Landlords selling up - Rents rising

JimmyVik

https://www.boards.ie/discussion/comment/117760597#Comment_117760597

Im not a landlord bur i believe if you look it up on revenue they will list out expenses that can and cannot be claimed for.

marieholmfan

https://www.boards.ie/discussion/comment/117760957#Comment_117760957

The profit is the asset that you get after 20 years.

purpleshoe

https://www.boards.ie/discussion/comment/117762214#Comment_117762214

Sure as you put it that way. Now I see it 🙄.

JimmyVik

https://www.boards.ie/discussion/comment/117762214#Comment_117762214

Break it down for us?

agoodpunt

https://www.boards.ie/discussion/comment/117762214#Comment_117762214

How can something you have borrowed and repaid be profit, is saving money every wk/mth also considered profit

If i dont have then why should you even though you worked it, LLs cant claim for there time as an exp, fact

Claw Hammer

Small landlords have always left the market. Many decide the hassle is not worth it. The real issue is why so few landlords are coming into the market to replace those who leave.

In any normal circumstances, low interest rates and rising rents should have been causing landlords to barrel in to the market. There are a number of reasons why this is so:- inability to raise finance on reasonable terms, high taxes with restricted deductions for expenses, RTB, BER and HAP regulations ll make for a massive burden on the one property landlord. Houses and apartments are being left empty by their owners because of the hassle in renting them out. I know a man who had a 4 bed house in Carrick on Shannon. He was getting €500 a month. When it went empty at the end of the tax break period he stopped letting it. I looked at Carrick on Shannon on DAFT recently. There were 2 properties to rent in the town itself. I then checked AirBnB and found there were about 10 entire properties available. It is obvious something is wrong.

The solution from some quarters is more rent restriction, more restriction on sales, more taxes, more regulations. It is nuts.

handlemaster

https://www.boards.ie/discussion/comment/117733040#Comment_117733040

Its so good everyone wants to do it. All up side not risk and tenants will look after you. Let us know when you buy

1874

https://www.boards.ie/discussion/comment/117760651#Comment_117760651

What sort of expenses do you think could possibly equate to 50% of an annual rent?

The total sum of the rent is eligible for tax as it is for social insurance and USC, so if a 1 bed apartment which is likely to go for 1250-1450 and the landlord is already on the higher rate (or moves into it), then all their rental income will be subject to tax at 42%, plus however that affects their social insurance payment plus additional percentage for USC, it depends on their overall income really.

Lets just say a round 1400/mth, 16800/annum, you think someone can legitimately offset 7056 of that to expenses? on what? technically you can only write off white goods at 12.5%/annum or 1 item of each type over 8 years (and from previous experience with tenants, white goods do NOT last that long).

I dont think you can write off anything for social ins (prsi/rsi/whatever its is called now) OR USC.

You have an effective 50%+ taxation, which the State/Revenue commissioners get their take one way or the other, which ine ssence means they get first dibs/main priority on that income, and that is why many landlords are either not even breaking even or subsidising the cost.

You cant claim for any of your own time. I can see legitimate reasons why a persons own time isn't claimable because it cant be proved and it could be scammed/there is no way to prove how many hours work was undertaken or if zero hours were undertaken, and as such it somewhat incentivises landlords to pay for work legitimately so it CAN be claimed back (which imo is understandable) What I dont understand is why people think landlords are making any profit on any given month, unless they got the property before prices took off and have long since paid significantly or completely, but anyone with a mortgage is unlikely to be making much if any profit, hence there is no reason to be involved in such a high risk, work intensive situation, that requires constant attention.

It could be made possible to make private landlording legitimate/legal, of better quality and finccially viable for tenants and rewarding for someone investing their time/money in it, but it would require sensible legislation.

Your post makes it sound like you think like a lot of people do, that you get to pay all expenses out of the rental income and then are taxed on whats left over, and thereby a landlord would have all their costs paid and then pay a paltry tax, thats not how it works, a person may pay their mortgage first (ie monthly) but the Revenue commissioners have a more significant claim on that income.

There would be a quick easy fix (given that it seems legislation can be written and enforced in a short time) but that would require the State to forgoe whatever paltry income they take from small landlords and offset that against the rental cost or a set value so the a tenants rent could be reduced by that amount.

The state has already done this for REITs who pay little to no tax, and they dont reduce market rates? yet the state wont do this for small landlords? That is why landlords are getting out/selling up, these sold properties usually have less people living in them, new housing stock isn't replacing housing sufficiently/ie demand outpaces the actual need. An increase in sold properties creates a further increased need for rental properties too, where the demand already isn't being met across all the market, hence rents increase even more.

