Not worth the hassle?

FrostyJack

RayCun wrote:

Not to be harsh, but just because something is a good long term investment doesn't mean it will be a good short term investment.

It might never be a good investment, if another crash happens, I will be totally screwed, along with anyone else in similar circumstances. I didn't buy as an investment, I foolishly bought to get on the ladder. I am lucky my job was never affected in the crash so I can afford the shortfall but I am sure most othet people were

RayCun

FrostyJack wrote: »

It might never be a good investment, if another crash happens, I will be totally screwed, along with anyone else in similar circumstances. I didn't buy as an investment, I foolishly bought to get on the ladder. I am lucky my job was never affected in the crash so I can afford the shortfall but I am sure most othet people were

again, not to be harsh, but you are an outlier who made a bad decision. Even at that, if you are putting in 300/month of your money but you are paying off the principal, then at the end of your mortgage term you will have an asset that is worth more than you paid for it. (500/month -> 6k/year -> 120k over 20 years, and I have to assume your property is worth more than 120k)

The women in the original link obviously thought that they could buy houses for very little down, rent them out, and cover their mortgages completely. And it isn't a crazy assumption - price-to-rent ratios in Ireland would usually support that. But they bought at the top of the market and they over-extended themselves. Over 20 years, even buying when they did, they might cover their mortgage with their rent. They'd certainly cover some of the mortgage principal with rent. But over a shorter time period you need to be able to make up a shortfall.

cruizer101

Ray Palmer wrote: »

No you don't understand it so why are you making a claim it is profit because you won't find any accountancy theory that agrees with that. Go try and you will see nobody considers it profit.

circular flexing wrote: »

I can't call it what I like, I will call it what it should be: an asset that has increased in value (which doesn't automatically mean more money, the asset still has to be converted to cash).

profit
/ˈprɒfɪt/Submit
noun
1.
a financial gain, especially the difference between the amount earned and the amount spent in buying, operating, or producing something.


You can say technically by accountancy terms it isn't a profit if you want but the simple fact is if you end up with more money than you put in you have made a profit.

So I take a loan for 200k, buy a property, over 20 years the mortgage gets paid off, over that time lets say the rent has covered all expenses, mortgage bills, tax whatever, you know lets even say I had to put in 200 a month to cover the mortgage, thats another 48k.
End of the 20 years i sell for 200k, property hasn't even appreciated at all.

So I put in 48k I got out 200k that means I made a profit. If you still disagree with the fact that now I have more money means I made a profit then I don't know what to say thats just madness.

Ray Palmer

McGaggs wrote: »

I'd imaging an accounting standard like IAS 18 would have something to say about this, and I don't believe it would say that a profit is no longer a profit if the cash generated is used as capital repayment against a debt.

Great then you can provide evidence that the financial talk about rent versus mortgage repayment clearly stating what is profit. You can show us this great financial plan where a person continue to add to rent and wait till it is paid off before any profit.

Should be really easy if it so well known according to people. Amazing how no proof has appeared yet.

FrostyJack

RayCun wrote:

again, not to be harsh, but you are an outlier who made a bad decision. Even at that, if you are putting in 300/month of your money but you are paying off the principal, then at the end of your mortgage term you will have an asset that is worth more than you paid for it. (500/month -> 6k/year -> 120k over 20 years, and I have to assume your property is worth more than 120k)

Sorry you are wrong. I am paying 300 out of my money then at least a further 500 on tax. 1200ish euro on maintance fee, 260ish property tax and at least 1k on repairs, plumbers etc. Not withstanding white goods and furniture. Plus I have already being paying for 10 years mainly interest before renting it out. So no I will not be up at the end if I rent it to term. The property is worth just over half of what I paid now and don't see it going much further before another correction down the line. I will have a property that I dont want and will struggle for the next 20 years to have it. God forbid another economic collapse and I can't make repayments. I live on fear of that anytime my phone rings from tenants that it is never good news. Also I am not that much of an outlier as I know loads of people in similar situation, like all of my neighbours in the development that are owner occupiers.

Grumpypants

cruizer101 wrote: »

profit
/ˈprɒfɪt/Submit
noun
1.
a financial gain, especially the difference between the amount earned and the amount spent in buying, operating, or producing something.


You can say technically by accountancy terms it isn't a profit if you want but the simple fact is if you end up with more money than you put in you have made a profit.

So I take a loan for 200k, buy a property, over 20 years the mortgage gets paid off, over that time lets say the rent has covered all expenses, mortgage bills, tax whatever, you know lets even say I had to put in 200 a month to cover the mortgage, thats another 48k.
End of the 20 years i sell for 200k, property hasn't even appreciated at all.

So I put in 48k I got out 200k that means I made a profit. If you still disagree with the fact that now I have more money means I made a profit then I don't know what to say thats just madness.

