Why I'm taking my rental off the market

Sleeper12

dubrov wrote:

There are loads of ways to value a business. You are assuming everyone who values a rental business should come up with the exact same number if they do it right. It is very dependent on the individual's/company's tax situation.

Let's say I have just one buy to let property & I'm thinking of selling with sitting tenants. When the business is valued for sale my interest rates don't come into the valuation. Why would they? I could have AAA rates or I could have high rates. None of this comes into the valuation because the person buying might be a cash buyer. The only thing that values my business is asking price and annual rent. How much interest the seller pays or does not pay does not effect the new buyer in the slightest. I have never come across a situation where interest rates effect the value as the interest rate only effects the person selling.

dubrov

Sleeper12 wrote: »

Let's say I have just one buy to let property & I'm thinking of selling with sitting tenants. When the business is valued for sale my interest rates don't come into the valuation. Why would they? I could have AAA rates or I could have high rates. None of this comes into the valuation because the person buying might be a cash buyer. The only thing that values my business is asking price and annual rent. How much interest the seller pays or does not pay does not effect the new buyer in the slightest. I have never come across a situation where interest rates effect the value as the interest rate only effects the person selling.

Do you honestly believe that there would be no impact on property sale prices if the government was to increase the allowable interest expense from 85% to 300%?

Sleeper12

dubrov wrote:

Do you honestly believe that there would be no impact on property sale prices if the government was to increase the allowable interest expense from 85% to 300%?

What has that got to do with the price of bananas in Japan?

In answer to the question yes it would make a huge difference to demand but your interest rates aren't part of the valuation.
My interest rates are only relative to me. Your interest rates are only relative to you. If I buy your rental business I don't care what your interest rate is. It could be lower than the rate I can get or much higher. I could be a cash buyer. Your personal interest rates aren't transferable to me as the new owner of the business so they are not part of the valuation. Why would they be? They are not part of the sale.

dubrov

Sleeper12 wrote: »

What has that got to do with the price of bananas in Japan?

In answer to the question yes it would make a huge difference to demand but your interest rates aren't part of the valuation.
My interest rates are only relative to me. Your interest rates are only relative to you. If I buy your rental business I don't care what your interest rate is. It could be lower than the rate I can get or much higher. I could be a cash buyer. Your personal interest rates aren't transferable to me as the new owner of the business so they are not part of the valuation. Why would they be? They are not part of the sale.

If you are a buyer, you don't care about my interest rates but you certainly care what your own will be. The market price is based on a number of different buyers, each with their own tax situation and interest rate. The less tax they pay and the lower the interest rate, they more they will be willing to pay to buy the property.

We are probably arguing the same thing and it is just terminology so I'll leave it there..

Sleeper12

dubrov wrote:

If you are a buyer, you don't care about my interest rates but you certainly care what your own will be. The market price is based on a number of different buyers, each with their own tax situation and interest rate. The less tax they pay and the lower the interest rate, they more they will be willing to pay to buy the property.

I'm just saying that interest does not go in the valuation. If I am a cash buyer then your valuation will be off the wall if it includes interest rates and payments.

kaymin

Sleeper12 wrote: »

I'm just saying that interest does not go in the valuation. If I am a cash buyer then your valuation will be off the wall if it includes interest rates and payments.

If you aren't factoring interest rates into your valuation then you aren't valuing the property correctly. The value of any asset is the present value of the future cash flows it generates. Present value is determined by the cost of capital, of which applicable interest rates is the most significant component. Even if you are a cash buyer interest rates are relevant as they represent the opportunity cost of tying your money up in the property.

Sleeper12

kaymin wrote:

If you aren't factoring interest rates into your valuation then you aren't valuing the property correctly. The value of any asset is the present value of the future cash flows it generates. Present value is determined by the cost of capital, of which applicable interest rates is the most significant component. Even if you are a cash buyer interest rates are relevant as they represent the opportunity cost of tying your money up in the property.

I'm sorry but you must be have read my post correctly.

I don't get how you so many have tunnel vision. Has any poster ever had a business valued before? I have mYou can't put interest rates into a valuation when selling a business. Your interest rates are your interest rates. They will not be the same as mine. They are a variable. You can't value a business with a variable. You are not selling the interest rates. They can't be in the valuation. If interest rates increase then you believe that your business is worth less? That's nonsense

The value of the business is the property & rental income less expenses

kaymin

Sleeper12 wrote: »

I'm sorry but you must be have read my post correctly.

