Is the desire to own your own home justified !

GreeBo

Eric Cartman wrote: »

however it is very possible to rent a house in ireland for 30 years where the value of the house would mean that your rent would be the same as the 'dead' interest payments on a mortgage.

1.2 million quid house, 80% LTV
mortgage payment at 3.5% is 4490 per month

if your rent was 3000 a month you could be in there 8 years without the mortgage being better
if your rent was 2000 a month you could be in there 14 years before the mortgage was better.

Doesn't work with all properties, but there very much are cases (particularly with large rural houses) where renting is kind of like being on an interest only mortgage with no deposit and a free maintenance deal.

But no matter what you will own the house at the end of a mortgage, which is comforting to many people.

I would consider long term renting if we had a functioning rental market, but when your rent on a property is significantly more than a new mortgage on the same property, something is wrong and I want no part of it.

If rent was say 60% of your mortgage then long term renting could make sense, otherwise its hard to see why you would want to rent other than perceived "freedom"

thomas anderson.

My current rent is €950, if I were to move out it would cost me a minimum of €1400.

I have no guarantee of tenure on the property I am in at the moment as its a single landlord who could at any stage pull the trigger and sell the property.

So I am currently trying to buy where my mortgage repayment will be under €500 a month. Now the purchase will wipe out my entire savings pot but Ive a kid on the way so its a no brainier.

Fol20

GreeBo wrote: »

But no matter what you will own the house at the end of a mortgage, which is comforting to many people.

I would consider long term renting if we had a functioning rental market, but when your rent on a property is significantly more than a new mortgage on the same property, something is wrong and I want no part of it.

If rent was say 60% of your mortgage then long term renting could make sense, otherwise its hard to see why you would want to rent other than perceived "freedom"

You seem to want all the pros with none of the cons of renting.

-Rent includes all maintenance of a property. This could include a new boiler or roof which can cost thousands while you still pay the same rate
-while renting, it allows you to be flexible and move at short notice if needed
- it allows you to stay in a property without having the money for a deposit of at least 30-50k.
-rent is at all times highs now, how about 5 years ago. People seem to have short memory of this> even 5 years ago rent was more expensive than a mortgage and it should always be this way or else you will never have investors willing to take a punt at the residential market. Why would they when it’s loss making then.

Over the long term, yes your much better off having a mortgage however there are a lot of benefits that tenants fail/refuse to observe. Yes you don’t have security of tenure at the moment but you can’t just say oh my rent is more expensive vs the same mortgage for a house when you have ongoing maintenance and several others costs factors that impact it.

Obvious Desperate Breakfasts

Aryanna Few Stint wrote: »

As I pointed out you could have your house repossessed with no mortgage on it if you use it as security against a totally non related loan. Does that mean the person doesn’t not own the house?

You own the house 100%, the fact it’s security against a mortgage does not not change that fact nor can it in anyway be compared to renting.

No you don’t. If you owned it 100%, it couldn’t ever be repossessed. If you put up your house as security against something then you can potentially lose it. Somebody who owns their house outright and somebody who has a mortgage are not on the same footing. Anyone can fall on hard times but I have a feeling people would generally be more sympathetic towards someone who falls behind on mortgage payments than rent payments. Hardly fair.

GreeBo

Fol20 wrote: »

You seem to want all the pros with none of the cons of renting.

-Rent includes all maintenance of a property. This could include a new boiler or roof which can cost thousands while you still pay the same rate
-while renting, it allows you to be flexible and move at short notice if needed
- it allows you to stay in a property without having the money for a deposit of at least 30-50k.
-rent is at all times highs now, how about 5 years ago. People seem to have short memory of this> even 5 years ago rent was more expensive than a mortgage and it should always be this way or else you will never have investors willing to take a punt at the residential market. Why would they when it’s loss making then.

Over the long term, yes your much better off having a mortgage however there are a lot of benefits that tenants fail/refuse to observe. Yes you don’t have security of tenure at the moment but you can’t just say oh my rent is more expensive vs the same mortgage for a house when you have ongoing maintenance and several others costs factors that impact it.

