Why I'm taking my rental off the market

Sleeper12

An_Toirpin wrote:

Is there is any published data on how many rented properties are owned outright?

I doubt it.

I would be thinking that at least half of all small landlords are mortgage free. I know lots of people bought a property to rent out in the last few years of the boom and many have lost the property since. Most long-term landlords stopped buying property in the late 90s or early 0s.

Sleeper12

Fol20 wrote:

I only included interest in the sample. I am talking about cash flow per month. Your also playing with words, I don’t care if it’s expense toward buying the business or whatever else it might be. From a pragmatic approach, this is a cost burden for the owner which they are also entitled to use to deduct their taxable bill from.

What interest you pay or don't pay has nothing to do with your profit. Including it is very misleading and distorts the facts. I'm not playing with words. Your personal expenses have nothing to do with your business expenses.

If you want to give out a real example you can't include the cost of buying a property or the interest. The only example to give is business expenses only. You can call your example cash flow per month if you want but why not put in how much you have left after you tax, and insure your car & put petrol in. The running cost of your car or your doctors bills have as much to do with the profit from your rental as your interest has. Absolutely nothing to do with it.

With the highest rents in the history of the state if you can't make money you need to get out of the game. Even with interest having nothing to do with your profits I'd like to point out that interest rates are at the lowest ever. Not in the history of the state but ever. Rents have never been higher & interest rates have never been lower.

the_syco

victor8600 wrote: »

Really? Is this how it works? I find it hard to believe that somebody can rent a house, trash it and just walk away. Why does not a landlord sue the tenant for damages? Was there a contract? Did the tenant put a fake name on it? If not, then what are you talking about by saying "tenant has vanished"?

How do you intend on suing someone when you don't know where to send their court summons to?

GingerLily wrote: »

I hope the government step in and restrict Airbnb propery rentals because its a real issue.

No. The real issue is that the government expects landlords to house people that they won't, and all the time reducing the amount of rights the landlord has.

davo10 wrote: »

We do have a rating system of sorts, the RTB website. The op should make a complaint to RTB, put it on record, all LLs/tenants should check RTB site to see if tenants/LLs name comes up.

AFAIK, they'll only put the tenants name on it if they lose. But I doubt the RTB will try the tenant in the tenants absence.

Eric Cartman

Sleeper12 wrote: »

I doubt it.

I would be thinking that at least half of all small landlords are mortgage free. I know lots of people bought a property to rent out in the last few years of the boom and many have lost the property since. Most long-term landlords stopped buying property in the late 90s or early 0s.

I would say less than 10% of them are. most keep paying down a property till they can get another, rinse repeat grow the empire.... most are perpetually paying some mortgage. Almost any of them who got into the game in the last 15 years are still paying it off.

Eric Cartman

Sleeper12 wrote: »

We definitely need a rating system here in Ireland for landlords and tenants. It's nuts that the guy who damaged OPs property can go on to another property and the new landlord can't check his past history.

the problem is , the government and certain bodies would argue what do you do with a tenant who has been shown to be bad but needs a house, some people think you can't just punish some people for their bad behaviour forever (I would say you can)

If there was a tenant rating system you'd have atleast 15 people I've seen over the years who would all be needing HAP / RA properties and have terrible ratings attached to them, thats false media outrage waiting to happen if I ever saw it.

Sleeper12

Eric Cartman wrote:

I would say less than 10% of them are. most keep paying down a property till they can get another, rinse repeat grow the empire.... most are perpetually paying some mortgage. Almost any of them who got into the game in the last 15 years are still paying it off.

Yes but I suggest that most landlords, more than 50 percent, are in the game 20 to 40 years. I know several that are 2nd generation and are in the game even longer. Almost none of these bought in the last 15 years and the ones that did bought for cash when the banks weren't lending & the bottom fell out of the market. There are no facts or figures to back up anything I just said. It's my belief based on landlords I know or have dealt with in Dublin.

Eric Cartman

Sleeper12 wrote: »

Yes but I suggest that most landlords, more than 50 percent, are in the game 20 to 40 years. I know several that are 2nd generation and are in the game even longer. Almost none of these bought in the last 15 years and the ones that did bought for cash when the banks weren't lending & the bottom fell out of the market. There are no facts or figures to back up anything I just said. It's my belief based on landlords I know or have dealt with in Dublin.

theres no real point in continuing this , I only have anecdotal evidence from working with landlords, you don't like landlords and have no figures at all ,

You would like to think landlords are all wealthy and just screwing people over which is absolutely not the case, for every 1 slumlord / genuinely cash solvent landlord in Ireland theres easily 10 who are just about keeping the bank away. Ulster bank talking about selling thousands of BTL mortgages and those are the ones well in arrears , during a time when you can rent out any property in the land , certainly tells you that the lads not on the repossession list are just barely above water.

