Market Value Rent

Rmgblue · 03-02-2021 8:13am #1

Query on behalf of my dad. He is renting an apartment for much much less than market value. (He is the landlord).
His long term Tennant has been paying 850pm and at present the property next door is pulling in 1400pm. This isn't greed but he wants to increase the rent. I have done little research and I am just wondering is it correct that despite it being so undervalued he still can only increase the rent by 4%. Its within a rent pressure zone. I just want to be sure in what information I give him. He won't be renovating or evicting in an effort to pull more money out of the property. He is a man looking to get his finances in order

893bet · 03-02-2021 8:14am

When is the last time the rent was increased?

Rmgblue · 03-02-2021 8:32am

893bet wrote: »

When is the last time the rent was increased?

Maybe 10 years ago

whomitconcerns · 03-02-2021 8:41am

If it was 10 years ago he could increase it to €1,036 max based on 2% a year for 10 years.

steamsey · 03-02-2021 8:42am

Rmgblue wrote: »

Query on behalf of my dad. He is renting an apartment for much much less than market value. (He is the landlord).
His long term Tennant has been paying 850pm and at present the property next door is pulling in 1400pm. This isn't greed but he wants to increase the rent. I have done little research and I am just wondering is it correct that despite it being so undervalued he still can only increase the rent by 4%. Its within a rent pressure zone. I just want to be sure in what information I give him. He won't be renovating or evicting in an effort to pull more money out of the property. He is a man looking to get his finances in order

Rpz calc here
https://www.rtb.ie/calculator/rpz

I'd say you're stuck with 4% p.a.

punisher5112 · 03-02-2021 8:43am

If he does major renovation he would be able to put the rent up to market rate but it needs to be substantial work.

Make sure if tenants are there and the time for increase is given with the correct time frame.

whomitconcerns · 03-02-2021 8:54am

He can still get it over 1k without doing anything to be fair. But after that it's do some major work on the place and probably look for a new tenant...

So do you want to take a 350€ hit or is it worth it to do the work?

Graham · 03-02-2021 9:09am

punisher5112 wrote: »

If he does major renovation he would be able to put the rent up to market rate but it needs to be substantial work.

I understood the exemption was base on a substantial change in the nature of the property rather than simply renovation.

OP there's an RTB guidance document if your father is considering going down that route.

Use the RTB calculator to work out the maximum allowable increase now (more than 4% after 10 years). After that increase the rent by the maximum allowable amount at every opportunity to get closer to the market rent.

Rmgblue · 03-02-2021 9:25am

Graham wrote: »

I understood the exemption was base on a substantial change in the nature of the property rather than simply renovation.

OP there's an RTB guidance document if your father is considering going down that route.

Use the RTB calculator to work out the maximum allowable increase now (more than 4% after 10 years). After that increase the rent by the maximum allowable amount at every opportunity to get closer to the market rent.

This seems to be the best advice. Thanks Graham and everyone else.
He is aware this may force his Tennant out and the property will require full refurb after. So he is aware of all this and prepared to spend the money if necessary.

meijin · 03-02-2021 10:28am

Rmgblue wrote: »

This isn't greed but he wants to increase the rent.

Rmgblue wrote: »

He is aware this may force his Tennant out

It is greed then.

03-02-2021 10:33am

meijin wrote: »

It is greed then.

BS.

Charging market rate is providing a service at the going rate for that service. Looking at it from a business perspective, it would be negligence not to do so.

Rmgblue · 03-02-2021 10:41am

meijin wrote: »

It is greed then.

Sorting out his finances isn't greed. He has afforded his Tennant a very fair price for in excess of ten years. I simply said he is aware it might force them out forcing him to spend money to show he has assessed the risk of doing all this.

rightmove · 03-02-2021 10:56am

meijin wrote: »

It is greed then.

giving a tenant massively reduced rent is greed ? Even with increase its still massively reduced.