Investors make money buy owning the property outright or having a small mortgage or by having the rent closely match the mortgage. Don't confuse yield with asset value.

Rent shouldn't be more expensive than the mortgage! How would that ever work?

Sure there are other expenses when owning but over the lifetime they won't come near paying rent for life for the same property, especially considering you own an asset.

Tbh i don't think you followed my post at all...i am a mortgage holder... I'm not in favour of renting at all, but i could see how, in a rational market some people would... that's why it works and is popular... in other rational markets.

Fol20

GreeBo wrote: »

Investors make money buy owning the property outright or having a small mortgage or by having the rent closely match the mortgage. Don't confuse yield with asset value.

Rent shouldn't be more expensive than the mortgage! How would that ever work?

Sure there are other expenses when owning but over the lifetime they won't come near paying rent for life for the same property, especially considering you own an asset.

Tbh i don't think you followed my post at all...i am a mortgage holder... I'm not in favour of renting at all, but i could see how, in a rational market some people would... that's why it works and is popular... in other rational markets.

When was rent ever cheaper than buying a home with a mortgage. It wasnt cheaper relative to a mortgage in the recession and its the exact same now. Try renting a car long term vs taking a loan and owning it. Try renting any item long term vs owning it. it is always cheaper to own it while renting for a year or two years will be more expensive from a cash flow point of view.

Where exactly does it work the way you talk about it. I know in France and USA, from a business point of view, it is the same as here.

GreeBo

Fol20 wrote: »

When was rent ever cheaper than buying a home with a mortgage. It wasnt cheaper relative to a mortgage in the recession and its the exact same now. Try renting a car long term vs taking a loan and owning it. Try renting any item long term vs owning it. it is always cheaper to own it while renting for a year or two years will be more expensive from a cash flow point of view.

Where exactly does it work the way you talk about it. I know in France and USA, from a business point of view, it is the same as here.

Its cheaper on a monthly basis... obviously over time it can even out our be more expensive to rent, but that's irrelevant if you can't afford a deposit or don't want to.
50 years of renting compared to 30/35 years of mortgage assuming most people don't leave home and go straight into a new hone of their own.

GreeBo

GreeBo wrote: »

Investors make money buy owning the property outright or having a small mortgage or by having the rent closely match the mortgage. Don't confuse yield with asset value.

Rent shouldn't be more expensive than the mortgage! How would that ever work?

Sure there are other expenses when owning but over the lifetime they won't come near paying rent for life for the same property, especially considering you own an asset.

Tbh i don't think you followed my post at all...i am a mortgage holder... I'm not in favour of renting at all, but i could see how, in a rational market some people would... that's why it works and is popular... in other rational markets.

Of course rent should be more than a mortgage payment. The only reason rents have been less than mortgages was comparing recession rents with boom mortgages at almost any other time rents are more, often considerably more than an equivalent mortgage and rightly So as it has to cover the property, all it’s maintainence and a profit for the LL.

sdanseo

In general no, absolutely unjustified.

In a market where the average mortgage is about half the cost of the equivalent rent, even with extortionate interest considered... go figure.

twowheelsonly

Aryanna Few Stint wrote: »

Of course rent should be more than a mortgage payment. The only reason rents have been less than mortgages was comparing recession rents with boom mortgages at almost any other time rents are more, often considerably more than an equivalent mortgage and rightly So as it has to cover the property, all it’s maintainence and a profit for the LL.

Yet most small landlords will tell you that they bought the property as an investment for their future / retirement. In that case they want to make a profit now and want to make a much larger profit again in 20 years time on top of that.
If you invest in Gold / Copper / Shares / Antiques / Paintings or whatever you're having yourself you take that risk yourself. Somehow, because it's property , it's expected that someone else should pay over the top for the use of that property so that your investment is protected ?

