two years prior to the rent cap coming into force. There is no way of getting the property out of the rent cap. There is nothing in the legislation to say that 2 years out of the rent cap means it can be let as a first letting.The rent cap was supposed to last for 3 years so in most cases it would have almost never happened that a property would be let, go out of letting for 2 years, and back in again, all within 3 years.

The_Conductor

4ensic15 wrote: »

That wouldn't take itr out from the rent cap. The rent cap applies to every property which was let in the two years prior to the rent cap coming into force. There is no way of getting the property out of the rent cap. There is nothing in the legislation to say that 2 years out of the rent cap means it can be let as a first letting.The rent cap was supposed to last for 3 years so in most cases it would have almost never happened that a property would be let, go out of letting for 2 years, and back in again, all within 3 years.

The only reason it wasn't challenged was because it was end-dated in the legislation. However, in the current environment- where the government are flailing at any possible scapegoat- its inevitable that its going to be renewed when the time comes............

OP- you want to live in the property anyway- how many bedrooms are in the place? Keep in mind you can earn up to 14k per annum on the rent-a-room scheme tax free............

As for doing up the property to extinguish the rent level- it would have to be renovated so as to change the nature of the property (e.g. an additional bedroom or structural rearragement of the property- but not a new kitchen/bathroom/floor etc.)

4ensic15

The_Conductor wrote: »

The only reason it wasn't challenged was because it was end-dated in the legislation. .)

It wasn't challenged because of meanness. The representative bodies for landlords didn't bother with a challenge because the members wouldn't pay for it.
It is now politically impossible to get rid of rent caps.

The_Conductor

I agree its impossible, from a political perspective- however, they're rapidly reaching the end of the road with using landlords as scapegoats- something has to give- and given the number of landlords running for the door- there simply isn't an awful lot more that can be done to further tar and feather them. Obviously- the answer is supply- and public supply at that- the manner in which the obligation to house those unfortunate enough not to be in a position to house themselves- was offloaded onto the private sector- has been an unmitigated disaster- and at this stage they're flogging a dead horse.

4ensic15

-The rent caps will be here until the vultures start hurting. The one way to stop rents rising would be to remove rent caps. The market would drop straight away.
I know a guy who has a house in Rathmines, he bought years ago. He now gets more for one of the bedsitters in it than the entire mortgage repayment. The other flats are basically profit!

Xterminator

4ensic15 wrote: »

The one way to stop rents rising would be to remove rent caps.!

That move taken in isolation would not do anything to lower rent prices. It would make matters worse and increase homelessness in the short term because there is a chronic undersupply of properties to rent.

why do people insist there is an easy or a quick fix to the housing and renting market in ireland?

4ensic15

Xterminator wrote: »

That move taken in isolation would not do anything to lower rent prices. It would make matters worse and increase homelessness in the short term because there is a chronic undersupply of properties to rent.

why do people insist there is an easy or a quick fix to the housing and renting market in ireland?

Removing rent caps would have a downward influence on rents. It would not be a cure-all. When there is a crisis all measures which would contribute to a solution should be deployed. there are habitable dwellings lying idle due to probate. Nothing is being done about it. there are habitable dwellings lying idle due to the home care scheme. Nothing is being done about it. The list goes on. the whole focus is on building, not administrative measure which would help immediately.

I don't know why people insist there is an easy or a quick fix to the housing and renting market in ireland. Why don't you ask those people?

paulo6891

Thanks for all the replies guys.

I am looking at 1 bed and 2 bed options, but I don't really plan on renting out the second room. I plan on using it as a long term investment, and only plan on staying there for a year or so.

The main issue is with one of my options. It is currently an expensive 2 bed apartment, which until recently got 1,400 on the market. It is really worth over 2k per month, going by current properties on daft, but that's another story.

So if I am reading this right, even if I live in it for 2 years and then go to rent it out, I am still screwed with keeping the rates low?

I could also go the renovations route, but that would mainly be cosmetic, so would I be out of luck in that instance too?

