Is the desire to own your own home justified !

Ush1

Old diesel wrote: »

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

This could be used to describe any business. How many people start a business(often with a loan) with the idea the business will never turn a profit and will cost them money, time and stress for 30 years, but may make a profit(not guaranteed!) when it's sold?

ROI is crucial and it needs to be as quick as possible if you are an investor.

L1011

Ush1 wrote: »

How many people start a business(often with a loan) with the idea the business will never turn a profit and will cost them money, time and stress for 30 years, but may make a profit(not guaranteed!) when it's sold?

Jeff Bezos, for one (look how long it took Amazon to make any profit; same with what he's done since).

Also, claiming BTL is a business is grossly overstating what it is. Its an investment; none of which are expected by sane people to buy themselves and return dividends constantly. You may get that expectation in the cryptocurrency forum admittedly.

Ush1

L1011 wrote: »

Jeff Bezos, for one (look how long it took Amazon to make any profit; same with what he's done since).

Also, claiming BTL is a business is grossly overstating what it is. Its an investment; none of which are expected by sane people to buy themselves and return dividends constantly. You may get that expectation in the cryptocurrency forum admittedly.

In the case of Amazon, salaries would be paid before profits. If you're happy for a landlord to pay himself a salary?

Of course it's a business but perhaps you're right as it doesn't have the same amount of tax write off on the loan, so it's more punitive on the landlord. Part of the reason so many are selling up and getting out of it?

Old diesel

Ush1 wrote: »

This could be used to describe any business. How many people start a business(often with a loan) with the idea the business will never turn a profit and will cost them money, time and stress for 30 years, but may make a profit(not guaranteed!) when it's sold?

ROI is crucial and it needs to be as quick as possible if you are an investor.

The problem with the buy a house for me model - is......

1) no transparency on costs - if you can see what a house cost first day and its repayments - you can sort of understand what the deal is. No landlord wants to give that info which is understandable - but it makes it harder for tenants to buy into.

2) If you want someone to work really hard to buy a house for you over the next number of years - what are you offering them in return. What landlords want to offer in return seems at odds with what they want a tenant to do for them. You might be requiring a tenant to effectively put their dreams and life on hold to pay a silly rent in order to buy a house for YOU. But you dont want to offer them security of tenure in return.

3) Need to get a handle on costs - if you want the public sector to cut its costs (ie not get paid "silly" wages) then i think its fair to ask why homes are a particular cost

The Student

Old diesel wrote: »

The problem with the buy a house for me model - is......

1) no transparency on costs - if you can see what a house cost first day and its repayments - you can sort of understand what the deal is. No landlord wants to give that info which is understandable - but it makes it harder for tenants to buy into.

2) If you want someone to work really hard to buy a house for you over the next number of years - what are you offering them in return. What landlords want to offer in return seems at odds with what they want a tenant to do for them. You might be requiring a tenant to effectively put their dreams and life on hold to pay a silly rent in order to buy a house for YOU. But you dont want to offer them security of tenure in return.

3) Need to get a handle on costs - if you want the public sector to cut its costs (ie not get paid "silly" wages) then i think its fair to ask why homes are a particular cost

Do you not understand this is a business transaction pure and simple.

If you agree a rent with a tenant and the tenant gets a big pay rise would you expect the tenant to pay more rent because he gets a pay rise.

The answer will most certainly be no.

Why can't people not understand this is a business where the landlord provides a service eg accommodation and the tenant purchases the service eg accommodation

This is no different to anyother business transaction people take everyday of the week whether its buying your lunch or paying your fare on public transport.

brightspark

As has probably been stated at some point before the price a landlord can charge for rent isn't the cost+required profit, it's whatever the landlord believes someone is willing to pay.
A prudent landlord of course would ensure that he makes a profit or else he shouldn't purchase the property.

The reason why rental prices are so high is that there is more demand than properties available so those who can afford to pay more are causing the prices to rise.

The same thing happens to the price of purchasing property, the more interested buyers the higher the price rises until only one person is left.


Like it or not the thing that inflated property prices prior to the last crash was too much credit. Effectively the banks were giving money to people to bid against each other, without the easy credit (100% mortgages etc) people would have reached an upper limit sooner.

And once someone has paid a few hundred thousand for a property, they aren't likely to sell it for less unless they are desperate.

Obvious Desperate Breakfasts

brightspark wrote: »

As has probably been stated at some point before the price a landlord can charge for rent isn't the cost+required profit, it's whatever the landlord believes someone is willing to pay.
A prudent landlord of course would ensure that he makes a profit or else he shouldn't purchase the property.

The reason why rental prices are so high is that there is more demand than properties available so those who can afford to pay more are causing the prices to rise.

