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The Downside to Residential Property Investments

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    #32
    Ray Palmer
    Registered Users Posts: 8,365 ✭✭✭Ray Palmer


    McGaggs wrote: »
    The rational investor realises the massively increased risk of the geared investment. Residential property is high risk mainly because of the high levels of gearing that no-one would use for any other investment.

    The risk with private rental is down to the bad laws and policies increasing risk not the nature of investing. When a tenant can simply never pay rent and it takes a year to remove them that possibility must be considered. The government increasing taxes and charge is another extra risk. These are the main dangers of being a landlord here not the prices.
    It is why landlords are leaving and why investment has slowed down when more rentals are needed.


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    #33
    awec
    Administrators Posts: 53,524 Admin ✭✭✭✭✭awec


    Eric Cartman wrote: »
    Correct but a small landlord mightent serve the notice immediately, a reit would have it to you the next day after a failed payment and possibly disable carpark/ communal door cards
    Again, this is just not true.
    The_Conductor wrote: »
    Letters of arrears etc- are automatically generated- if/when periodic rental payments are late. Little/no intervention is needed- its all automatic. There are no sob stories, no excuses, no explanations- if something is late- there is an immediate cause and effect- a formal letter issues.

    Due process is followed, to a 'T'- however, there is little/no leeway- and there is no appealing to 'humanity'- its a business, period.

    The bigger issue with REITs etc- that even people who aren't tenants have- is the manner in which they are structured so they don't pay tax on rental income (whereas a small scale landlord can be saddled with up to 52% tax and charge demands). A far fairer scheme would be the German model- whereby a straight 2.5% of the property value could be offset against any costs annually- or the old Irish proposal- to simply apply the prevailing rate of witholding tax to all rental income- at source- as the tax rate- and not allow any deductions whatsoever.

    The Irish tax system is littered with inequities- the manner in which the REITs and certain other businesses can legitimately use it to avoid tax (not avoid, not evade)- is a deep seated inequity- which means the average taxpayer in the country pays more than they would otherwise do.

    Nor is this.


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    #34
    The J Stands for Jay
    Registered Users Posts: 5,689 ✭✭✭The J Stands for Jay


    Ray Palmer wrote: »
    The risk with private rental is down to the bad laws and policies increasing risk not the nature of investing. When a tenant can simply never pay rent and it takes a year to remove them that possibility must be considered. The government increasing taxes and charge is another extra risk. These are the main dangers of being a landlord here not the prices.
    It is why landlords are leaving and why investment has slowed down when more rentals are needed.

    And the gearing magnifies those risks.


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    #35
    Sleeper12
    Registered Users Posts: 16,956 ✭✭✭✭Sleeper12


    Graham wrote:
    Thread Split


    That explains a lot. Reading the first seven posts & for the life of my I couldn't understand how people were quoting posts that aren't in the thread. :)


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    #36
    Graham
    Moderators, Society & Culture Moderators Posts: 17,642 Mod ✭✭✭✭Graham


    Sleeper12 wrote: »
    That explains a lot. Reading the first seven posts & for the life of my I couldn't understand how people were quoting posts that aren't in the thread. :)

    We like to keep you on your toes. :D


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    #37
    Wheres Me Jumper?
    Closed Accounts Posts: 1,288 ✭✭✭Wheres Me Jumper?


    beauf wrote: »
    What's the point of this thread anyway. REIT have been increasing in the Irish market for years. We are just repeating the UK and London experience. Look at the profits they are reporting here.

    People wanted them in the market in bigger numbers. They have got it.

    i laugh when i hear tenants decry REITs/Vulture funds.

    those same people couldn't help giving out about "greedy, lazy Irish LLs who didn't pay their taxes and how amateurish they were. if only we had proper LLs, who knew how to do things professionally"

    be careful what you wish for. :D


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    #38
    beauf
    Closed Accounts Posts: 22,651 ✭✭✭✭beauf


    mdebets wrote: »
    While often repeated, that's just not true. While the REIT pays lower corporation tax at the beginning, they don't exist, to just make money, they exist, to give the earned money to someone (employees, shareholders, owners). They then have to pay the same income tax as the small landlord has to pay. So a REIT actually pays more tax (all other things being the same then a small time landlord).