200K loan
Interest @3.6% = 80K
Upkeep & bills modest average 2k per year over 20 years = 40K

200K property at the end of 20 years has cost 320K.

To get 320K in rental "profit" after tax (lets say effective tax rate of 37%) you need to earn (320 * 1.37) = 438K

438K/20/12 = €1826

Is there really properties out there that you can buy for 200K and get nearly 2K a month in rent for?

Much more likely to get around €1100 for that property which means it would take 33 years to pay off the debt.

So if you buy a property before you turn 40 you can have 33 years of stress and then cash in just in time to die.

RayCun

Ray Palmer wrote: »

You can show us this great financial plan where a person continue to add to rent and wait till it is paid off before any profit.

(not real numbers, I'm demonstrating the principles)

Property costs 100,000
Deposit is 10,000
Mortgage payments of 1000/month for 20 years (interest and principal)
Rent is 1000/month
Tax, expenses etc mean the owner has to put in another 200/month to cover mortgage payments

After 20 years, property is paid off and worth 100,000.
Landlord has put in 10,000 + (200 x 12 x 20 ) = 58000, so can sell for a profit of 42,000 (or hold on to this asset for an income of 9-10k/year)

BUT
the landlord can also sell after 10 years, and realise the equity they have put in. Or sell after 5 years.

Yes, mortgage payments are loaded towards interest in the early years.
Yes, in the short term, the value of the property may fall. (But over 20 years it is almost certainly going to increase)
Yes, there are always risks associated with renting - bad tenants, market falls, property damage etc.

But the idea that you can't make a profit until the mortgage term is up is simply wrong.

You can't rely on making a profit in the short term. Letting property is a form of investment where you need to be able to weather bad years. But the government isn't putting guns to peoples heads and forcing them to invest in property. People aren't buying rental property as a form of public service. People are buying rental property because they see a real investment opportunity.

RayCun

Grumpypants wrote: »

Is there really properties out there that you can buy for 200K and get nearly 2K a month in rent for?

There are properties out there that you can buy for 200k and over the lifetime of the mortgage the average rent will be close to 2k.

Rent may be 1100 now. In 5 years time 1500. In 10 years time 2000. In 15 years time 2500.

And at the end of the mortgage you have an asset that is returning over 2k/month.

https://www.statista.com/statistics/592287/house-price-to-rent-ratio-ireland/

https://www.numbeo.com/property-investment/country_result.jsp?country=Ireland

https://www.irishtimes.com/business/economy/average-rents-reach-all-time-high-of-1-304-per-month-1.3598655

Ray Palmer

RayCun wrote: »

(not real numbers, I'm demonstrating the principles)

Property costs 100,000
Deposit is 10,000
Mortgage payments of 1000/month for 20 years (interest and principal)
Rent is 1000/month
Tax, expenses etc mean the owner has to put in another 200/month to cover mortgage payments

After 20 years, property is paid off and worth 100,000.
Landlord has put in 10,000 + (200 x 12 x 20 ) = 58000, so can sell for a profit of 42,000 (or hold on to this asset for an income of 9-10k/year)

BUT
the landlord can also sell after 10 years, and realise the equity they have put in. Or sell after 5 years.

Yes, mortgage payments are loaded towards interest in the early years.
Yes, in the short term, the value of the property may fall. (But over 20 years it is almost certainly going to increase)
Yes, there are always risks associated with renting - bad tenants, market falls, property damage etc.

But the idea that you can't make a profit until the mortgage term is up is simply wrong.

You can't rely on making a profit in the short term. Letting property is a form of investment where you need to be able to weather bad years. But the government isn't putting guns to peoples heads and forcing them to invest in property. People aren't buying rental property as a form of public service. People are buying rental property because they see a real investment opportunity.

So you can't find an accounting principle and financial claim for this model!

I can completely understand what you are saying. You aren't showing how this is good theory and acceptable accounting logic.

Claiming it should work like that is not how it is worked out.

You are completely ignoring the fact the government increased costs and how landlords had to put more money in as a result. Still claiming rents are high enough to make a profit on rent as it is more than mortgages. That is not true and already explained. The couple here also bought at 2008 prices. Their mortgage didn't drop when rent and prices did but costs went up. How can you not see how detrimental an act like that was on the market. It stopped investment in property and fuelled the housing shortgage

RayCun

Ray Palmer wrote: »

So you can't find an accounting principle and financial claim for this model!

What on earth are you talking about?

pwurple

Ah isn't that handy that all the real world examples given are outliers.
Where I live, there are a bunch of repossessions going on over the last few years. About 15 in this parish / small area. All these people owned their own house, and either had invested in residential or commercial property. They've been Nama'd. Lost not only every asset, but also their family home.