In comparison with another property that I'm looking at, the previous rent was 1500 and it is 80k cheaper. Granted, not as nice an area (but still quite fancy) but as an investment, if my conclusions above are correct, it seems to make more sense.

Thanks for all your help

Fol20

If your spending 15-20k on replacing boiler, toilets, kitchen, rads all in one go. This would normally be enough to go to market rate. If you just do a single improvement, it would not be enough.

dennyk

Here's the RTB's detailed guidance on the nature of a "substantial change" required to get an RPZ exemption:

https://onestopshop.rtb.ie/images/uploads/Comms%20and%20Research/RTB_Guidelines_for_good_practice_on_the_substantial_change_exemption_in_Rent_Pressure_Zones.pdf

Fian

paulo6891 wrote: »

Thanks for all the replies guys.

I am looking at 1 bed and 2 bed options, but I don't really plan on renting out the second room. I plan on using it as a long term investment, and only plan on staying there for a year or so.

The main issue is with one of my options. It is currently an expensive 2 bed apartment, which until recently got 1,400 on the market. It is really worth over 2k per month, going by current properties on daft, but that's another story.

So if I am reading this right, even if I live in it for 2 years and then go to rent it out, I am still screwed with keeping the rates low?

I could also go the renovations route, but that would mainly be cosmetic, so would I be out of luck in that instance too?

In comparison with another property that I'm looking at, the previous rent was 1500 and it is 80k cheaper. Granted, not as nice an area (but still quite fancy) but as an investment, if my conclusions above are correct, it seems to make more sense.

Thanks for all your help

If you find a property that has not been rented in teh two years before the RPZ was imposed you will be outside the rent caps alltogether. Not just on your first letting either - you will be legally entitled to raise to market rent annually.

Though I expect the legislation will eventually be changed to capture such properties - they won't be allowed to remain outside the RPZ permanently.

tvjunki

dennyk wrote: »

Here's the RTB's detailed guidance on the nature of a "substantial change" required to get an RPZ exemption:

https://onestopshop.rtb.ie/images/uploads/Comms%20and%20Research/RTB_Guidelines_for_good_practice_on_the_substantial_change_exemption_in_Rent_Pressure_Zones.pdf

By looking at the list of you make it more efficient maybe spend around 8to 10k that would allow the increase in rent. Don't forget you have to give your tenants a letter showing the before rent and what it is now.
A few years ago any work done before renting out could not be used to increase capital allowances. You may have to keep the bills until you go to sell to help you reduce your tax bill at the end. I don't know if this has changed.

At the moment the government are getting huge amount of tax from small landlords. This replaced the large stamp duty on properties. If the government reduced the tax there could be some movement. USC on gross rent is killing as well.

Fol20

tvjunki wrote: »

By looking at the list of you make it more efficient maybe spend around 8to 10k that would allow the increase in rent. Don't forget you have to give your tenants a letter showing the before rent and what it is now.
A few years ago any work done before renting out could not be used to increase capital allowances. You may have to keep the bills until you go to sell to help you reduce your tax bill at the end. I don't know if this has changed.

At the moment the government are getting huge amount of tax from small landlords. This replaced the large stamp duty on properties. If the government reduced the tax there could be some movement. USC on gross rent is killing as well.

I never understood why they made usc on gross rent minus current expenses rather gross rent -minus capital and current expenses. Can anyone please explain the reasoning behind this?

4ensic15

Fol20 wrote: »

If your spending 15-20k on replacing boiler, toilets, kitchen, rads all in one go. This would normally be enough to go to market rate. If you just do a single improvement, it would not be enough.

Can you show any RTB decisions where that was held? I have been to the RTB and it was stated that if it is work you have to do anyway, the rent cap is not broken. It doesn't matter how much is done in one go, it is just necessary replacement. It is not enhancement.

dccaresuckers

buy to let its fantastic but prices in dubliun arent worth to be honest.

Fol20

4ensic15 wrote: »

Can you show any RTB decisions where that was held? I have been to the RTB and it was stated that if it is work you have to do anyway, the rent cap is not broken. It doesn't matter how much is done in one go, it is just necessary replacement. It is not enhancement.

