Not worth the hassle?

Samuel T. Cogley

Wheres Me Jumper? wrote: »

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?

Where people want to put them, generally.

The J Stands for Jay

Ray Palmer wrote: »

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

Could you explain how there would be tax payable if there wasn't a profit?

Ray Palmer

RayCun wrote: »

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)"

You provide nonsense figures.

There are standard economic principles and they are listed in many many books. Supply and demand is a simple economic principle.

Your plan is not one anyone would sign up for. People who invest in property are telling you they won't do it your way as it is unsustainable. You are make believing an investor that doesn't exsist.

You can go on about how you think it should work but it just simply doesn't happen like that. You saying it won't make it so.

End result is less rentals about.

The J Stands for Jay

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.

They should've had better advice and bought the property through their pension.

The J Stands for Jay

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.

Accounting standards don't set out how a business should be run. They set out how those transactions should be reported in their accounts.

L1011

Wheres Me Jumper? wrote: »

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?

Some of them don't meet building regulations and people also seem to forget the need for planning permission as soon as factory built buildings come in to play - the same requirements exist

Samuel T. Cogley

Guys franklly I think the investment/doesn't cover the mortgage debate has be done to death. The issue as far as I'm concerned is the inability to evict a non-paying tenant and for them to be held accountable for the damage they do. The latter being enforced ideally by ruining thier credit for years.

I personally don't mind paying in a bit each month, however cashflow has to be in the black if one is expected to take that sort of risk.

Browney7

Samuel T. Cogley wrote: »

Where people want to put them, generally.

Exactly, you'd have a log cabin back garden blitz in suburbia in no time. Desperate times but there's a lot of things that can be tried before resorting to desperate measures

davindub

Ray Palmer wrote: »

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

Ias 40 covers investment property gains. Note your personal tax is not done to any accounting standards.

I dont see the need to be stating value increases are not profit, they are not taxed until you sell but its an increase in wealth all the same.

Ray Palmer

McGaggs wrote: »

Could you explain how there would be tax payable if there wasn't a profit?

It isn't treated as a business by revenue so you are taxed on income not profit.

pwurple

RayCun wrote: »

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?"

Actually, it often does disappear. When tenants leave, and they can't afford to repair the damage, it's vacant until there's a change. 
When there's a change of use, from the painful residential sector to the far less problematic commercial / office space, it disappears. 
When it sits unsold for years on end (because there is some issue with title etc).
When it's consumed by NAMA. 

It might be short term, it might be long term, but  either way, the housing stock certainly disappears for some period of time. 
People must have a very different idea of a functioning housing market to me. Is it really the ideal where all rental service providers are eliminated, and no matter where you go, you have to buy a house to live there for a few years? That was certainly not what I wanted for a lot of my adult life. I didn't turn 18 and want to buy bricks and mortar.

GGTrek

Ray Palmer wrote: »

McGaggs wrote: »

Could you explain how there would be tax payable if there wasn't a profit?

It isn't treated as a business by revenue so you are taxed on income not profit.

I believe this post from IPOA explains it very well:
https://ipoa.ie/budget-2019-a-positive-small-step-for-landlords/
"the restoration of mortgage interest relief to 100% as of 1st January 2019 was “a small start” on the long road of encouraging private landlords to either stay, or invest further, in the sector. “We have repeatedly told the Government that providing private rental property is a business,” says IPOA Chairman, Stephen Faughnan.  “Like every normal business, landlords have to cover costs and make it worthwhile to continue.  I hope this small start will represent a real decision to make it possible for landlords to continue playing a full part in providing quality and affordable accommodation to the 20% of the population living in rental properties.”

