The Irish rental market needs more regulation

Donald Trump

Eric Cartman wrote: »

Exactly, so it has to cover the cost of itself including the mortgage payments to break even, thus when you lump the obscene tax on top, rent usually has to be around 2x the mortgage payment to break even in the short term, hence my original point, landlords aren't all scrooge mcduck sitting on piles of cash screwing over tenants like the original post suggested.

No it doesn't.


Lets so a simplistic example. I am not getting any interest on my savings so I agree to loan Eric 100k at an interest rate of 3%. You will repay me at a rate of 1000 per month. (In the first year, that will be 250 interest and 750 off the capital value...ok not exact but good enough for us here).


Eric goes and buys a house for 100k using that money. He installs a tenant paying 800 a month. He pays 400 tax on this and puts 600 of his own money towards the repayments.



At the end of one year, Eric decides to sell the house and pay off the outstanding balance.



Lets look at what Eric has paid first 12 months @ 1000 a month = 12000.
How much after tax income from rent? 12 months @ 400 a month = 4800

This means that net, over those 12 months, Eric has invested 7200 of his own money. The average investment time is 6 months for that.



How much of the capital value has been reduced ? 12 months @ 750 a month = 9000. So Eric will owe 91k.


Eric sells the house for what he bought it for. He receives 100k, pays the 91k balance and has 9k left in his pocket.


So he turned 7200, invested for an average of only 6 months, into 9000. 1800 profit.....That's a 50% rate of return (annualised) even though you say he was far far below the "breaking even" point.......By your criteria he needed to rent it for 2k a month to break even........ . Yet he made a profit. What sort of black magic is he up to!!!!

sk8board

Donald Trump wrote: »

No it doesn't.


Lets so a simplistic example. I am not getting any interest on my savings so I agree to loan Eric 100k at an interest rate of 3%. You will repay me at a rate of 1000 per month. (In the first year, that will be 250 interest and 750 off the capital value...ok not exact but good enough for us here).


Eric goes and buys a house for 100k using that money. He installs a tenant paying 800 a month. He pays 400 tax on this and puts 600 of his own money towards the repayments.



At the end of one year, Eric decides to sell the house and pay off the outstanding balance.



Lets look at what Eric has paid first 12 months @ 1000 a month = 12000.
How much after tax income from rent? 12 months @ 400 a month = 4800

This means that net, over those 12 months, Eric has invested 7200 of his own money. The average investment time is 6 months for that.



How much of the capital value has been reduced ? 12 months @ 750 a month = 9000. So Eric will owe 91k.


Eric sells the house for what he bought it for. He receives 100k, pays the 91k balance and has 9k left in his pocket.


So he turned 7200, invested for an average of only 6 months, into 9000. 1800 profit.....That's a 50% rate of return (annualised) even though you say he was far far below the "breaking even" point.......By your criteria he needed to rent it for 2k a month to break even........ . Yet he made a profit. What sort of black magic is he up to!!!!

With entry and exit costs of about €2-3k x 2, Eric is not really a good investor, that’s for sure.

(full time LL here, btw). You are vastly over simplifying the maths to suit your point. But the s o is everyone else

suicide_circus

suicide_circus wrote: »

if the government owned all property, it could just allocate housing based on need. It could also control all factories, farms and transport.

Eric Cartman wrote: »

I can't think of anything more horrific.

but it's worked every time its been tried!

Donald Trump

sk8board wrote: »

With entry and exit costs of about €2-3k x 2, Eric is not really a good investor, that’s for sure.

(full time LL here, btw). You are vastly over simplifying the maths to suit your point. But the s o is everyone else

But lets be realistic, you shouldn't invest short term in an illiquid asset like property.


Nonetheless it shows the absurdity of the claim that you need 2x full repayment rate to "break even".


I kept the maths as simple as possible because it seems that a lot of people have difficulty grasping it.


You can feel free to take issue with any of my figures if you think that they are really off or out of scale. 3% IR probably isn't too far off. 1k a month for a 100k mortgage is probably a duration of a little shorter than normal. 800 a month probably isn't that far off for a 100k house... but even if you want to drop that to 600 a month then you are still only knocking 1200 net off his income so he'll still be up on the year!

sk8board

Donald Trump wrote: »

But lets be realistic, you shouldn't invest short term in an illiquid asset like property.