The same thing happens to the price of purchasing property, the more interested buyers the higher the price rises until only one person is left.


Like it or not the thing that inflated property prices prior to the last crash was too much credit. Effectively the banks were giving money to people to bid against each other, without the easy credit (100% mortgages etc) people would have reached an upper limit sooner.

And once someone has paid a few hundred thousand for a property, they aren't likely to sell it for less unless they are desperate.

That can’t always be ensured. In today’s market, yes. But in a tenant’s market, profit might not be possible.

brightspark

Obvious Desperate Breakfasts wrote: »

That can’t always be ensured. In today’s market, yes. But in a tenant’s market, profit might not be possible.

True, and that is why some landlords are selling their properties before it becomes a tenants markets.

handlemaster

L1011 wrote: »

Ush1 wrote: »

How many people start a business(often with a loan) with the idea the business will never turn a profit and will cost them money, time and stress for 30 years, but may make a profit(not guaranteed!) when it's sold?

Jeff Bezos, for one (look how long it took Amazon to make any profit; same with what he's done since).

Also, claiming BTL is a business is grossly overstating what it is. Its an investment; none of which are expected by sane people to buy themselves and return dividends constantly. You may get that expectation in the cryptocurrency forum admittedly.

Amazon doesnt fall into the normal rule of business. They actually dont make money on what is their traditional distribution business that everyone.knows. AWS and advertising is where they make their money. They reinvested heavily what revenues they got as there was an end less line of investors who bank rolled this new model of business. I would argue this model is more applicable to the techniques sector any would not fit in order sector.

GreeBo

Fol20 wrote: »

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.

No, they are exorbitant because they are far higher than the cost of buying the house... and far higher than they were in the past.

individual ll are leaving the market because of regulation and them realising that being a ll is not easy money.

If it's a 25 year horizon then why make rents higher than mortgage repayments? Your post seems contradictory to me.

Fol20

GreeBo wrote: »

No, they are exorbitant because they are far higher than the cost of buying the house... and far higher than they were in the past.

individual ll are leaving the market because of regulation and them realising that being a ll is not easy money.

If it's a 25 year horizon then why make rents higher than mortgage repayments? Your post seems contradictory to me.

Rent prices are higher now as the cost of the asset is also much higher. In fact the purchase price of the property has increase greater than the rental rate they can achieve.

My expectations is that the rent will cover all costs associated with the property and in 25years, I will own the asset. Some years I might have surplus rental profit while others it maybe negative. Over the 25 years, I want it to balance out so the cash flow will at least be neutral. When I discussed horizons. It was in related to realized gains takes much longer to get the money out compared to other businesses

brightspark

The price of anything be it a bottle of water, dinner, a car, or renting a house isn't determined by Cost + Profit wanted it's whatever the customer is willing to pay.

Competition between sellers is what keeps prices down, competition between buyers keeps prices up.

As long as there are more people trying to rent in an area than there are properties available then the price will increase.

CoffeeBean2

brightspark wrote: »

Competition between sellers is what keeps prices down, competition between buyers keeps prices up.

As long as there are more people trying to rent in an area than there are properties available then the price will increase.

It really is amazing how many people do not understand this very simple point when it comes to property!

Landlords are not a charity, but a lot of people here believe they should be.

Old diesel

CoffeeBean2 wrote: »

It really is amazing how many people do not understand this very simple point when it comes to property!

Landlords are not a charity, but a lot of people here believe they should be.

Is wanting affordable accommodation the same as believing a landlord should be a charity though.

What landlords seem to want is increases on top of already excessive rents at a percentage that's higher then what pay increases a tenant might get.

The reason it's excessive is because people struggle to afford it.

Graham

Old diesel wrote: »

The reason it's excessive is because people struggle to afford it.

You don't think there might be a slight connection to increased property prices and a supply constrained property market?

Old diesel

Old diesel wrote: »

The reason it's excessive is because people struggle to afford it.

Who can and can’t afford it is not the LLs concern no more than a car dealer cares that a lot of people can’t afford to buy their cars. Those who can do those who can look elsewhere.

Old diesel

Aryanna Few Stint wrote: »

Who can and can’t afford it is not the LLs concern no more than a car dealer cares that a lot of people can’t afford to buy their cars. Those who can do those who can look elsewhere.

Clearly not - but the current rental process is just totally unsustainable.

Unless there is a plan to take it to a more sustainable place.

The only way to make the current rental model sustainable for tenants is to allow more and more people access a reformed and changed HAP style scheme.

That way - landlords paying too much for housing - from REITs in 2019 to small time guys in 2006 - can make/salvage a return.

But the tenant won't get screwed financially

old_house

Aryanna Few Stint wrote: »

No they don't have a "LL" nor are they at the mercy of anyone, honestly how do people imagine up this stuff.