Anyone who thinks it's easy money is simply naieve. It's hard work, and it's complicated. You need a decent knowledge of the law, and iron clad insurance. You are at risk of losing far more than what you ever invested.. You can lose money you don't even have, and end up in massive debt.  I've managed to keep it going, keep people housed, not turf tenants onto the street, but only by moving money into it from other sources of income, because it does make a loss some of the time. I've also had to take people to court, so you need balls of titanium and some backup funds behind you to protect yourself.

RayCun

pwurple wrote: »

Ah isn't that handy that all the real world examples given are outliers.

Average rent in Dublin is over 1500/month. Do you think most landlords are making a loss?

pwurple wrote: »

Anyone who thinks it's easy money is simply naieve. It's hard work, and it's complicated. You need a decent knowledge of the law, and iron clad insurance. You are at risk of losing far more than what you ever invested.. You can lose money you don't even have, and end up in massive debt.  I've managed to keep it going, keep people housed, not turf tenants onto the street, but only by moving money into it from other sources of income, because it does make a loss some of the time. I've also had to take people to court, so you need balls of titanium and some backup funds behind you to protect yourself.

I agree, it's not like putting money into a bank and getting a steady rate of interest with no risk.
Of course, the rate of interest you will get in a bank is tiny. Renting property has the potential for much higher returns, but requires much more involvement, is much less steady, and has risks.

handlemaster

Alot of small time landlords do this to top up their pensions. Property paid from their already taxed pay in another sector. Why are so many people against other people trying to have enough cash in retirement so can pay their bills without looking for further social assistance.

RayCun

handlemaster wrote: »

Alot of small time landlords do this to top up their pensions. Property paid from their already taxed pay in another sector. Why are so many people against other people trying to have enough cash in retirement so can pay their bills without looking for further social assistance.

Who has said they want to stop people from buying property to rent?

If that's what people want to invest in, that's up to them.

But they should go into it with their eyes open, not expecting easy money, treating it like any other business investment.

To turn your question around, why should society support investment in rental property to the extent that people expect it to have a greater return than, for example, a pension fund?

Ray Palmer

RayCun wrote: »

What on earth are you talking about?

You are claiming that paying extra into a rental property is a standard financial plan. I asked you to go find an accounting principle and financial plan with academic standing to prove this.

You are unable to do so but did repeat what has been said numerous times.

I am explaining the model you suggest is not sound economics nor accounting principles. Your goal should be to show how what you claim is sound economics is agreed with by financial planets, economists and accountants.

If it so sound you should be able to find a ton of documentation to back it up. If you don't find any my point is proven that it is not sound economics or accounting.

I understand what you believe so no need to repeat yourself. I and others reject what you believe and say it is bad economics. Prove it is an agreed good economic view as you are so sure it is.

RayCun

Ray Palmer wrote: »

You are claiming that paying extra into a rental property is a standard financial plan. I asked you to go find an accounting principle and financial plan with academic standing to prove this.

Really, is there a list of standard financial plans you expect me to look up somewhere?

Are you suggesting that financial planners, accountants, and economists everywhere are unfamiliar with the idea of buying a property to rent, and sometimes having to put in money beyond the rent to meet a mortgage payment? That they would be shocked and appalled that this would sometimes be part of buying to let?

Are you suggesting that they would say this is a crazy idea? That even though you end the mortgage term with an asset worth more than you paid for it, the fact that you put in more than the initial deposit means it is rank insanity?

Don't be silly.

Grumpypants

RayCun wrote: »

Who has said they want to stop people from buying property to rent?

If that's what people want to invest in, that's up to them.

But they should go into it with their eyes open, not expecting easy money, treating it like any other business investment.

To turn your question around, why should society support investment in rental property to the extent that people expect it to have a greater return than, for example, a pension fund?

Because you can't live in a pension fund.

Every day people are harping on about a housing crisis. Yet the only group that is doing anything to provide housing to the population are being unfairly punished at every turn, and constantly vilified in the media. All they want is a parity with other businesses to ensure that is sustainable.

What benefit is it to society to remove private landlords. How will fewer houses to rent help the housing crisis?

RayCun

Grumpypants wrote: »

Because you can't live in a pension fund.

Every day people are harping on about a housing crisis. Yet the only group that is doing anything to provide housing to the population. All they want is a tiny break to ensure that is sustainable.

What benefit is it to society to remove private landlords. How will fewer houses to rent help the housing crisis?

Private landlords are not building houses.

If private landlords decide it is too much work and sell up, the house does not disappear.

Really, is anyone looking at the current property market and thinking, "What this situation really needs is more prospective buyers?"

GingerLily

Wanderer78 wrote: »

What happens if there's an unexpected property crash, and are these risks explained enough by the financial institutions that give the loans in the first place?