Problem OP is that the value of your property is also affected in that anyone who may buy it is stuck on your rent should they rent it out. Totally unconstitutional but doesnt surprise me these days where governments do things that seem to break rules in favour of virtue popularity to sync in with the opinions of posters like meijin.

meijin · 03-02-2021 11:02am

rightmove wrote: »

giving a tenant massively reduced rent is greed ?

how did you come up with this completely illogical statement?

Rmgblue · 03-02-2021 11:05am

meijin wrote: »

how did you come up with this completely illogical statement?

Meijin - you seem to think I'm here asking how my dad can increase the rent from 850 to 1400. I'm not. I'm trying to advise him on the correct procedure - his legal requirements.

notharrypotter · 03-02-2021 11:12am

meijin wrote: »

how did you come up with this completely illogical statement?

It seems that comparable property is fetching 1400pm. Based on the ability to increase the rent could rise to just over 1000.
1400 -1000 = 400, a significant discount.
Therefore the op's father is still been generous to their tennant.

03-02-2021 11:13am

meijin wrote: »

how did you come up with this completely illogical statement?

You are contending that op’s father is being greedy by raising the rent to the max allowed, even though it is capped significantly lower than current market rate?

beauf · 03-02-2021 11:14am

There is a rent Freeze in place until April 12.

https://www.thejournal.ie/eviction-ban-5277742-Nov2020/
https://www.citizensinformation.ie/en/housing/renting_a_home/tenancies_and_covid19.html
https://www.thejournal.ie/tenants-arrears-eviction-notices-christmas-eviction-ban-5342381-Feb2021/

antimatterx · 03-02-2021 11:14am

1K a month for rent is still cheap in most places in Ireland tbh.

beauf · 03-02-2021 11:19am

Rmgblue wrote: »

Meijin - you seem to think I'm here asking how my dad can increase the rent from 850 to 1400. I'm not. I'm trying to advise him on the correct procedure - his legal requirements.

Its nonsense. Just trying to derail your query. Best to just click ignore.

2ndcoming · 03-02-2021 11:26am

Depends on several factors. Is the tenant reliable, looks after the place well? This can be worth a lot more than an extra €150 a month. Problematic tenants can cost you thousands, not to mention the grief of dealing with them. Plus any month the property is lying vacant or between tenants hits your pocket also. I'm speaking from experience, went through three tenants before getting a good couple, left them on 850 coincidentally from 2010 until the property was sold in 2018 as it covered the mortgage and they gave no hassle.

If they are a good tenant it's worth asking them how much they can go up. €150 a month might not seem like much but to low earners it can be the difference between being able to afford it and not.

By going off comparable properties in a ludicrously overblown market, there's also the moral issue that if everyone did that we would have many times worse of a housing crisis than we already do. Not any one individual's fault, indeed directly the fault of successive governments going back to the 80s or 90s, but if you're into societal issues it may be something you'd consider.

Graham · 03-02-2021 11:27am

Mod Note

if you'd like to discuss the morality of current market rents, start a new thread.

Do not reply to this post.

03-02-2021 11:32am

beauf wrote: »

There is a rent Freeze in place until April 12.

https://www.thejournal.ie/eviction-ban-5277742-Nov2020/
https://www.citizensinformation.ie/en/housing/renting_a_home/tenancies_and_covid19.html
https://www.thejournal.ie/tenants-arrears-eviction-notices-christmas-eviction-ban-5342381-Feb2021/

All of those articles state that rent increases are not allowed to be given to people financially impacted by Covid-19. Otherwise they are permitted.

beauf · 03-02-2021 11:55am

kian163 wrote: »

All of those articles state that rent increases are not allowed to be given to people financially impacted by Covid-19. Otherwise they are permitted.

That's the first thing someone will claim, if you go to up their rent. However there are criteria now...

https://www.citizensinformation.ie/en/housing/renting_a_home/tenancies_and_covid19.html

The other thing to consider if you are increasing someone's rent, its in their best interest not to move as long as possible.

AnRothar · 03-02-2021 12:06pm

2ndcoming wrote: »

Depends on several factors.

People to on about "good tenants/good landlords" which is not relevant.

To the op, a moral obligation to the tenant is moot. Your father has a legal obligation to them in terms of what to provide, no more no less.