Nonetheless it shows the absurdity of the claim that you need 2x full repayment rate to "break even".


I kept the maths as simple as possible because it seems that a lot of people have difficulty grasping it.


You can feel free to take issue with any of my figures if you think that they are really off or out of scale. 3% IR probably isn't too far off. 1k a month for a 100k mortgage is probably a duration of a little shorter than normal. 800 a month probably isn't that far off for a 100k house... but even if you want to drop that to 600 a month then you are still only knocking 1200 net off his income so he'll still be up on the year!

Nothing wrong with your example - however the biggest issue the market has for landlords is the risk - not the return.

66% of the residential LL’s rent just one property (120k from 170k, according to RTB report).
That means that 100% of your investment return is reliant on that tenant (a total stranger, really) paying on time every month. And every so often a new stranger will need to be found and vetted.
If you have a mortgage repayment, it’s even higher risk.
If you need a full time job to supplement your rental income, then the returns are hugely reduced by tax.

There is simply no logical reason for someone with one rental property to take such a high risk for such a return.

And so they sell up in their thousands (ref: RTB annual report) and get out of the market - due to the risks, not the returns.

Donald Trump

sk8board wrote: »

Nothing wrong with your example - however the biggest issue the market has for landlords is the risk - not the return.

66% of the residential LL’s rent just one property (120k from 170k, according to RTB report).
That means that 100% of your mortgage repayment or income is reliant on that tenant (a total stranger, really) paying on time every month. And every so often a new stranger will need to be found and vetted.

There is simply no logical reason for someone with one rental property to take such a high risk.

And so they sell up in their thousands (ref: RTB annual report) and get out of the market - due to the risks, not the returns.

Of course. I agree with you. I tried making that point here on a thread many months ago and I was vilified for it.



It is very inefficient for single person or an entity with one tenant to hedge that risk. If you have 100 landlords each with one house and 5% of tenants default then you will have 5 landlords who lose everything and 95 who get 100%.


If those 100 pool their resources, set up an entity which buys 100 houses. owned equally between them then they each get 95% of the headline rental income. Nobody goes bust.


(Again, deliberately simplistic to illustrate the basic idea).


You demand a larger return for a larger risk. That inefficiency is why the one-tenant fella cannot compete with the larger diversified entities.

steddyeddy

I bought my house in Cork (Carrigaline) with the intention of living in it. With the banking crash, and loss of employment, I was forced to rent out the place. At the time, the rental price barely covered my mortgage without services, taxes or the insurance on the place/assets.

In the years since the banking crash, the rental amounts have gradually increased over time to reach a point where I can make an actual profit (first actual profit two years ago). However, I also have over a decade of consistent losses in the thousands each year during that time.... and I'm not even close to making up for those years of losses.

Renting out a house has expenses. Many tenants are great (although it's potluck to find them), who do look after the place, but damages occur along with normal repairs. And there are many other tenants who aren't even remotely good, who treat the place like a dump, and skip on the charges for the damage they did. A deposit rarely, if ever, covers the cost of damages done to the place, and a LL can't ask for higher deposits if they want to remain competitive. But even without real damage to the place, each time a tenant moves out, the place needs to be painted, repaired, and checked over. That can take a while, which means no income during the period.

An example... I have a no dogs rule. Why? Because they dig up and **** all over the gardens. The house has wooden floors, and the dogs invariably scratch the **** out of them, along with other problems. I've had two different tenants who agreed to the rental agreement, and then later, got themselves dogs. You can guess what happened. The tenants didn't clean up after the dogs, and when they moved out, I had to replace both gardens... and redo the floors. That's expensive, when you're barely making a profit on the place.

It's wonderful when you find tenants who stay a year or longer... but they're rare. A lot of people rent for 6 months, and then, announce they're moving on. Which leaves you searching for replacements.. another series of costs. No need to mention the tenants who sign up for 6 months and bail after 3, leaving their deposits behind.. but generally messing the place up in the process.

I find with these threads that the people who complain about LL have no clue about what's involved in maintaining a property. There are heaps of different costs... and many of them are far less obvious than you might think.

steddyeddy wrote: »

Actually the court ruled in their favour so I doubt the scum hypothesis. I worked in UCD's student accommodation sector. I've seen countless times were the landlord behaved unlawfully.