    Sorry what? The reit doesn't exist to make money and they pay everyone else's income tax? Can I get job there so they can pay my tax, sounds great.


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    #39
    Wheres Me Jumper?
    Closed Accounts Posts: 1,288 ✭✭✭Wheres Me Jumper?


    beauf wrote: »
    Sorry what? The reit doesn't exist to make money and they pay everyone else's income tax? Can I get job there so they can pay my tax, sounds great.

    apparently in their offices they have large framed pictures of Mother Theresa.


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    #40
    beauf
    Closed Accounts Posts: 22,651 ✭✭✭✭beauf


    abcabc123123 wrote: »
    Seems to be taken as a given that REITs are bad, can someone articulate why?

    https://www.independent.ie/irish-news/dozens-of-tenants-stage-protest-as-landlord-hikes-rents-by-up-to-25pc-37390012.html

    https://fora.ie/ires-sandyford-apartments-3379970-May2017/
    PhoenixParker wrote: »
    I would love to see more housing in thos country provided by a REIT/housing association hybrid model.

    Low or no profit, whole apartment blocks owned, rents to everyone. Opportunities to move up or down apartment size in the same block, furnished to your desired level, big enough to employ inhouse maintenance, strict rules on anti-social behaviour, very limited rent increases encouraging long term occupancy, any profit reinvested in growing the portfolio.

    I think they are looking for a bigger return and faster, than your idea.


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    #41
    The J Stands for Jay
    Registered Users Posts: 5,689 ✭✭✭The J Stands for Jay


    beauf wrote: »
    Sorry what? The reit doesn't exist to make money and they pay everyone else's income tax? Can I get job there so they can pay my tax, sounds great.

    A REIT doesn't pay tax. When a REIT makes a payment to someone, they pay income tax. They pay the same rate of tax as the small landlord. It's a pretty simple concept.


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    #42
    riclad
    Registered Users Posts: 8,184 ✭✭✭riclad


    Buy house ,rent it out, wait for value to go up, become rich ,is not quiet
    true.
    maybe true 5 years ago when you could buy a house in dublin for 100k.
    You have to borrow money, you pay interest.
    Say you borrow 100k, if you pay it off after 20 years ,it costs you 200k
    approx.
    Who knows what tax,s the government might bring in in 5 years time on landlords .
    Property investment is long term, you need to think in terms of 10 years

    plus .Maybe reits are designed for people to invest in property so they know exactly how much tax they will pay,
    and the property will be managed by professionals .People can invest in stocks and bonds but stocks can go up
    or down anytime.
    Dublin,s population will increase by 20 per cent ,we need more landlords and more investors
    in the rental sector.


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    #43
    Wheres Me Jumper?
    Closed Accounts Posts: 1,288 ✭✭✭Wheres Me Jumper?


    In Kennedy Wilson’s case, the company owns a property portfolio here worth roughly €1 billion.

    Rent from those properties was in the region of €26 million for the first six months of 2016 (two properties owned by KWER here are the Stillorgan Leisureplex in south Co Dublin, and Portmarnock Golf Club). And no tax was paid on that rent.

    “Investments in Ireland are held through two Irish qualifying investor alternative investment funds, which are exempt from any Irish taxation on income and gains,” the company says in its half-year results for the first six months of this year.

    In the same section KWER states that it is subject to 25% corporate tax on profits within its Spanish subsidiaries, and 20% on rental income from its UK investment properties. From that point of view Ireland is naturally an attractive prospect.


    http://www.thejournal.ie/tax-laws-ireland-qiaif-icav-2971661-Sep2016/


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    #44
    beauf
    Closed Accounts Posts: 22,651 ✭✭✭✭beauf


    McGaggs wrote: »
    A REIT doesn't pay tax. When a REIT makes a payment to someone, they pay income tax. They pay the same rate of tax as the small landlord. It's a pretty simple concept.