Take a look at page 10 on the RTB website below:
https://onestopshop.rtb.ie/images/uploads/Comms%20and%20Research/RTB_Guidelines_for_good_practice_on_the_substantial_change_exemption_in_Rent_Pressure_Zones.pdf

I think you will see your answer: “ a combination of a number of improvements may suffice as substantial improvement”.

Yes the figures do matter, you are highlighting the amount invested in changing your property. In all 3 scenarios thenRTB website offer why do you think they mention the price?

4ensic15

Fol20 wrote: »

Take a look at page 10 on the RTB website below:
https://onestopshop.rtb.ie/images/uploads/Comms%20and%20Research/RTB_Guidelines_for_good_practice_on_the_substantial_change_exemption_in_Rent_Pressure_Zones.pdf

I think you will see your answer: “ a combination of a number of improvements may suffice as substantial improvement”.

Yes the figures do matter, you are highlighting the amount invested in changing your property. In all 3 scenarios thenRTB website offer why do you think they mention the price?

Those are FAqs. The key word is improvements. Not repairs. I have been to adjudication. The adjudicator was not accepting the price as being relevant.Are there any Tribunal reports giving a view?

Fol20

4ensic15 wrote: »

Those are FAqs. The key word is improvements. Not repairs. I have been to adjudication. The adjudicator was not accepting the price as being relevant.Are there any Tribunal reports giving a view?

Yes they are faq, it even just says “best practices”. If a kitchen is 10-15 years old it might not need to be repair. You can choose to improve it by removing the entire old kitchen and put in a new kitchen. Same with the rest of the stuff. A repair is if it’s broken and improvements are when it is making something better. I have never had to fight something specifically about this topic in the RTB however this is what I would be using since it’s up on their website.

What adjudication do you have so I can review them to see if they had other circumstances that would cause the ll loose.

4ensic15

Fol20 wrote: »

Yes they are faq, it even just says “best practices”. If a kitchen is 10-15 years old it might not need to be repair. You can choose to improve it by removing the entire old kitchen and put in a new kitchen. Same with the rest of the stuff. A repair is if it’s broken and improvements are when it is making something better. I have never had to fight something specifically about this topic in the RTB however this is what I would be using since it’s up on their website.

What adjudication do you have so I can review them to see if they had other circumstances that would cause the ll loose.

Adjudications are not published. Those were the adjudicators comments. Specifically it was mentioned that replacing 17 year old kitchen units would not be deemed an improvement.

Fol20

4ensic15 wrote: »

Adjudications are not published. Those were the adjudicators comments. Specifically it was mentioned that replacing 17 year old kitchen units would not be deemed an improvement.

Well i Don’t know what you call replacing a kitchen that is functioning ok. It is not a repair. As the RTB even indicates on their best practices that a combination of them are acceptable so I will take their written basis for my approach unless proven otherwise.

Graham

Fol20 wrote: »

Well i Don’t know what you call replacing a kitchen that is functioning ok. It is not a repair.

I wouldn't call it a substantial change in the nature of the property.

Fol20

Graham wrote: »

I wouldn't call it a substantial change in the nature of the property.

This on its own may not however “a combination of them does suffice” as it say it on the link above.

Graham

may suffice

Fol20

Graham wrote: »

may suffice

Your right fair point. Since it’s still somewhat vague where a few people disagree with what I’m saying it’s hard to say what works and doesn’t work. I can only base it on what I believe it to be and go from there

4ensic15

Fol20 wrote: »

Your right fair point. Since it’s still somewhat vague where a few people disagree with what I’m saying it’s hard to say what works and doesn’t work. I can only base it on what I believe it to be and go from there

The RTBN is notoriously pro-tenant so that is where I would start. When an adjudicator says replacing a kitchen is not a change even when it was combined with other work, that is not going to give me any confidence that it is enough.

The_Conductor

It'll probably suffice- unless its challenged- in which case- they'll roll over............