Tenants have so many "rights" that it's often a bit of a minefield for LL's. Courts are typically very interested in protecting the rights of tenants, even when it's obvious that the tenant was at fault. Honestly, I wouldn't dream of investing in a property with the aim of renting it out, because the scope for getting screwed by the law is pretty wide. While I've avoided it, a number of my neighbors who also rent out have been hit with fines even when it was clear that the tenant had broken the rental agreement, and damaged the property... I wouldn't be looking to the courts to give a LL a fair shake. Which is why most LL will try to settle out of court.

People on boards like to present the idea that tenants are constantly getting screwed by LL... as if they don't have many protections. They do. Fact is, I pity the small time LL more than the tenants, or the larger companies who make renting a core part of their business. (those businesses can, at least, not wince every time they need a solicitor to do something for them... Solicitor services can be damn expensive)

steddyeddy wrote: »

It seems the case that a commercial landlord might avoid a loss but the economy takes a much bigger hit in the process. Is this sustainable? What's more important, that businesses stay open or that landlords are protected from loss?

Depends whether you're dumping all LL in with Private limited companies who are geared towards the commercial end of things. Private limited companies have certain protections for that type of business. Would you be seeking for those protections to removed from every business of that type, or simply focusing on commercial LL.

Manach

Has the OP ever taken a book on the laws and regulations on renting in their hands. For Ireland alone these are hundreds of pages in size and to increase the regulatory burden is not going to free-up or ease issues on the market.

Mad_maxx

rogue tenants are far more plentiful than rogue landlords for the simple reason the law protects rogue tenants , a rogue landlord needs to be an out and out scumbag who doesnt give a sh1t , any tenant can break bad with more or less no fear of consequence

Mad_maxx

Mad_maxx wrote: »

rogue tenants are far more plentiful than rogue landlords for the simple reason the law protects rogue tenants , a rogue landlord needs to be an out and out scumbag who doesnt give a sh1t , any tenant can break bad with more or less no fear of consequence

It's not cost effective to chase them.

I worked as a credit controller for over a decade. I know how to track down people, but getting people to pay for broken agreements is typically far too expensive in legal costs (if you manage to win at all, which is extremely doubtful). Most rogue tenants would be written off as a unavoidable expense.

steddyeddy

Mad_maxx wrote: »

rogue tenants are far more plentiful than rogue landlords for the simple reason the law protects rogue tenants , a rogue landlord needs to be an out and out scumbag who doesnt give a sh1t , any tenant can break bad with more or less no fear of consequence

Well tenants are more numerous than LLs anyway. However, I've never made the point that tenants are blameless either. I subletted a house when I was a student, great situation until two scumbags moved in and wrecked the good relationship we had with the landlord. He himself picked these two girls and assumed they were decent girls because their father was a garda. I warned him against it as they had been kicked out of previous accommodation but he thought middle class can't equal scum. Unfortunately for everyone he was dead wrong. They destroyed the place after I moved out.

osarusan

Better regulations to protect tenants and landlords from chancers.

And as somebody else said, more, much more, enforcement of existing (and any new) regulations.

Eric Cartman

Donald Trump wrote: »

No it doesn't.


Lets so a simplistic example. I am not getting any interest on my savings so I agree to loan Eric 100k at an interest rate of 3%. You will repay me at a rate of 1000 per month. (In the first year, that will be 250 interest and 750 off the capital value...ok not exact but good enough for us here).


Eric goes and buys a house for 100k using that money. He installs a tenant paying 800 a month. He pays 400 tax on this and puts 600 of his own money towards the repayments.



At the end of one year, Eric decides to sell the house and pay off the outstanding balance.



Lets look at what Eric has paid first 12 months @ 1000 a month = 12000.
How much after tax income from rent? 12 months @ 400 a month = 4800

This means that net, over those 12 months, Eric has invested 7200 of his own money. The average investment time is 6 months for that.



How much of the capital value has been reduced ? 12 months @ 750 a month = 9000. So Eric will owe 91k.


Eric sells the house for what he bought it for. He receives 100k, pays the 91k balance and has 9k left in his pocket.