A home owner 100% owns the house mortgage or no mortgage. It can in now way whatsoever be compared to renting.

While due to some quirks in how the law operates in Ireland (i.e. reluctance of judges to grant reposessions) the occupier of a mortgage-financed property enjoys much greater protection from being evicted than a non-paying tenant would that doesn't mean he has full ownership:
While the mortgage holder can theoretically sell the house he would likely need to get permission from the lending bank and this fact will also be marked in the title documents. If he receives that permission (which he may not) he will not get to keep the proceeds, but only the part that exceeds the outstanding mortgage plus a possible penalty for early repayment and lost interest. If you own the house outright you can convert it to any other asset whenever you like and get to keep the full value.
Also, other than an outright owner you will not be allowed to rent out the house without getting permission from the bank, which will in turn make your mortgage prohibitively expensive. Structural changes to the building may be prohibited as they could be detrimental to the value of the property.
Finally, the bank has the right to sell your debt obligations, which basically tells you that you gave up some of your rights in return for borrowing the money. This is a long term risk that you accepted when signing your mortgage pack, while an outright owner doesn't need to worry about any of that.

I'm not disputing the fact that in the long run a mortgage and building equity in a property may be a better path than renting, but you should keep in mind that you only ever own a share in the property as long as the mortage isn't paid off in full. As we all know this share may even be negative. As such, having to service a mortgage will always be somewhere inbetween renting and ownership, slowly moving from the former to the latter as you pay it off. I honestly think the term "fancy renting" is not too far off, at least for the early part of a mortgage term...

twowheelsonly

brightspark wrote: »

As has probably been stated at some point before the price a landlord can charge for rent isn't the cost+required profit, it's whatever the landlord believes someone is willing to pay.
A prudent landlord of course would ensure that he makes a profit or else he shouldn't purchase the property.

The reason why rental prices are so high is that there is more demand than properties available so those who can afford to pay more are causing the prices to rise.

The same thing happens to the price of purchasing property, the more interested buyers the higher the price rises until only one person is left.


Like it or not the thing that inflated property prices prior to the last crash was too much credit. Effectively the banks were giving money to people to bid against each other, without the easy credit (100% mortgages etc) people would have reached an upper limit sooner.

And once someone has paid a few hundred thousand for a property, they aren't likely to sell it for less unless they are desperate.

The likes of HAP has helped to fuel the higher rent situation as well in much the same way as the easy credit fuelled the inflated property prices. Take that HAP away and a lot of people can't afford the rents. The less people that can afford the rents the more likely it is that rental income will fall.

GreeBo

Fol20 wrote: »

Rent prices are higher now as the cost of the asset is also much higher. In fact the purchase price of the property has increase greater than the rental rate they can achieve.

My expectations is that the rent will cover all costs associated with the property and in 25years, I will own the asset. Some years I might have surplus rental profit while others it maybe negative. Over the 25 years, I want it to balance out so the cash flow will at least be neutral. When I discussed horizons. It was in related to realized gains takes much longer to get the money out compared to other businesses

Cost of buying a house is only relevant if you are a landlord who is buying new property, how many landlords are buying new property? Its certainly not all of them yet all the rents have increased.

My expectation is that rent will cover the costs of maintaining the property and *some* of the mortgage costs, I certainly wouldnt be buying a property to let expecting that rent will cover all this and mortgage as I think thats madness. Sure, some years it might, but I'd expect the vast majority of them it wouldnt and would be budgeting to pay probably 50% of the mortgage myself.

Its an investment in an asset whilst also providing a service that you get paid for (rent).

Your expectations seem to be that someone is going to buy a property for you, pay your mortgage, pay you to service the property and pay any incidental costs and at the end, hand over the property to you.

Does that really seem realistic to you?

Graham

GreeBo wrote: »

Cost of buying a house is only relevant if you are a landlord who is buying new property

I'm not sure that's particularly true.

If you have a property that's currently worth say €600k and you're getting €12,000pa in rent, I'd imagine a 2% yield might be relevant.

Old diesel

GreeBo wrote: »

Cost of buying a house is only relevant if you are a landlord who is buying new property, how many landlords are buying new property? Its certainly not all of them yet all the rents have increased.

My expectation is that rent will cover the costs of maintaining the property and *some* of the mortgage costs, I certainly wouldnt be buying a property to let expecting that rent will cover all this and mortgage as I think thats madness. Sure, some years it might, but I'd expect the vast majority of them it wouldnt and would be budgeting to pay probably 50% of the mortgage myself.

Its an investment in an asset whilst also providing a service that you get paid for (rent).