4ensic15

Eric Cartman wrote: »

I would say less than 10% of them are. most keep paying down a property till they can get another, rinse repeat grow the empire.... most are perpetually paying some mortgage. Almost any of them who got into the game in the last 15 years are still paying it off.

The greater percentage of landlords have only one rental property. They clearly do not expand continually.

Eric Cartman

4ensic15 wrote: »

The greater percentage of landlords have only one rental property. They clearly do not expand continually.

not for lack of want, they can't afford it because, as above, they're not making a great return on the existing property. Most landlords in my experience are retired execs or civil servants who bought a house to supplement their retirement and have found that its really not paying off how they wanted it to.

4ensic15

Eric Cartman wrote: »

not for lack of want, they can't afford it because, as above, they're not making a great return on the existing property. Most landlords in my experience are retired execs or civil servants who bought a house to supplement their retirement and have found that its really not paying off how they wanted it to.

There are a lot of small timers who have had property for years. How do you know that your experience of landlords and their former occupations is typical? I have met very few retired landlords. The public servants I know who were involved in property sold up on retirement or shortly after, by which time their loans were paid off.

Eric Cartman

4ensic15 wrote: »

There are a lot of small timers who have had property for years. How do you know that your experience of landlords and their former occupations is typical? I have met very few retired landlords. The public servants I know who were involved in property sold up on retirement or shortly after, by which time their loans were paid off.

obviously they would have taken on the property while working but usually towards the end of their career when their own house has been paid down , the civil service is one of the few places that a defined benefit pension would be taken by a bank as income for paying a mortgage.

the ones who sold up in your experience are no longer landlords so don't count, but straw poll of most people renting off a single unit landlord and you'll find most are gardai, school principals, doctors, executives, civil servants or retired formerly those things, its anecdotal but Im talking here about personally contacting 250+ landlords scouting for business, not a tiny pool, not a massive one either.

Fol20

Sleeper12 wrote: »

What interest you pay or don't pay has nothing to do with your profit. Including it is very misleading and distorts the facts. I'm not playing with words. Your personal expenses have nothing to do with your business expenses.

If you want to give out a real example you can't include the cost of buying a property or the interest. The only example to give is business expenses only. You can call your example cash flow per month if you want but why not put in how much you have left after you tax, and insure your car & put petrol in. The running cost of your car or your doctors bills have as much to do with the profit from your rental as your interest has. Absolutely nothing to do with it.

With the highest rents in the history of the state if you can't make money you need to get out of the game. Even with interest having nothing to do with your profits I'd like to point out that interest rates are at the lowest ever. Not in the history of the state but ever. Rents have never been higher & interest rates have never been lower.

Yea it does. It directly impacts how much I have in my pocket at the end of the month. I can claim interest as an expense as per revenue website.

https://www.revenue.ie/en/property/rental-income/irish-rental-income/what-expenses-are-allowed.aspx

I’m not saying I’m not making money. But right now as you pointed out we are at a peak of when rates are low and rent is high. This can only go on for so long and btl is a long game so you need to build up resources to endure the other end of the stick also.

4ensic15

Eric Cartman wrote: »

obviously they would have taken on the property while working but usually towards the end of their career when their own house has been paid down , the civil service is one of the few places that a defined benefit pension would be taken by a bank as income for paying a mortgage.

the ones who sold up in your experience are no longer landlords so don't count, but straw poll of most people renting off a single unit landlord and you'll find most are gardai, school principals, doctors, executives, civil servants or retired formerly those things, its anecdotal but Im talking here about personally contacting 250+ landlords scouting for business, not a tiny pool, not a massive one either.

When was this straw poll done?

Eric Cartman

4ensic15 wrote: »

When was this straw poll done?

I did one in 2012 to examine the business case for the most part west Dublin / north Kildare rental properties seem to be owned by retired or soon to retire civil servants.

4ensic15

Eric Cartman wrote: »

I did one in 2012 to examine the business case for the most part west Dublin / north Kildare rental properties seem to be owned by retired or soon to retire civil servants.

One small area of the country with a lot of '90s and '00s built houses?

Eric Cartman

4ensic15 wrote: »

One small area of the country with a lot of '90s and '00s built houses?

small perhaps, densely populated - definitely though.
Well then , what demographic do you suggest most single unit landlords come from so ?