The State is complicit in worsening the situation by introducing restrictive legislation that discourages existing landlords and discourages new landlords from entering the market, so they are either doing this unintentionally (meaning they are incompetent) OR they are doing it intentionally meaning imo they are compromised as politicians because they are either corrupt or biased towards large businesses owning/running rentals or even having such a significant influence on owner occupiers (see businesses outbidding for new properties geared towards first time buyers).

The entire housing system is dysfunctional, from inaction, corruption, poor planning.

A start out of this would be to tax REITs at levels small landlords have been taxed at, encourage them out.

The J Stands for Jay

https://www.boards.ie/discussion/comment/117763052#Comment_117763052

That's a lot of words to say that you don't realise that capital repayment does not affect profit.

1874

https://www.boards.ie/discussion/comment/117763273#Comment_117763273

Your reply suggested to me you didnt understand what profit means, or how it is generally interpreted by tenants.

Who seem to think all rent is profit, and arent aware of costs incurred

Revenue deems all rent as taxable income, profit (whats practical) to me is whats left over after all costs are paid.

If you are suggesting that someone is in profit, because they have made a payment off the prinicipal, thats a long wait to get your return, there is usually a significant outlay to get that potential return over a long period of time, which doesnt factor in non paying tenants or the difficulty getting rid of them. I think most landlords would be happy to get the capital paid off, because that is the only avenue for profit (if there is no profit in it, why would anyone get involved). Do you even think that should be allowed? or do you expect people to put up the capital to acquire a property to allow someone to live in for free.

When someone puts up the initial capital to put a property up for rent, they are saving the state from doing so from taxation, why do you think there should there not be a regular income from that ie some form of profit? without landlords where would anyone who needs a roof over their heads live? The state doesnt want to do it? Are you ok with REITs not being taxed at all? do you think they will be a better option for renters?

I worked out the capital appreciation over the years I had a rental property, taking into account taxation (significant 50+%) all the time, hassle dealing with unreasonable tenants, by the time CGT was paid, I would have been better off doing OT in work.

The J Stands for Jay

Property investment is already tax advantaged over other asset classes. Dividends or coupon payments are all taxable, with no deductions whereas rent has many allowable deductions in the calculation of tax. The source of finance for the purchase price of the assets is irrelevant, should there be interest relief available for anyone who takes out a loan to buy shares?

1874

https://www.boards.ie/discussion/comment/117763523#Comment_117763523

Well maybe the State should build more houses? if they arent going to invest in them for those that cant afford to purchase a home themselves, who does?

If rentals which can support greater occupancy than non rented property are in short supply, you think the state would be significantly encouraging turning property to that purpose, but Ive read where people say they leave domestic property vacant rather than be subject to increasingly one sided regulation. If the State wont build the houses, then surely when a private individual provides a rental, it cant be expected its is done without ongoing reward. The potential risks are significant due to delinquent tenants. If there is no reward, no one will opt for that route.

The only significant advantage is for REITs, for ordinary citizens taxation on rentals is high, given that a private person is taking the responsibility and saving the state directing state resources and funds to provide accommodation. The source of funding isn't irrelevant, if someone can get more return for money they have access to, then they will, if they have to source that funding through a mortgage, then it has to be viable.

The State could forgo the significant tax percentage, which in overall taxation is likely to be small and have a system that allows the tax not be due in line with that amount being deducted from the going rate. Tenants would benefit from reduced rents, landlords would still get the same amount, the value could be set down in terms of percents of market rates and recorded in tax returns.

I dont think the amount lost from taxation of rental income would be significant compared to the overall tax take, and the savings could be passed on directly to tenants.

The reality is, being a smalltime landlord is NOT viable, even when rents are high, the risks are higher, people are not clamoring to become landlords, people are clamoring to get out.

People still need places to live and the state cant or wont provided them, if those who sell formerly rented property invest their money elsewhere, that isn't likely to put a roof over peoples heads and certainly not at a reduced amount.

MBE220d

Small landlords are being made the scapegoat for housing crises for years now, every couple of months there is some new law or regulation brought in while the big REIT's get away without paying any tax, no surprise they can buy up apartment blocks and leave them empty.

You have know it all SF mouthpiece out every day on about renters and their rights, no one ever mentions landlords rights, it's all one way in favour of the tenant.