I don't get how you so many have tunnel vision. Has any poster ever had a business valued before? I have mYou can't put interest rates into a valuation when selling a business. Your interest rates are your interest rates. They will not be the same as mine. They are a variable. You can't value a business with a variable. You are not selling the interest rates. They can't be in the valuation. If interest rates increase then you believe that your business is worth less? That's nonsense

The value of the business is the property & rental income less expenses

You really don't know what you're talking about. If someone's cost of capital is 10% they will lose money by investing in a property yielding, say 5%. You can't look at the rental yield in isolation when valuing a property. Why don't you just Google 'howto value a business' to find the basics of valuation.

Sleeper12

kaymin wrote: »

You really don't know what you're talking about. If someone's cost of capital is 10% they will lose money by investing in a property yielding, say 5%. You can't look at the rental yield in isolation when valuing a property. Why don't you just Google 'howto value a business' to find the basics of valuation.

Dear god the mind boggles.



Interest rates aren't universal. Some people get higher or lower rates to other people.If you value your property including your interest rate how does that have any relation on what the property is worth to me?


The value is the property itself FREE AND CLEAR of any loans & the rental income less running costs. Interest rates servicing a loan in your name does not come into the valuation nor does the mortgage itself. A buyer MUST have a valuation free & clear of any loans. How else can he see the true value of the business.That's the value of the business. It's then up to the buyer to get mortgage & interest rates quotes that relate to themselves. At this stage the buyer can value what the business is worth to them including their own loans.



You can't include your loans in the valuation of the business as these loans aren't being sold to the new buyer.The new buyer might have to borrow more than you & have higher loan & interest payments


you have 100,000 left on the mortgage so your loan payments are X. I'm buying the business for 600,000 & I'm borrowing 400,000. My loan payments are XXXX. Please, Please explain how your valuation with loans has any bearing on my investment. My payments will be four times the rate you used in the valuation. That is nuts. The only way you can value the business is without loans.

Fol20

Sleeper, the general consensus so far is that you do include interest when trying to determine if its a viable venture. I understand what you are trying to say however when your actually a ll, All your going to consider is how much do i have after everything else is deducted incl interest, capital value when it is sold and or risks attached to it. I still think your playing with words/terms and over complicating something which is quite simple. Your the first person i have ever heard say that you disregard interest when its one of the most important factors in this industry.

Sleeper12

Fol20 wrote: »

Sleeper, the general consensus so far is that you do include interest when trying to determine if its a viable venture. I understand what you are trying to say however when your actually a ll, All your going to consider is how much do i have after everything else is deducted incl interest, capital value when it is sold and or risks attached to it. I still think your playing with words/terms and over complicating something which is quite simple. Your the first person i have ever heard say that you disregard interest when its one of the most important factors in this industry.

I seem to be the only person here to have gotten business valued & sold as going concerns



Can you answer this

you have 100,000 left on the mortgage so your loan payments are X. I'm buying the business for 600,000 & I'm borrowing 400,000. My loan payments are XXXX. Please, Please explain how your valuation with loans has any bearing on my investment. My payments will be four times the rate you used in the valuation. That is nuts. The only way you can value the business is without loans.



I think you chaps are confusing an estate agent showing you what your projected returns are if you buy the lovely new house or apartment. This isn't a valuation of the business. Even is it were he's using current market rates for most likely 75 percent of the mortgage & that's ok. But when selling a from the example above you can see how it's totally different to using your 10, 20 year old loans & interest rates to value. Your interest rates & loan payments can not be used to value a business simply because when I buy I wont have your loans & interest rates.

Glenalla

Pkiernan wrote: »

I have a nice apartment in a very desirable area that will rent in a heartbeat.

I haven't raised the rent since 2008, and property was last rented at 40% below market rate. I've never been interested in getting the most rent possible.

Last tenant just abandoned the property without notice owing 4 months rent and has left the place in such a state that the kitchen and bathroom had to be entirely torn out and rebuilt from the studs out.

Living room floor so damaged it has to be replaced.

Kitchen appliances destroyed or missing.
Entire apartment needs to be completely repainted.