So he turned 7200, invested for an average of only 6 months, into 9000. 1800 profit.....That's a 50% rate of return (annualised) even though you say he was far far below the "breaking even" point.......By your criteria he needed to rent it for 2k a month to break even........ . Yet he made a profit. What sort of black magic is he up to!!!!

and over the entire life cycle including selling the asset that works, but if we look at it on a micro instead of macro level , you have somebody with a 1400 quid a month mortgage and owe an income tax payment in October, so if you're banking your income tax (pre-emptively) on a monthly basis you still need 1400 quid after that to pay that mortgage. you're not considering the exit on the investment , value gains etc.. the first 10 years of your investment before any inflation does anything significant , you have to bill roughly twice the mortgage per month to break even on an annual basis.

Donald Trump

Eric Cartman wrote: »

and over the entire life cycle including selling the asset that works, but if we look at it on a micro instead of macro level , you have somebody with a 1400 quid a month mortgage and owe an income tax payment in October, so if you're banking your income tax (pre-emptively) on a monthly basis you still need 1400 quid after that to pay that mortgage. you're not considering the exit on the investment , value gains etc.. the first 10 years of your investment before any inflation does anything significant , you have to bill roughly twice the mortgage per month to break even on an annual basis.

You are confusing "break even" with cash flow.



If a person will have liquidity problems then they shouldn't invest in an illiquid asset. If they didn't realise that a particular asset class was illiquid then why on earth should rules to changed to reward them for rushing into an investment where they didn't even understand the most basic properties of that investment!

Eric Cartman

Donald Trump wrote: »

You are confusing "break even" with cash flow.



If a person will have liquidity problems then they shouldn't invest in an illiquid asset. If they didn't realise that a particular asset class was illiquid then why on earth should rules to changed to reward them for rushing into an investment where they didn't even understand the most basic properties of that investment!

there are almost no small landlords who are liquid to that extent, if you exclude breaking even in a micro / cashflow aspect you're removing about 80% of rental properties in this land. yet again,(for landlords) if its not paying twice the mortgage amount its a bad buy , (for tenants) if the landlord is charging you less than twice the mortgage , they're not greedy moustache twiddlers

Cupatae

Blaze420 wrote: »

No they aren’t, commercial landlords perhaps but the domestic landlord is vilified for no reason (and no I’m not a landlord but I am renting). What do you expect them to do? If a house is going for 1600 in the area they own property should they just be good souls and price it at 1000? That’s not how it works and that’s not how any supply/demand market works.

Haha they should weld it on to em and ask for 1800 , what else are they meant to do ? They d be charity cases otherwise.

They should keep driving prices up for profit aswell because what else are ya meant to do ? Sky's the limit and if they can't pay it out with em they should pay there rent on time or get the boot . Hon the LL !! up the rent !!

If you ve to put a family out on the street so be it just tell em... Supply and demand baby... Supply and demand!

Cupatae

Eric Cartman wrote: »

its not an exact figure but considering the mortgage is paid after tax (interest relief only goes so far) , its a good rule of thumb to say 2x mortgage payment to break even.

Does the house just up and vanish in this equation ?

Eric Cartman

Cupatae wrote: »

Does the house just up and vanish in this equation ?

as explained over pages, thats break even in the micro sense of keeping yourself profitable year to year,

Cupatae

Eric Cartman wrote: »

as explained over pages, thats break even in the micro sense of keeping yourself profitable year to year,

Are you tryna say landlords don't make a profit? I'm not seeing the break even part.

Donald Trump

Eric Cartman wrote: »

there are almost no small landlords who are liquid to that extent, if you exclude breaking even in a micro / cashflow aspect you're removing about 80% of rental properties in this land. yet again,(for landlords) if its not paying twice the mortgage amount its a bad buy , (for tenants) if the landlord is charging you less than twice the mortgage , they're not greedy moustache twiddlers

That expectation is madness.



You think that the market should be such that an individual can get a mortgage, then have a tenant that pays the interest (cost) of that capital, plus the principal of the capital plus the tax on the value of the asset for you (which is indirectly effectively what is being paid on the rental income) so that you end up with a "free" house at the end of it? Free in the sense that the renter will have covered all costs. And all because you want that house but don't actually have the necessary liquidity or cash flow. That's madness.

Jjohnrockk

Cupatae wrote: »

Are you tryna say landlords don't make a profit? I'm not seeing the break even part.