Sleeper12

Eric Cartman wrote:

theres no real point in continuing this , I only have anecdotal evidence from working with landlords, you don't like landlords and have no figures at all ,

Eric Cartman wrote:

You would like to think landlords are all wealthy and just screwing people over which is absolutely not the case, for every 1 slumlord / genuinely cash solvent landlord in Ireland theres easily 10 who are just about keeping the bank away. Ulster bank talking about selling thousands of BTL mortgages and those are the ones well in arrears , during a time when you can rent out any property in the land , certainly tells you that the lads not on the repossession list are just barely above water.

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.

Sleeper12

Fol20 wrote:

Yea it does. It directly impacts how much I have in my pocket at the end of the month. I can claim interest as an expense as per revenue website.

Yes you can claim tax relief on the interest but that doesn't mean that its part of the business profit & loss. Why do you keep banging this drum. I suggested that you ask in the accounting forum. They will tell you what I have told you.

You were replying to me saying that non landlords believe that landlords are making a fortune. You came back with figures that distorted the amount that you might make on a month's rent by adding in something that has no bearing on the profit of the business

Fol20

Sleeper12 wrote: »

Yes you can claim tax relief on the interest but that doesn't mean that its part of the business profit & loss. Why do you keep banging this drum. I suggested that you ask in the accounting forum. They will tell you what I have told you.

You were replying to me saying that non landlords believe that landlords are making a fortune. You came back with figures that distorted the amount that you might make on a month's rent by adding in something that has no bearing on the profit of the business

Im not going to create a thread for something when all I care about is how much I have in my pocket at the end of the month/year. How about if you show me a link that explains what you are talking about, then I will change my response. When I deduct my interest, it is marked as an expense. It is you who is trying to distort the figures for a very basic example.

You keep saying interest on a loan has no bearing on profit/loss. How can that make sense when the amount I’m paying is against said property and is costing me money to run it and you are even agreeing that it can be “expensed”

Sleeper12

Fol20 wrote:

Im not going to create a thread for something when all I care about is how much I have in my pocket at the end of the month/year. How about if you show me a link that explains what you are talking about, then I will change my response. When I deduct my interest, it is marked as an expense. It is you who is trying to distort the figures for a very basic example.

What you have or have not in in your pocket has nothing to do with profit from your business.

I'll try one last time.

I buy a freehold rental unit. I am allowed tax relief on the interest of any monies borrowed to buy the building. My annual interest is 10k after tax relief.

I now decide to open a hardware store.

The purchase of the freehold building is not part of the hardware business. Has absolutely nothing to do with it. The hardware runs a profit of 50k per year. Because I pay 10k in interest after tax relief does not change the hardware profit to 40k. They are separate things.

Let's say my interest is 60k & I only make 50k profit from the hardware. Unless I want to add 10k of my own money I'll have to sell the building. The hardware was still profitable at 50k per year but I couldn't afford the building.

Your figures are bringing expenses from outside of the rental business and including them in the rental business. Buying the building is an investment. Renting it out is a separate business. Your mortgage repayment & interest comes out of the profit of the rental. In your example the interest should not be there. The interest you showed is actually profit. So I believe you said 700 interest. That's another 350 profit after tax. Instead of the 250 profit you suggest you actually have 600 profit after tax

DubCount

Sleeper12 wrote: »

What you have or have not in in your pocket has nothing to do with profit from your business.

I'll try one last time.

I buy a freehold rental unit. I am allowed tax relief on the interest of any monies borrowed to buy the building. My annual interest is 10k after tax relief.

I now decide to open a hardware store.

The purchase of the freehold building is not part of the hardware business. Has absolutely nothing to do with it. The hardware runs a profit of 50k per year. Because I pay 10k in interest after tax relief does not change the hardware profit to 40k. They are separate things.

Let's say my interest is 60k & I only make 50k profit from the hardware. Unless I want to add 10k of my own money I'll have to sell the building. The hardware was still profitable at 50k per year but I couldn't afford the building.

Your figures are bringing expenses from outside of the rental business and including them in the rental business. Buying the building is an investment. Renting it out is a separate business. Your mortgage repayment & interest comes out of the profit of the rental. In your example the interest should not be there. The interest you showed is actually profit. So I believe you said 700 interest. That's another 350 profit after tax. Instead of the 250 profit you suggest you actually have 600 profit after tax

This is just wrong.

In the scenario you outline one of 2 things happens:
1) The premises is part of the hardware store business. The premises is an asset of the business, the mortgage is a liability of the business and the interest is an expense of the business.
2) There are 2 separate businesses. One is a hardware store, and one is a commercial letting business that lets the premises to the hardware store. In this case the premises is an asset of the commercial letting business. The rent charged from the commercial letting business to the hardware store is income for the letting business and an expense for the hardware store. The interest is an expense of the commercial letting business.