    Everyone pays someone else. No one is different in that regard. The Landlord pays an agent. The agent pays income tax. So did the landlord pay tax twice then ...


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    #45
    The J Stands for Jay
    Registered Users Posts: 5,689 ✭✭✭The J Stands for Jay


    beauf wrote: »
    Everyone pays someone else. No one is different in that regard. The Landlord pays an agent. The agent pays income tax. So did the landlord pay tax twice then ...

    By paying an agent, the landlord reduces their Case V profit and therefore their tax.


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    #46
    beauf
    Closed Accounts Posts: 22,651 ✭✭✭✭beauf


    I take that as a yes you see that as the LL paying tax twice. ...


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    #47
    titan18
    Registered Users Posts: 11,941 ✭✭✭✭titan18


    Wheres Me Jumper? wrote: »
    In Kennedy Wilson’s case, the company owns a property portfolio here worth roughly €1 billion.

    Rent from those properties was in the region of €26 million for the first six months of 2016 (two properties owned by KWER here are the Stillorgan Leisureplex in south Co Dublin, and Portmarnock Golf Club). And no tax was paid on that rent.

    “Investments in Ireland are held through two Irish qualifying investor alternative investment funds, which are exempt from any Irish taxation on income and gains,” the company says in its half-year results for the first six months of this year.

    In the same section KWER states that it is subject to 25% corporate tax on profits within its Spanish subsidiaries, and 20% on rental income from its UK investment properties. From that point of view Ireland is naturally an attractive prospect.


    http://www.thejournal.ie/tax-laws-ireland-qiaif-icav-2971661-Sep2016/

    Yup, and that's what people here seem to want to move to, and as a result, reduce our actual tax take as small scale landlords move out and larger ones like the above move in.


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    #48
    The J Stands for Jay
    Registered Users Posts: 5,689 ✭✭✭The J Stands for Jay


    beauf wrote: »
    I take that as a yes you see that as the LL paying tax twice. ...

    The landlord doesn't pay tax twice.


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    #49
    The J Stands for Jay
    Registered Users Posts: 5,689 ✭✭✭The J Stands for Jay


    titan18 wrote: »
    Yup, and that's what people here seem to want to move to, and as a result, reduce our actual tax take as small scale landlords move out and larger ones like the above move in.

    The tax is payable when the REIT makes distributions to its investors.


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    #50
    The Student
    Registered Users Posts: 1,253 ✭✭✭The Student


    McGaggs wrote: »
    The tax is payable when the REIT makes distributions to its investors.

    Only if the investors are tax resident in Ireland.


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    #51
    beauf
    Closed Accounts Posts: 22,651 ✭✭✭✭beauf


    McGaggs wrote: »
    The tax is payable when the REIT makes distributions to its investors.

    The investors pay the tax, not the REIT.


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    #52
    davindub
    Registered Users Posts: 1,447 ✭✭✭davindub


    The Student wrote: »
    McGaggs wrote: »
    The tax is payable when the REIT makes distributions to its investors.

    Only if the investors are tax resident in Ireland.

    Non residents pay dwt, the same rate as tenants deduct from rent for non resident landlords.

    They cannot claim a refund of this but their own country may give them a tax credit for tax paid to the irish revenue.


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    #53
    beauf
    Closed Accounts Posts: 22,651 ✭✭✭✭beauf


    McGaggs wrote: »
    The landlord doesn't pay tax twice.

    and the REIT doesn't pay the investors income tax.


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    #54
    beauf
    Closed Accounts Posts: 22,651 ✭✭✭✭beauf


    I don't think anyone cares about the tax. Its just a stick to beat the REIT or the LL or tenant.

    If people had affordable places to live no one would care.

    So the issue really is what effect do REIT have on housing and affordable rents.
    There are here, has it made rent more affordable or increased the availability?


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    #55
    beauf
    Closed Accounts Posts: 22,651 ✭✭✭✭beauf


    beauf wrote: »
    https://www.independent.ie/irish-news/dozens-of-tenants-stage-protest-as-landlord-hikes-rents-by-up-to-25pc-37390012.html

    https://fora.ie/ires-sandyford-apartments-3379970-May2017/



    I think they are looking for a bigger return and faster, than your idea.