What do you understand about banking?

Ray Palmer

RayCun wrote: »

Really, is there a list of standard financial plans you expect me to look up somewhere?

Are you suggesting that financial planners, accountants, and economists everywhere are unfamiliar with the idea of buying a property to rent, and sometimes having to put in money beyond the rent to meet a mortgage payment? That they would be shocked and appalled that this would sometimes be part of buying to let?

Are you suggesting that they would say this is a crazy idea? That even though you end the mortgage term with an asset worth more than you paid for it, the fact that you put in more than the initial deposit means it is rank insanity?

Don't be silly.

Your the one claiming it is good financial sense there should be something to back up this claim. People are telling you that isnt how it works. You should be able to prove it surely

You and others are not suggesting occasionally putting money in but to continue to do it.

You are being silly by making a claim as standard financial planning when people who do actually invest in property telling you they wouldn't invest in the circumstances you claim are normal. They aren't normal,sustainable nor attractive. It is precisely why landlords are leaving the market and not investing.

Ray Palmer

RayCun wrote: »

Private landlords are not building houses.

If private landlords decide it is too much work and sell up, the house does not disappear.

Really, is anyone looking at the current property market and thinking, "What this situation really needs is more prospective buyers?"

Rented property has a higher occupancy rate than privately owned. So the number of properties to rent do disappear and are not replaced.
Rented house by me had 5 adults living in it. Was sold and a couple moved in 3 less people housed and less property to rent

RayCun

Ray Palmer wrote: »

Your the one claiming it is good financial sense there should be something to back up this claim.

I'm providing figures.

You seem to expect me to say, "This is Investment Strategy 36c, from Richard Scarry's Big Book of Investment Strategies (as used by all top economists and accountants)"

Grumpypants

RayCun wrote: »

Private landlords are not building houses.

If private landlords decide it is too much work and sell up, the house does not disappear.

Really, is anyone looking at the current property market and thinking, "What this situation really needs is more prospective buyers?"

If they sell it is being sold to someone who wants to live in it so it does leave the rental market. The share of rental properties has been steadily decreasing as landlords flee the market as they come out of negative equity.

RayCun

Ray Palmer wrote: »

Rented property has a higher occupancy rate than privately owned. So the number of properties to rent do disappear and are not replaced.
Rented house by me had 5 adults living in it. Was sold and a couple moved in 3 less people housed and less property to rent

So we should provide support for room rental schemes to increase occupancy rates.

GingerLily

RayCun wrote: »

So we should provide support for room rental schemes to increase occupancy rates.

The current scheme seems quite decent- 14k pa tax free and eviction instantly no reason needed? I don't know what other support should be given to RAR schemes

RayCun

Grumpypants wrote: »

If they sell it is being sold to someone who wants to live in it so it does leave the rental market. The share of rental properties has been steadily decreasing as landlords flee the market as they come out of negative equity.

And the share of owner-occupied housing has been increasing.

If we were in the middle of a recession, you could argue that supports for landlords were necessary to increase demand. But demand is not the problem right now.

RayCun

GingerLily wrote: »

The current scheme seems quite decent- 14k pa tax free and eviction instantly no reason needed? I don't know what other support should be given to RAR schemes

Yeah, I was implying an "... oh wait, we already do!"

Browney7

Ray Palmer wrote: »

Rented property has a higher occupancy rate than privately owned. So the number of properties to rent do disappear and are not replaced.
Rented house by me had 5 adults living in it. Was sold and a couple moved in 3 less people housed and less property to rent

Which shows the absolute dearth of housing stock we have in the city suitable for housing the demographic of people who rent.

More apartments are needed for couples and small groups of adults. I don't care who builds them, REITs, government, developers, Bob the builder. Telling mid paid professionals, nurses, teachers, above 40k salary that they should share a 4 bed semi on a combined rent over 2 grand with three other adults in terenure or some ex corpo in Marino till their thirties until they are ready to buy that "forever home" is nonsense.

The J Stands for Jay

Ray Palmer wrote: »

Great then you can provide evidence that the financial talk about rent versus mortgage repayment clearly stating what is profit. You can show us this great financial plan where a person continue to add to rent and wait till it is paid off before any profit.

Should be really easy if it so well known according to people. Amazing how no proof has appeared yet.

Rental Gross profit = rent - (loan interest + expenses).
Net profit = gross profit - tax.

There will also be profit on any capital appreciation of the asset: value - cost to buy = profit

Wheres Me Jumper?

Ciara Kelly just did a piece on Newstalk timber/log homes which can be erected much more quickly for a fraction of the price of your standard concrete box. Much more energy efficient too.
But there seems to be a lot of resistance to these type of houses.
Why?