Mr Faughnan also expressed the hope that the Government will now begin to address other relevant issues including USC charged on gross income, acceptance of the Local Property Tax as an expense for rental properties, the complexity of landlord/tenant legislation, lack of protection during lengthy legal processes, and the inability to write-off other legitimate business costs from gross income."
I have just completed my Form 11 and landlords instead of filling in the Self-employed income section (like most trades people do) have to fill in the separate Irish Rental Income part (in order to get the "special" tax treatment), since income from letting is not treated as a business from Revenue (tax side), but it is treated as a business from the RTB and Courts (civil side). This is a bad joke only present in few (badly managed) jurisdictions like Ireland. It is not passive income like you would have on bonds or shares, but for convenience on the tax side the hypocrite Irish govvie likes it (very much) like this and discriminates (yes this is the correct word) against landlords on tax treatment. The govvie wants its cake and eat it too!
In this forum there is a lot of BS from some people that say that letting property is not a business, it only shows they have that lefty/socialist thinking that makes any discussion with these people useless.

RayCun

pwurple wrote: »

It might be short term, it might be long term, but  either way, the housing stock certainly disappears for some period of time. 

I don't think that's in question, just the idea that landlords getting out of the market means a reduction in housing stock.

pwurple wrote: »

People must have a very different idea of a functioning housing market to me. Is it really the ideal where all rental service providers are eliminated, and no matter where you go, you have to buy a house to live there for a few years? That was certainly not what I wanted for a lot of my adult life. I didn't turn 18 and want to buy bricks and mortar.

Nor is anyone claiming that this is the ideal.
The rental sector is in no danger of disappearing.
I take a lot of the landlord posts in this forum with a bag of salt, but the implication of some is that REITs are taking over a larger proportion of the rental market and small landlords are leaving.

The J Stands for Jay

Ray Palmer wrote: »

It isn't treated as a business by revenue so you are taxed on income not profit.

You're taxed on your case V profit, not your cashflow.

Ray Palmer

McGaggs wrote: »

You're taxed on your case V profit, not your cashflow.

Not true as explained above you are taxed on the income with few deductions and certainly treated differently than businesses.
Whether you like the view or not the mortgage is a cost and taxed without that deduction so rent is seen as mostly income.

Fol20

Ray Palmer wrote: »

Not true as explained above you are taxed on the income with few deductions and certainly treated differently than businesses.
Whether you like the view or not the mortgage is a cost and taxed without that deduction so rent is seen as mostly income.

Mortgage interest is expendable and will be back up to 100pc as of 2019

Ray Palmer

Fol20 wrote: »

Mortgage interest is expendable and will be back up to 100pc as of 2019

True but it was reduced and businesses can use full mortgage payments as expense. Landlords are not treated the same. USC and PRSI are also payable by landlords but not for businesses.

It also doesn't matter they restored it as people who bought wouldn't have expected it to be removed in the first place along with the other extra charges. Landlords have been taking these extra expenses. People saying it is just bad investment are ignoring the increases

GingerLily

Ray Palmer wrote: »

True but it was reduced and businesses can use full mortgage payments as expense. Landlords are not treated the same. USC and PRSI are also payable by landlords but not for businesses.

Employees of businesses pay USC and PRSI.

Ray Palmer

GingerLily wrote: »

Employees of businesses pay USC and PRSI.

The company doesn't pay it on gross profit like landlords.

I am not sure what your problem is but it is plain and simple rentals are treated very differently and do not follow the investment theories being spouted here where a landlord is to have nothing but cost and effort for 20-30 years before being able to get a profit.

https://www.propertyinvestmentsuk.co.uk/how-to-work-out-rental-yield/

This is how it is done but due to government interference you actually needed to have about a 16% rental yield.

cruizer101

Ray Palmer wrote: »

True but it was reduced and businesses can use full mortgage payments as expense. Landlords are not treated the same. USC and PRSI are also payable by landlords but not for businesses.

There is nothing stopping you from setting up as a Ltd company if you want and running your rental business through that to get the advantages you are taking about.
There are other disadvantages mind.

But the fact still remains no one forced the original couple to invest the way they did and stretch themselves so thinly.
Landlords have had it tough but so have lots of people with the recession and the various measures brought in during it.

If it is such a bad business, then get out of it.

beauf

Something like 80% or more of landlords have one one rental property.

So this couple are in the minority with 3-4 properties. They just over extended and were a bit unlucky. Not every business is successful. Most startups fail. Might be timing bad luck or any one of a number of things.