I am.blessed to learn that LL are doing charity. Renting houses at loss is a charity in any country. Thanks LL for being so kind hearted.

Do me a favour- offer me your spare money. I shall give you some returns in positive. What I fear is you may else invest extra money into another house and rent it for charity I.e at loss.

May be hidden secret is at the end of morthage LL gift houses to homeless for free.

Who invests at loss? All the big companies who renting houses in Dublin are making losses? Last I read was some big corporate name had jump of 150% profits since a previous year riding on rental income. Charity happens at 50% jump in profits???

Cupatae

Jjohnrockk wrote: »

I am.blessed to learn that LL are doing charity. Renting houses at loss is a charity in any country. Thanks LL for being so kind hearted.

Do me a favour- offer me your spare money. I shall give you some returns in positive. What I fear is you may else invest extra money into another house and rent it for charity I.e at loss.

May be hidden secret is at the end of morthage LL gift houses to homeless for free.

Who invests at loss? All the big companies who renting houses in Dublin are making losses? Last I read was some big corporate name had jump of 150% profits since a previous year riding on rental income. Charity happens at 50% jump in profits???

They sure do make profits , you d be silly to think any ll is renting for the craic

I find it strange to see so much sympathy for LL s on here.. I don't hate em but I certainly dont have sympathy most are doing well for themselves at worst they ll have a house

runawaybishop

Cupatae wrote: »

They sure do make profits , you d be silly to think any ll is renting for the craic

I find it strange to see so much sympathy for LL s on here.. I don't hate em but I certainly dont have sympathy most are doing well for themselves at worst they ll have a house

At worst they will have sunk more into a house than it is worth. That's the risk they take, waiting 10/20 years to hopefully realise a profit

markodaly

steddyeddy wrote: »

If the corona pandemic has highlighted on thing it's that the Irish rental market has some serious problems. In an article from the Independent, Amy Molloy reveals that the some Irish landlords have repeatedly flouted the tenancy laws, with one landlord owing 44k due to repeatedly unlawful ending of tenancies.




On the Commercial side of things we're seeing the closure of Bewley's, a business entity which sees over 600,000 customers pass through their doors. The closure of a business affects all of the other businesses around it through loss of custom.

More recently Nick's coffee company in Ranelagh, Dublin has been closed by a local landlord responsible for closing several businesses in the area.


I know people will say that being late with rent is a problem for landlords too but where's the priority here? A landlord that misses out on some payment, in part due to an epidemic or a business like Bewley's which sees up to 600,000 a year pass through its doors.

It seems the case that a commercial landlord might avoid a loss but the economy takes a much bigger hit in the process. Is this sustainable? What's more important, that businesses stay open or that landlords are protected from loss?

I am not sure what the problem is here.
The landlords in question here are rightly being asked to compensate their tenants for illegal behavior.

The issue of commercial landlords is a different thing entirely. An owner of a building will have a big mortgage to pay. Covid-19 will shake up the entire sector though, especially office buildings.

beauf

steddyeddy wrote: »

If the corona pandemic has highlighted on thing it's that the Irish rental market has some serious problems. In an article from the Independent, Amy Molloy reveals that the some Irish landlords have repeatedly flouted the tenancy laws, with one landlord owing 44k due to repeatedly unlawful ending of tenancies.


On the Commercial side of things we're seeing the closure of Bewley's, a business entity which sees over 600,000 customers pass through their doors. The closure of a business affects all of the other businesses around it through loss of custom.

More recently Nick's coffee company in Ranelagh, Dublin has been closed by a local landlord responsible for closing several businesses in the area.


I know people will say that being late with rent is a problem for landlords too but where's the priority here? A landlord that misses out on some payment, in part due to an epidemic or a business like Bewley's which sees up to 600,000 a year pass through its doors.

It seems the case that a commercial landlord might avoid a loss but the economy takes a much bigger hit in the process. Is this sustainable? What's more important, that businesses stay open or that landlords are protected from loss?

Did you miss the news for the last 20 yrs and the housing crisis or something?

Can't read your link its behind a pay wall.

How are the LLs protected for loss. Rather the opposite. They are the one paying for most of this. Who did you think was paying for it?

if they break the law they get punished. How did you think this worked?