Your expectations seem to be that someone is going to buy a property for you, pay your mortgage, pay you to service the property and pay any incidental costs and at the end, hand over the property to you.

Does that really seem realistic to you?

Landlords who lost money during the crash now need to make those losses back.

It's part of the objection to the RPZ - as that's impacting on potential landlord income.

If you take a place at 1800 euro a month - at 4 percent increase that will be 72 euros a month increase.

At 10 percent increase its 180 euro a month - so the ability to recover from previous losses is restricted.

The tax situation doesnt help either (ie the tax adds to cost and makes it harder to cover cost)

GreeBo

Graham wrote: »

I'm not sure that's particularly true.

If you have a property that's currently worth say €600k and you're getting €12,000pa in rent, I'd imagine a 2% yield might be relevant.

"currently worth" has nothing to do with yield though...

Yield is based on whats coming in vs how much has been spent on the property.

If you and I each buy a property for 100K and have a rental income of say 10K year, its irrelevant from a yield point of view if my property is now worth 200K but yours is worth 50K.

GreeBo

Old diesel wrote: »

Landlords who lost money during the crash now need to make those losses back.

It's part of the objection to the RPZ - as that's impacting on potential landlord income.

If you take a place at 1800 euro a month - at 4 percent increase that will be 72 euros a month increase.

At 10 percent increase its 180 euro a month - so the ability to recover from previous losses is restricted.

The tax situation doesnt help either (ie the tax adds to cost and makes it harder to cover cost)

You only "lost" money if you sold the property though...hence my earlier point that expecting the rental income to cover all your costs and your mortgage is, to me at least, madness.

Graham

GreeBo wrote: »

"currently worth" has nothing to do with yield though...

Yield is based on whats coming in vs how much has been spent on the property.

If you and I each buy a property for 100K and have a rental income of say 10K year, its irrelevant from a yield point of view if my property is now worth 200K but yours is worth 50K.

I'd argue it is entirely relevant for any investor with an ounce of cop on. If the yield against current value is too low, you'd be pretty daft not to consider other investment options.

I'd suggest that's one of the contributory factors behind the decrease in the number of rental properties as private investors cash out.

The Student

Graham wrote: »

I'd argue it is entirely relevant for any investor with an ounce of cop on. If the yield against current value is too low, you'd be pretty daft not to consider other investment options.

I'd suggest that's one of the contributory factors behind the decrease in the number of rental properties as private investors cash out.

This is too simplistic, you need to look at your exit costs from your current investment and your entry costs to your new investment.

I suspect the reason for the decrease in the number of rental properties was the CGT tax exemptions (introduced to stimulate the sector post crash) and the anti landlord stance the State has taken.

Why would you continue on with an investment that is so heavily biased against. not only that you are restricted via the RPZ on what you can increase your rent.

I would suggest the above are the more likely reason for the decrease in the number of rental properties.

GreeBo

Graham wrote: »

I'd argue it is entirely relevant for any investor with an ounce of cop on. If the yield against current value is too low, you'd be pretty daft not to consider other investment options.

I'd suggest that's one of the contributory factors behind the decrease in the number of rental properties as private investors cash out.

But again, that only comes into it if you are thinking about buying more property to let *now*.
The current value of your existing portfolio has no relevance to your yields.

Fol20

Old diesel wrote: »

Clearly not - but the current rental process is just totally unsustainable.

Unless there is a plan to take it to a more sustainable place.

The only way to make the current rental model sustainable for tenants is to allow more and more people access a reformed and changed HAP style scheme.

That way - landlords paying too much for housing - from REITs in 2019 to small time guys in 2006 - can make/salvage a return.

But the tenant won't get screwed financially

So you want our entire society to become more dependent on social aid while it should be going the other way. Where will the government get all of this extra expenses? It will come from people in the middle or above who are already being taxed enough as it is.

old_house

GreeBo wrote: »

But again, that only comes into it if you are thinking about buying more property to let *now*.
The current value of your existing portfolio has no relevance to your yields.

The key concept here is opportunity cost. If some other asset of equal value could achieve a higher return then you are effectively losing money by sticking to what you already have. Getting out of rental property and reinvesting into other asset classes while the resale value is high might be a smart decision for some landlords.

Fol20

twowheelsonly wrote: »

The likes of HAP has helped to fuel the higher rent situation as well in much the same way as the easy credit fuelled the inflated property prices. Take that HAP away and a lot of people can't afford the rents. The less people that can afford the rents the more likely it is that rental income will fall.

I honestly dont think HAP is causing rents to rise much. What would happen if HAP is taken away is those type of tenants would have to move further out allowing only private renters to live in the best locations. I would personally be ok with this as the government would be able to save more in expenditure but from a social aspect, it might be a little questionable and not politically palatable.