Trying to extrapolate how the business model works or not from a non typical example is a bit pointless.

mikemac2

Plenty of people their age put their money into bank shares and got wiped out. Nobody cares as it was their decision and that’s the risk you take

But if you put your money into property and it isn’t going well you can get into a national newspaper.

GGTrek

cruizer101 wrote: »

Ray Palmer wrote: »

True but it was reduced and businesses can use full mortgage payments as expense. Landlords are not treated the same. USC and PRSI are also payable by landlords but not for businesses.

There is nothing stopping you from setting up as a Ltd company if you want and running your rental business through that to get the advantages you are taking about.
There are other disadvantages mind.

But the fact still remains no one forced the original couple to invest the way they did and stretch themselves so thinly.
Landlords have had it tough but so have lots of people with the recession and the various measures brought in during it.

If it is such a bad business, then get out of it.

In my previous post I was talking about BS and this post is a perfect example. Please investigate much better the heavvy tax penalties of managing a property / letting business through an Ltd in Ireland. You will discover that it is strongly disfavoured by the govvie that again discriminates actively against landlords through the tax code compared to other businesses. The govvie only likes big REITS! If you are a medium or small landlord, it screws you.

beauf

mikemac2 wrote: »

Plenty of people their age put their money into bank shares and got wiped out. Nobody cares as it was their decision and that’s the risk you take

But if you put your money into property and it isn’t going well you can get into a national newspaper.

That's because we are in the middle of a housing crisis not a shares and investment crisis.

Also the media love to stir the pot.

beauf

GGTrek wrote: »

...The govvie only likes big REITS!...

The media seem to be completely ignoring govt policy with regard to REITs. In fact they give the govt in general a light touch.

aluminium

Seems to me looking at the posts above, there is a lot of vitriol towards Landlords. The replies to Landlord responses are more than proportionate. The vitriol also seems to be moving up a notch after every post.

To the Landlords posting, its an argument your not going to win, begrudgers, malcontents and the envious are aplenty.

Pkiernan

aluminium wrote: »

Seems to me looking at the posts above, there is a lot of vitriol towards Landlords. The replies to Landlord responses are more than proportionate. The vitriol also seems to be moving up a notch after every post.

To the Landlords posting, its an argument your not going to win, begrudgers, malcontents and the envious are aplenty.

This is the best post in this thread.

There are obviously some 2nd year Arts students posting here who just don't have life experience.

RayCun

Yeah, the world is out to get you, no-one knows the trouble you've seen

Diemos

Wheres Me Jumper? wrote: »

Just spotted this article today.
Wondering if other LLs feel the same way, or were they just unlucky or perhaps a tad naive?


https://www.independent.ie/irish-news/its-not-worth-the-hassle-woman-on-nightmare-experience-of-being-a-dublin-landlord-37435400.html

Niave, certainly but I think a lot of people buy into the logic that landlords do nothing except collect cash on a monthly basis and have no risk.
I think that makes the investment stupid rather than unlucky, you would not take out massive loans to invest in the stock market. Given that there are 4-5 properties in dublin, it's not unreasonable to assume as asset value in excess of 1 million. Who has a portfolio like that with out doing even the most basic of homework on the industry?
Looks like these guys leveraged way too much on multiple properties, they took a hell of a gamble and lost. During the boom a lot of people did this, a few people managed to pull this off (more luck than judgement imho) but most will lose their shirt in this situation.


The thing that confuses me it, if they are struggling to get by now, how on earth did they keep their head above water from 2010 through 2013.

Ray Palmer

cruizer101 wrote: »

There is nothing stopping you from setting up as a Ltd company if you want and running your rental business through that to get the advantages you are taking about.
There are other disadvantages mind.

But the fact still remains no one forced the original couple to invest the way they did and stretch themselves so thinly.
Landlords have had it tough but so have lots of people with the recession and the various measures brought in during it.

If it is such a bad business, then get out of it.

You really don't know what you are talking about.

The couple did not simply make a bad financial decision. If they followed a sensible approach they were then shafted by the government.

While rents dropped taxes were increased. What is so difficult to see that it was not market factors but government interference.

The government also failed to protect them from nonpaying tenants.

They are getting out and taking a loss. People claim landlords are all raking in money.