Having rents higher than mortgage costs only has the long term effect of killing the goose that laid the golden egg. If I'm paying €1600 pm on rent and I can have a mortgage for €800 or so then I'm gone like a hot snot as soon as I have my deposit together. If that rent was 5 or 600 then the urgency is not so great and I'm happy to rent away for longer.

IMO, building more Social housing and wiping out the likes of HAP is the only way to go. It's going back 30 years but at least housing was affordable then for most working people - just the way it should be.

Ush1

twowheelsonly wrote: »

Yet most small landlords will tell you that they bought the property as an investment for their future / retirement. In that case they want to make a profit now and want to make a much larger profit again in 20 years time on top of that.
If you invest in Gold / Copper / Shares / Antiques / Paintings or whatever you're having yourself you take that risk yourself. Somehow, because it's property , it's expected that someone else should pay over the top for the use of that property so that your investment is protected ?

Having rents higher than mortgage costs only has the long term effect of killing the goose that laid the golden egg. If I'm paying €1600 pm on rent and I can have a mortgage for €800 or so then I'm gone like a hot snot as soon as I have my deposit together. If that rent was 5 or 600 then the urgency is not so great and I'm happy to rent away for longer.

IMO, building more Social housing and wiping out the likes of HAP is the only way to go. It's going back 30 years but at least housing was affordable then for most working people - just the way it should be.

You're talking the difference between investing in commodities and company shares(i.e. a business).

Commodities like some you mentioned are speculative, a bar of gold doesn't do anything apart from look shiny. A house does do something, it provides shelter to someone on an ongoing basis hence a good investor will be looking for short term yield whilst also expecting to make a profit when the asset is sold.

Just to note also, many shares accumulate dividends which pay out on a regular basis.

John_Rambo

Aryanna Few Stint wrote: »

Of course rent should be more than a mortgage payment. The only reason rents have been less than mortgages was comparing recession rents with boom mortgages at almost any other time rents are more, often considerably more than an equivalent mortgage and rightly So as it has to cover the property, all it’s maintainence and a profit for the LL.

Lol! Meanwhile, in the real world!

L1011

Aryanna Few Stint wrote: »

Of course rent should be more than a mortgage payment. The only reason rents have been less than mortgages was comparing recession rents with boom mortgages at almost any other time rents are more, often considerably more than an equivalent mortgage and rightly So as it has to cover the property, all it’s maintainence and a profit for the LL.

Rents have rarely been more than the equivalent mortgage cost. The idea that rent "has to" provide a provide after costs including those towards the ownership of the asset is quite a recent thing, driven by BTL mortgages

Invest money you have, not money you've borrowed. If you lose borrowed money on any other asset class purchase you'll find no sympathy from anywhere for instance

GreeBo

L1011 wrote: »

Rents have rarely been more than the equivalent mortgage cost. The idea that rent "has to" provide a provide after costs including those towards the ownership of the asset is quite a recent thing, driven by BTL mortgages

Invest money you have, not money you've borrowed. If you lose borrowed money on any other asset class purchase you'll find no sympathy from anywhere for instance

Exactly, you make money as a landlord by owning the property outright, not by borrowing to buy it and then charging exorbitant rents to cover your costs and still make a return and *still* have a lump sum bonus at the end from capital appreciation.

Fol20

L1011 wrote: »

Rents have rarely been more than the equivalent mortgage cost. The idea that rent "has to" provide a provide after costs including those towards the ownership of the asset is quite a recent thing, driven by BTL mortgages

Invest money you have, not money you've borrowed. If you lose borrowed money on any other asset class purchase you'll find no sympathy from anywhere for instance

It has been this way in the states for some time now. Since Ireland has turned into the modern society it is today, it has always been like this. 30/40 years ago renting wasn’t as big as it is today however society back then was very very different and incomparable to today’s situation. Expectations at least for the past 20 years is that the rent will cover all payments necessary for a property.