There is another hoary chestnut thrown about regarding "accidental landlord's" .
We're there "accidental landlord's" ?
Without a doubt the answer is a resounding yes.
However by now most should have crystallized their losses and gotten rid of the property.
Anyone who hasn't is a fool.

Anyone else involved in renting out a property should be treating it as a business.

I'm speaking from experience, went through three tenants before getting a good couple, left them on 850 coincidentally from 2010 until the property was sold in 2018

Out of curiosity how much was a comparable property to yours fetching during this time?

Suppose the equivalent was 1000, so you gifted the tenants €150 per month for 8 years, roughly €15000.

AnRothar · 03-02-2021 12:13pm

beauf wrote: »

That's the first thing someone will claim, if you go to up their rent. However there are criteria now...

https://www.citizensinformation.ie/en/housing/renting_a_home/tenancies_and_covid19.html

The other thing to consider if you are increasing someone's rent, its in their best interest not to move as long as possible.

The citizens advice page linked above confirms that unless you have been financially impacted by covid then normal rent increase criteria apply.

Regarding the latter part of your post it copper fastens the need for landlord's to follow the rules regarding increasing the rent by the max at each opportunity.
The tenant knows they have it good so are in no hurry to look for something cheaper.

beauf · 03-02-2021 12:36pm

If you do not maintain the rent at market rate you devalue the property to a buyer. This of course only matters if you are selling it.

It also likely have less money spent on the property to maintain it. Which if its going on a long time will also devalue the property.

The other issue, is if you give a discount to a long time tenant, the next tenant will also get the much the same discount.
So the LL is encouraged by the system to maintain the rent at the market rent going forward.

There are ways to encourage lower rents. Successive Govts have chosen not to do anything about it.

beauf · 03-02-2021 12:41pm

AnRothar wrote: »

The citizens advice page linked above confirms that unless you have been financially impacted by covid then normal rent increase criteria apply.

Regarding the latter part of your post it copper fastens the need for landlord's to follow the rules regarding increasing the rent by the max at each opportunity.
The tenant knows they have it good so are in no hurry to look for something cheaper.

Unless they change it again. Which is not impossible.

2ndcoming · 03-02-2021 2:30pm

AnRothar wrote: »

People to on about "good tenants/good landlords" which is not relevant.

To the op, a moral obligation to the tenant is moot. Your father has a legal obligation to them in terms of what to provide, no more no less.

There is another hoary chestnut thrown about regarding "accidental landlord's" .
We're there "accidental landlord's" ?
Without a doubt the answer is a resounding yes.
However by now most should have crystallized their losses and gotten rid of the property.
Anyone who hasn't is a fool.

Anyone else involved in renting out a property should be treating it as a business.

Out of curiosity how much was a comparable property to yours fetching during this time?

Suppose the equivalent was 1000, so you gifted the tenants €150 per month for 8 years, roughly €15000.

Given the OP mentioned one property and not ten he may well be an "accidental" or at least incidental landlord himself. Especially considering he hasn't upped the rent in ten years.

On the rest of it, more to life than money pal. I'm happy enough with how it all worked out.

Note this thread is in the Society & Culture forum under the heading Accomodation & Property, not the Business & Finance forum.

beauf · 03-02-2021 3:13pm

2ndcoming wrote: »

....
Note this thread is in the Society & Culture forum under the heading Accomodation & Property, not the Business & Finance forum.

The finance of this is entirely relevant regardless of where it is.

Graham · 03-02-2021 3:21pm

2ndcoming wrote: »

Accomodation & Property, not the Business & Finance forum.

Mod Note

assume that's irrelevant.

Rmgblue · 03-02-2021 7:54pm

@graham I have all my answers here. Thanks for everyone's help and advice. My dad has decided to meet somewhere in the middle between existing rent and rtb calculator. I have filled in the paper work for him to sign and within the form you must submit 'like' properties. They range from 1650-1800. The very last thing my dad is is greedy. Not that I need to fight that corner. Advise here has been very supportive and informative. If it makes you're life easier you can close now. Stay safe everyone

Market Value Rent

Comments