    No one here seems to care about these tenants issues.


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    #56
    The_Conductor
    Moderators, Society & Culture Moderators Posts: 32,279 Mod ✭✭✭✭The_Conductor


    davindub wrote: »
    Non residents pay dwt, the same rate as tenants deduct from rent for non resident landlords.

    They cannot claim a refund of this but their own country may give them a tax credit for tax paid to the irish revenue.

    In which case- should the playing field be leveled and a blanket 20% rate applied to all rental income for all landlords?

    There is not a level playing field- and trying to suggest there is- just doesn't hold water.

    Also- this smacks of the same way that we have given away our gas and oil- our Corrib gasfield is designed to never generate a profit- Shell are allowed to write off global rather than Irish generated costs- against the Corrib gas income.

    We seem to have a preoccupation with giving large companies bizzare tax arrangements- that are arguably wholly unjustifiable (esp. when you consider we have a national debt of 214 billion- which costs us over 10 billion a year in interest to service).

    I just don't get this country.


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    #57
    The J Stands for Jay
    Registered Users Posts: 5,689 ✭✭✭The J Stands for Jay


    beauf wrote: »
    and the REIT doesn't pay the investors income tax.

    Yes, the investors are taxed when the get cash from the REIT.


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    #58
    The J Stands for Jay
    Registered Users Posts: 5,689 ✭✭✭The J Stands for Jay


    The_Conductor wrote: »
    In which case- should the playing field be leveled and a blanket 20% rate applied to all rental income for all landlords?

    There is not a level playing field- and trying to suggest there is- just doesn't hold water.

    Also- this smacks of the same way that we have given away our gas and oil- our Corrib gasfield is designed to never generate a profit- Shell are allowed to write off global rather than Irish generated costs- against the Corrib gas income.

    We seem to have a preoccupation with giving large companies bizzare tax arrangements- that are arguably wholly unjustifiable (esp. when you consider we have a national debt of 214 billion- which costs us over 10 billion a year in interest to service).

    I just don't get this country.

    After the deduction of DWT at 20%, this income is included on the investors tax return. If they are a higher rate taxpayer, then have to pay the balance of the tax due. Giving a 20% tax rate to landlords would unfairly advantage them.


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    #59
    beauf
    Closed Accounts Posts: 22,651 ✭✭✭✭beauf


    Protect the bond holders eh?....


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    #60
    The J Stands for Jay
    Registered Users Posts: 5,689 ✭✭✭The J Stands for Jay


    beauf wrote: »
    Protect the bond holders eh?....

    No bond holders here. REITS are limited in the amount of debt they can hold. Unlike the small landlord who is only limited by the rules of the lenders.


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    #61
    The_Conductor
    Moderators, Society & Culture Moderators Posts: 32,279 Mod ✭✭✭✭The_Conductor


    McGaggs wrote: »
    Giving a 20% tax rate to landlords would unfairly advantage them.

    Instead- we charge them PRSI and USC on the gross rather than the net rental income, we don't allow property tax be deducted as a cost- and we have hamstrung them constitutionally dubious RPZs (that haven't been challenged- solely because they have defined lifespan associated with them).

    The whole sector is in shambles.
    We need thinking outside the box.
    We need more supply.
    We should not be striving to banish small landlords- who account for just shy of 70% of the sector- out of the market.
    If there are different classes of landlords in the market- the very least we should do- is treat them in a similar manner from a tax perspective.

    The era of having small landlords to use as a whipping boy for politicians- is rapidly dwindling- as any sane landlords race to the door.

    The taxation model- and how to account for costs- is dealt with in different ways in different countries- however, the Irish model- is almost uniquely antagonistic towards small landlords. Compare renting an apartment in Dublin to one in Berlin. In Berlin- at least I'd have 2% of the value of the property- to use as unvouched expenses- annually. Here- it doesn't matter whether letting the property is profitable (or not)- you have a selection of taxes due on the gross rental income......... Does not compute.


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