When you invest in anything, you do have a risk of loosing it all irregardless of the fact that it is borrowed or money you have. People should never have sympathy for investment money if they loose it so not sure why you brought that up

Fol20

GreeBo wrote: »

Exactly, you make money as a landlord by owning the property outright, not by borrowing to buy it and then charging exorbitant rents to cover your costs and still make a return and *still* have a lump sum bonus at the end from capital appreciation.

Not sure why you need to mention “exorbitant rents”. It goes back to the fact that tenants think ll are fleecing tenants when in reality a business should charge as much as buyer will allow which is normal for how a business to operate.

In other business, you might be able to make your money quick and you make a profit per annum.When buying property. Your buying it for the long game with a 25-40year horizon. In this regard, you can’t realize your profits for a very long time so there has to be added benefits to this. If it was as easy as you make it seem, why is the market share of ll decreasing instead of increasing.

L1011

~04-07 and 14-now is not the past 20 years

BTLers expecting a property to be bought for them *and* a dividend on top is not a facet of a modern society

Fol20

L1011 wrote: »

~04-07 and 14-now is not the past 20 years

BTLers expecting a property to be bought for them *and* a dividend on top is not a facet of a modern society

In your opinion what was the difference between those years. Going back to before the recession, there was more tax write offs available which would have made up for the current situation.

L1011

Supply side problems weren't creating an abnormality.

It is abnormal that someone can have a property bought for them by tenants and have an income from it at the same time. A few years of that happening does not make it normal.

Ush1

L1011 wrote: »

~04-07 and 14-now is not the past 20 years

BTLers expecting a property to be bought for them *and* a dividend on top is not a facet of a modern society

It's not bought for them. They still have to come up with the deposit, they will be further scrutinised by a bank than a normal mortgage.

They will also have to make sure there is always a tenant to rent it out, maintenance, all the risk etc....

Institutional or large investors who are buying a property outright can charge a lower rent as they likely got a discount on the price by paying cash and also have no interest to pay. The ROI will happen quicker for them as they aren't servicing a loan.

Fol20

L1011 wrote: »

Supply side problems weren't creating an abnormality.

It is abnormal that someone can have a property bought for them by tenants and have an income from it at the same time. A few years of that happening does not make it normal.

Agreed supply side is a major issue and is propping up rental rates.

Personally I wouldnt be expecting a surplus although we do have one right now. I would expect the rent to cover the payments however. When I bought during the recession due to property prices being much less, rents also covered the mortgage back then also. My analogy for other items people can rent is the same for houses imo.

Fol20

Ush1 wrote: »

It's not bought for them. They still have to come up with the deposit, they will be further scrutinised by a bank than a normal mortgage.

They will also have to make sure there is always a tenant to rent it out, maintenance, all the risk etc....

Institutional or large investors who are buying a property outright can charge a lower rent as they likely got a discount on the price by paying cash and also have no interest to pay. The ROI will happen quicker for them as they aren't servicing a loan.

They also won’t charge lower rent however it’s nice to have a wedge.
Taxation for them is also very different.

Obvious Desperate Breakfasts

Aryanna Few Stint wrote: »

Of course rent should be more than a mortgage payment. The only reason rents have been less than mortgages was comparing recession rents with boom mortgages at almost any other time rents are more, often considerably more than an equivalent mortgage and rightly So as it has to cover the property, all it’s maintainence and a profit for the LL.

Tenants don’t care about all that though. In a tenant’s market, if one potential landlord is trying to charge enough rent to cover taxes and turn a profit and another landlord is offering a similar letting, quality- and location-wise for far less rent, why would anyone go for the more expensive place? The potential tenants wouldn’t be doing it for spite either, they’d just naturally go for the cheaper rent because why wouldn’t they?

The Student

L1011 wrote: »

~04-07 and 14-now is not the past 20 years

BTLers expecting a property to be bought for them *and* a dividend on top is not a facet of a modern society

Is being a landlord not a business? Why can't a landlord have a property bought for them and have a dividend?

Are the fundamentals of business not to make as much as you can?