With all the +/-, both work out exactly the same.

DubCount

Capital appreciation/depreciation on a rental property is recognised for accounting and tax purposes, but only when the property is sold and the capital gain/loss is realised.

Sleeper12

DubCount wrote:

In the scenario you outline one of 2 things happens: 1) The premises is part of the hardware store business. The premises is an asset of the business, the mortgage is a liability of the business and the interest is an expense of the business. 2) There are 2 separate businesses. One is a hardware store, and one is a commercial letting business that lets the premises to the hardware store. In this case the premises is an asset of the commercial letting business. The rent charged from the commercial letting business to the hardware store is income for the letting business and an expense for the hardware store. The interest is an expense of the commercial letting business.

Sorry I was trying to come up with a simple way to explain how the interest on the purchase of a rental property is not used to value the rental business. I was trying to explain that you pay the interest out of the profit & not use the interest as an expense from the rental business. The rental business doesn't own the property and doesn't pay for interest.

If you want to set up a company that owns the property & takes in the rent then the value of the property comes into play. Your property is increasing 20k or so every year over the last 20/25 years.

dubrov

Sleeper12, I am afraid your examples make no sense.
Interest is most certainly an allowable expense (well 85% if it anyway) and does have an effect on profit.

Fol20

Sleeper12 wrote: »

What you have or have not in in your pocket has nothing to do with profit from your business.

I'll try one last time.

I buy a freehold rental unit. I am allowed tax relief on the interest of any monies borrowed to buy the building. My annual interest is 10k after tax relief.

I now decide to open a hardware store.

The purchase of the freehold building is not part of the hardware business. Has absolutely nothing to do with it. The hardware runs a profit of 50k per year. Because I pay 10k in interest after tax relief does not change the hardware profit to 40k. They are separate things.

Let's say my interest is 60k & I only make 50k profit from the hardware. Unless I want to add 10k of my own money I'll have to sell the building. The hardware was still profitable at 50k per year but I couldn't afford the building.

Your figures are bringing expenses from outside of the rental business and including them in the rental business. Buying the building is an investment. Renting it out is a separate business. Your mortgage repayment & interest comes out of the profit of the rental. In your example the interest should not be there. The interest you showed is actually profit. So I believe you said 700 interest. That's another 350 profit after tax. Instead of the 250 profit you suggest you actually have 600 profit after tax

I now understand what your saying however in your example where would you put your mortgage payment as it will be your biggest expense every year and one of the most important factors that will make or break a ll

Sleeper12

Fol20 wrote:

Ill give an example Rent 1500 Mortgage(interest only part) 700 Maintenance +misc @20pc =300 That leaves you with 1500-(700+300)=500 Tax &50pc =250

The correct example is Rent 1500 Mortgage(interest only part) 700 Maintenance +misc @20pc =300 That leaves you with 1500-(700+300)=500 Tax &50pc =250[ plus 20k increase in my investment per year or 1600 per month

Sleeper12

dubrov wrote:

Sleeper12, I am afraid your examples make no sense. Interest is most certainly an allowable expense (well 85% if it anyway) and does have an effect on profit.

When you value the rental business the interest rate can't come into it. I've said all along that the interest rate is tax deducted. But you can't include the interest rate on the mortgage without including the value of the property in the business. Property increases 1600 per month. This can't be ignored once you introduce the property into the business

Fol20

Sleeper12 wrote: »

The correct example is Rent 1500 Mortgage(interest only part) 700 Maintenance +misc @20pc =300 That leaves you with 1500-(700+300)=500 Tax &50pc =250[ plus 20k increase in my investment per year or 1600 per month

You can’t realize the value of the investment until it’s sold. Your also not accounting for the purchase price which could be highly variable depending on the year you bought it. Plus depending on when you sell the property which could be tomorrow or 30years from now you still have the ability to make a loss on the sale price(yes I know you paid the principle and now you own it outright)

Sleeper12

Fol20 wrote:

You can’t realize the value of the investment until it’s sold. Your also not accounting for the purchase price which could be highly variable depending on the year you bought it. Plus depending on when you sell the property which could be tomorrow or 30years from now you still have the ability to make a loss on the sale price(yes I know you paid the principle and now you own it outright)

That's why you don't include the cost of the property or the interest when valuing the business. Too many variables

dubrov

Sleeper12 wrote: »

That's why you don't include the cost of the property or the interest when valuing the business. Too many variables

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.

Think of the old Section 23 relief properties. They were worth a lot more to individuals who had a lot of rental income to offset.