With the unpaid rent and repairs I'm out of pocket approx 17k euro, and no hope of reimbursement.

He had been there for 3 years with relatively few issues.


Place will be refurbed by end of September and is going on Air BnB, where 120 days a year occupancy will net me more than renting.

If the government restricts short term rentals then I'll just keep it empty and use it as a holiday home.


I'm sure I'm like many others who are sick of having zero property rights over their own property.

Have to agree with your thoughts OP. Had a beautiful 3 bed detached cottage rented to a professional couple for 4.5 years. It was handed back trashed. It took more than 4.5 years rent to refurbish it. Now it will never be back on the rental market. I can use it as a holiday home. It is in a beautiful area in the North West.

Pkiernan

Sleeper12 wrote: »

Where are you getting this from? Have you read any of my posts? Are you mixing me up with someone else? I don't hate landlords. I am a landlord myself.
I also know & work with many landlords. There are many, many slum Lords in Dublin and yes I do hate them. Ive met slum Lords that would think nothing about taking a mattress out of a skip for a property. I also know a great many really good landlords. I never said all landlords are bad.

I don't believe that all landlords are making a fortune. The good ones make nice money. I just don't believe it helpful to either side of the debate to put false figures on the profit of the business. When you try to mislead people in this way they question if everything you say is untrue. It does not help the argument.

I also said that I believe that more than half of landlords are mortgage free. I said that this is based on my own personal experience with landlords in Dublin. I have no figures or links to back up my personal belief. I never tried to pass it off as fact. It's based purely based on my experience. I haven't met every landlord in Dublin so I don't have facts. I only have an opinion.

I am sorry for Ops troubles. I wouldn't wish it on anyone. I believe that he didn't run it properly as a business. That doesn't mean that I'm glad it happened. His tenant is a scumbag no doubt about it but he was a scumbag when op met him and didn't just turn into a scumbag after three years. You also can't run a business long term charging 40 percent less than your competitors. This is the case with all businesses. You cheapen the brand and the product. Not everyone who can buy a property should be landlords. Not all tradesmen should own their own business. They can be the top in their trade in the country but might not be able to run a profitable business. Not all landlords can run a business.

Your attitude was ignorant from the start.
I've owned that property for 24 years and it's mortgage free.

How on earth can you say that having one bad tenant (whose actions turned bad after 3 years occupancy) means that I can't run a business?

I've run it very fairly and quite profitably since I bought it in 1994.

You're drawing wild and totally inaccurate conclusion.
You're just an abusive keyboard warrior and nothing else. You should grow up and cop on.

Sleeper12

Pkiernan wrote: »

Your attitude was ignorant from the start.
I've owned that property for 24 years and it's mortgage free.

How on earth can you say that having one bad tenant (whose actions turned bad after 3 years occupancy) means that I can't run a business?

I've run it very fairly and quite profitably since I bought it in 1994.

You're drawing wild and totally inaccurate conclusion.
You're just an abusive keyboard warrior and nothing else. You should grow up and cop on.

I am dyslexic. Most of the words I want to use spell check wont correct I'm that far out. There isn't a week goes by without someone with small man syndrome slagging my spelling. A few days ago on Boards I was asked if I was Russian cos I can't speak English. The bottom line is I am limited in the words I use here on boards.


I am also autistic. sometimes I say something that others think aggressive. If I come across as gruff I am sorry. I want to apologize to you Pkiernan if I caused offence. You said I wouldn't talk to you the same way if we were face to face. I would you know. I feel I have given you genuine heartfelt friendly advise that you are not suited to the rental business & I think you agree to some extent as you are packing it in & going airbnb. I don't feel I was attacking you thouge at the start of the thread others were being nasty to you.



I am genuinely sorry what has happened to you & I hope you make a stress free fortune in airbnb. Again Pkiernan I didn't mean to cause offence

BBFAN

Sleeper12 wrote: »

I am dyslexic. Most of the words I want to use spell check wont correct I'm that far out. There isn't a week goes by without someone with small man syndrome slagging my spelling. A few days ago on Boards I was asked if I was Russian cos I can't speak English. The bottom line is I am limited in the words I use here on boards.