Obvious Desperate Breakfasts

The Student wrote: »

Is being a landlord not a business? Why can't a landlord have a property bought for them and have a dividend?

Are the fundamentals of business not to make as much as you can?

Don’t shareholders only get dividends if there’s a profit that year?

L1011

The Student wrote: »

Is being a landlord not a business? Why can't a landlord have a property bought for them and have a dividend?

Are the fundamentals of business not to make as much as you can?

A single or low number of unit BTL is about as much of a business as my 1.4 is a supercar.

Expecting to be able to borrow money and have it entirely paid for and a cherry on top is not a business - its an gamble on an investment. And it wasn't the case in the past expect for a few years.

The reality is that in any normal supply situation it is impossible for rents to be that much ahead of mortgages. People getting in to BTL assuming that it will forever be the case are going to hit the ground hard.

The Student

Obvious Desperate Breakfasts wrote: »

Don’t shareholders only get dividends if there’s a profit that year?

A profit is when expenses in a given year exceed income. Profits are whats available for distribution.

A company does not have to issue dividends it can retain profits for future years dividends.

The Student

L1011 wrote: »

A single or low number of unit BTL is about as much of a business as my 1.4 is a supercar.

Expecting to be able to borrow money and have it entirely paid for and a cherry on top is not a business - its an gamble on an investment. And it wasn't the case in the past expect for a few years.

The reality is that in any normal supply situation it is impossible for rents to be that much ahead of mortgages. People getting in to BTL assuming that it will forever be the case are going to hit the ground hard.

All business is a gamble, whether its your corner shop or a big multinational. Businesses borrow money everyday, the whole premise of being in business is to make money be it via profit on a day to day basis, be it capital appreciation of an asset or a mixture of both.

We don't have a normal supply because of Govt/State interference.

Simple economic law states that when an industry earns Supernormal profits other suppliers enter the same industry to secure a share of those supernormal profits which increases supply and erodes supernormal profits down to normal profits for all suppliers where supply meets demand.

So in a normal market supply would increase based on the above concept. So why is it not happening in the rental sector?

Until the Govt/State stops interfering rents are not going to drop anytime soon and the more the Govt/State try to cap existing rents the lower the rental standards will become because it will not make business sense to invest in upgrading a property if you can't get a return on your investment.

Obvious Desperate Breakfasts

The Student wrote: »

A profit is when expenses in a given year exceed income. Profits are whats available for distribution.

A company does not have to issue dividends it can retain profits for future years dividends.

Ah yeah, my point was that buying shares in a business doesn’t guarantee dividends. Say the company never turns a profit and folds. Likewise, rent might not always cover mortgage payments.

Old diesel

Ush1 wrote: »

It's not bought for them. They still have to come up with the deposit, they will be further scrutinised by a bank than a normal mortgage.

They will also have to make sure there is always a tenant to rent it out, maintenance, all the risk etc....

Institutional or large investors who are buying a property outright can charge a lower rent as they likely got a discount on the price by paying cash and also have no interest to pay. The ROI will happen quicker for them as they aren't servicing a loan.

If you are requiring a margin every month on top of ALL costs including the following......

1) full loan/mortgage (capital and interest) repayment.

2) full maintenance costs over the long term (including repairs)

Then you are effectively requiring the tenants that live in the house over its time with you - to effectively buy the house on your behalf.

Its not the end of the world - but some things landlords might object to in normal thinking should become less of an issue if everyone is clear that the house is to make a profit each month on average and is to be paid for, repaired/maintained - AND make a profit all the time from tenants rent.

For example if a tenant pays 450 k rent over the years on a house that originally cost 200 k to the landlord then the following shouldnt be a massive issue.....

1) tenant asking for a 400 quid washing machine.....

2) the house coming back after 500 k rent paid on it with a pink colour in the sitting room.

3) The tenant asking you to provide confirmation they live there when seeking a restructure of a bank loan.

4) providing a tax clearance cert because the tenant now needs state support for the rent (ie HAP).

Yet landlords sulk about stuff like the above