JustAThought

I’d like the tax the government takes from the rent to be removed entirely - it is a double taxation from the tenant on their earnings - once via PAYE and again via a higher rent demanded because 50% off the rent is due in tax from the LL to the government which is ultimately paid for by higher rents to civer this tax required from the tenant.

Following ten days grace, Immediate police facilitated forced evictions for non payments of rent. This country is awash with hotel ‘emergency’ accommodation and overnight hostels. If an tenant does not pay their rent and can not borrow it from work, friends or family or justify it for an emergency payment from the social welfare office then out they go to a hostel or hotel.

The Belgians (used) have a system where three times the rent was the deposit. Each side went the same day to the rental and itemised every nick, stain and wear in it - all contents counted and accounted for. This is kept in an third party facilitated account that neither can access. When the lease is up an independent inspector goes through the peoperty with both LL and tenant and they review what damage is done and this is deducted from the depisit and the balance returned to the tenant.

A national database of lists of offenses and images for tenants who have unpaid bills/ default on the lease or leave before the end of the lease without good documented reason or agreement - searchable and accessible to all like in the US - so defaulters will pay the price if their actions and other landlords not fall victim to recidivist cheats or thiefs.

Mortgage holding landlords being able to sell the debt of the tenant to debt collectors within the banking industry so the tenant will have their unpaid rent added to their existing debts or visa bills or be refused loians/car HP/credit/mortgages in the future until their debt is repaid.

The end of HAP and rent allowance being paid out for life for people who can work but choose not to .An end to unsustainable rents being paid in city centre locations for tenants who think they are entitled to taxpayer funded lifestyle choices in the city of their choice while not working for life - bulk send them to Leitrim or Carlow or low rent Roscommon & make them pay their lifestyle debt via community improvement work schemes -
litter piicking, road sweeping, painting etc.


Automatic first priority governmental rental housing and subsidised rent for life to be given to the disabled Irish adult children with facility for a prent or carer to live rent free with them if wanted and automatic entitlement to 24/7’carers to support them.

Homes and communities for the mentally ill to be build and staffed - modern caring enclosed and safe ‘institutions’ with catering, mental health professionals and 24/7 workers - not this discarded into the community in a HAP bedsit or incapable of running a house rental and paying rent and managing alone with Down Syndrome/Serious Behavioural and mental health illness crap.

etc.

Better Than Christ

JustAThought wrote: »

I’d like the tax the government takes from the rent to be removed entirely - it is a double taxation from the tenant on their earnings - once via PAYE and again via a higher rent demanded because 50% off the rent is due in tax from the LL to the government which is ultimately paid for by higher rents to civer this tax required from the tenant.

Why should landlords - the most privileged people in the country - not have to pay tax? We all pay income tax - why should someone who doesn't even have to work for it be exempt?

The state should build enough houses to kill the private rental sector off completely.

Better Than Christ

Better Than Christ wrote: »

Why should landlords - the most privileged people in the country - not have to pay tax?

How exactly are LL "most privileged people in the country"?

We all pay income tax - why should someone who doesn't even have to work for it be exempt?

Very few LL would be able to live entirely off their rental incomes... where are you getting the idea that LL don't work, in addition to being LL?

The state should build enough houses to kill the private rental sector off completely.

So... people would be renting off the State instead? Unless you're expecting houses to be built with no costs involved.. and no purchase needed by people? Where would the State get the money to do this massive undertaking?

boring accountant

runawaybishop wrote: »

It's enforcement that is needed, not more regulation. No point having regulations if you can just ignore them and get away with it.

This is the beginning and the end of the conversation. Until a tenant can call up the PRTB or the commercial equivalent and get someone to come out to the property to deal with the dispute unfortunately landlords will continue to run roughshod over tenants rights. Has to be said most landlords are fine and play by the rules, but stricter enforcement (and that means not 6 months after the fact) is needed.

boring accountant

[Deleted User] wrote: »

How exactly are LL "most privileged people in the country"?



Very few LL would be able to live entirely off their rental incomes... where are you getting the idea that LL don't work, in addition to being LL?



So... people would be renting off the State instead? Unless you're expecting houses to be built with no costs involved.. and no purchase needed by people? Where would the State get the money to do this massive undertaking?

Landowners by nature are always the among the most privileged in any society, I wouldn’t have thought that would require explanation.