I am also autistic. sometimes I say something that others think aggressive. If I come across as gruff I am sorry. I want to apologize to you Pkiernan if I caused offence. You said I wouldn't talk to you the same way if we were face to face. I would you know. I feel I have given you genuine heartfelt friendly advise that you are not suited to the rental business & I think you agree to some extent as you are packing it in & going airbnb. I don't feel I was attacking you thouge at the start of the thread others were being nasty to you.



I am genuinely sorry what has happened to you & I hope you make a stress free fortune in airbnb. Again Pkiernan I didn't mean to cause offence

I've been following this thread and none of the above is any excuse for how rude you're being to people.

Sleeper12

BBFAN wrote:

I've been following this thread and none of the above is any excuse for how rude you're being to people.

Ain't you a peach

BBFAN

Sleeper12 wrote: »

Ain't you a peach

Just another example of your bad manners.

Bluefoam

BBFAN wrote: »

Just another example of your bad manners.

Yes, your manners leave allot to be desired.

The_Conductor

Sleeper12 - please do not post in this thread again.
Being dyslexic and/or autistic is no excuse for the bad manners you've displayed towards several posters.

You are lucky to only have a public on thread warning- other posters have not been so lucky.

Trasna1

Graham wrote: »

They must be the landlords that aren't aware of the 10% returns and endless capital appreciation you mentioned earlier.

There must be. Landlords here seem to ignore asset appreciation - only cash in the paw is actually a gain??

Given that on average property prices have risen on average 4% year on year over the last 18 years, and a €1250 rent p/m on a €300k property is far from outlandish, a return of the order of 8-10% pa is hardly unheard of.;)

handlemaster

Trasna1 wrote: »

Graham wrote: »

They must be the landlords that aren't aware of the 10% returns and endless capital appreciation you mentioned earlier.

There must be. Landlords here seem to ignore asset appreciation - only cash in the paw is actually a gain??

Given that on average property prices have risen on average 4% year on year over the last 18 years, and a €1250 rent p/m on a €300k property is far from outlandish, a return of the order of 8-10% pa is hardly unheard of.;)

Its  total win win game thats why so many moaners on boards are saving up to put their hard earned cash into an investment and hand it over to someone they have just met.

dev_ire

I did not kick someone out owing me 4 months rent and I asked for 40% of what it is worth, oh poor me!

DubCount

Trasna1 wrote: »

There must be. Landlords here seem to ignore asset appreciation - only cash in the paw is actually a gain??

Given that on average property prices have risen on average 4% year on year over the last 18 years, and a €1250 rent p/m on a €300k property is far from outlandish, a return of the order of 8-10% pa is hardly unheard of.;)

Would you not consider this easy street investment yourself? Lots of landlords selling up and leaving room for new entrants to clean up.

Samuel T. Cogley

dev_ire wrote: »

I did not kick someone out owing me 4 months rent and I asked for 40% of what it is worth, oh poor me!

Clearly zero idea what you're talking about - you can't just kick someone out. The OP knows how lucky he is that this 'only' went on for four months.

ouxbbkqtswdfaw

Asset appreciation? I'd say many landlords are in deep negative equity. I am anyway.

Fol20

Samuel T. Cogley wrote: »

Clearly zero idea what you're talking about - you can't just kick someone out. The OP knows how lucky he is that this 'only' went on for four months.

The op is “lucky” it cost him 17k. That’s the sad state of affairs our messed up system views ll.

BBFAN

0z14cqaw95mjdu wrote: »

Asset appreciation? I'd say many landlords are in deep negative equity. I am anyway.

Well you clearly paid silly money for your investment then.

davo10

BBFAN wrote: »

Well you clearly paid silly money for your investment then.

Isn't hindsight wonderful.

ebbsy

BBFAN wrote: »

I've been following this thread and none of the above is any excuse for how rude you're being to people.

Exactly.

ELM327

ebbsy wrote: »

Exactly.

You clearly have no understanding of autism, black and white thinking, and emotional regulation.


I am on the spectrum myself, I have high functioning aspergers. Which is co morbid with the above two disorders and also severe anxiety.


I understand exactly why the OP reacted as he did. Not saying it's right but when everyone speaks a different hidden language to you, and every post contra to your opinion feels like goading because you're having a bad day, it's difficult to engage your rational mind and overcome your emotions.