Claw Hammer

Regardless of profit or not, many small investors have a negative cash flow from the investment. In such circumstances there should be light at the end of the tunnel. Rents edging up, equity increasing over time. This is not happening in many cases and the light at the end of the tunnel is becoming more remote and dimmer.

Geuze

https://www.boards.ie/discussion/comment/117759340#Comment_117759340

I agree 100%.

Many landlords include the capital repayment as a cost/expense.

It is not.

It is saving/building up equity.

Given rents these days, the vast majority of landlords are earning huge rental profits, especially if they have a tracker mortgage.

I am sympathetic with them when I hear the stories of bad tenants, yes, but they are earning large rental profits.

Claw Hammer

https://www.boards.ie/discussion/comment/117766196#Comment_117766196

First of all many are cash flow negative. Secondly many are stuck with RPZ rents which are well below the current asking rents. Throw in the bad tenants and the level of regulation and it should be no surprise many are opting out.

exaisle

https://www.boards.ie/discussion/comment/117763523#Comment_117763523

Precisely what "many allowable deductions" are available?

A Shaved Duck?

https://www.boards.ie/discussion/comment/117766196#Comment_117766196

This is simply false, i already explained we are accidental landlords and we bought in 2006 which means we have been in negative equity for the lifetime of the mortgage.

Barely breaking even on rent in against the mortgage does not cover the losses we will incur when we sell up. Dont be under any illusion that we are making huge profits, but sure continue that the small landlords are the issue narrative if you must.

Successive Irish governments have thrown the small landlord under the bus to cover up their abject failure to address or solve an issue that has been around for decades. When Leo v is asked about the funds buying up entire housing estates and paying little to no tax his first response is to blame sinn fein for not coming up with a solution. This is the same sinn fein that will hammer landlords when they get in, there is no way on earth we are keeping our place and cant sell quick enough.

Flinty997

https://www.boards.ie/discussion/comment/117766196#Comment_117766196

Why if they are making huge profits. Are they leaving the sector.

handlemaster

https://www.boards.ie/discussion/comment/117766196#Comment_117766196

The vast majority are earning are earning huge profits!!! Can you provide any evidence of this ?

MBE220d

https://www.boards.ie/discussion/comment/117766196#Comment_117766196

Not every landlord in the country is getting huge rents, yet they are all tarred with the same brush.

I rent property in the west on average €700/750 pm for a 3 bedroom house I could get more but I am happy with the tenants I have now so it will be left at that.

Now, this is where the government interference in the private rental market comes into play, if I were in an RPZ area I would have been putting the rent up 4% every year but because I'm not I don't feel like I have to. I have one young couple in a house coming up on 4 years with no rent increase and no intention of doing it either until they leave, then I can charge the going rate if I want, my decision not something that I'm forced to do..

dave 27

Just checked Daft and it appears there are only 3 properties to rent in Limerick City, just shows how bad the situation is getting there!

Property to Rent in Limerick City | Daft.ie

MBE220d

https://www.boards.ie/discussion/comment/117767393#Comment_117767393

I bet you there is a lot more but left vacant because people don't want the hassle of renting anymore, all rights for tenants nothing for landlords.

JimmyVik

https://www.boards.ie/discussion/comment/117766963#Comment_117766963

Many landlords like you, who didnt increase to market rent for years because they had a nice tenant were left high and dry overnight when legislation for rent controls were brought in.

The same will happen to you when new legislation comes in faster than you can react to make the entire country an RPZ. Its coming.

So think about the repercussions of that happening.

You will no longer be able to increase rent above inflation.

If your current good tenant moves out, your new tenants will still be on the low rent.

If you go to sell your house, the low rent will be a factor in the price you get for it.

And then there is also the possibility of legislation coming in overnight, or at least before you can get notice to vacate out, that you cannot ask the tenant to leave, ever, including if you want to sell up.

And thats me being optimistic :)

I think any new legislation will be worse than that.

MacDanger

https://www.boards.ie/discussion/comment/117770143#Comment_117770143

"If you go to sell your house, the low rent will be a factor in the price you get for it."

How exactly will prospective bidders have the slightest idea of what rent the seller has been receiving?

agoodpunt

https://www.boards.ie/discussion/comment/117770272#Comment_117770272

You will see there are some adds on daft with the last rent roll and I can assure you investment buyers are asking I can reliablely confirm I am in the market atm agents are been up front it is a factor in the sale price.

If you buy an ex rental leave it vacant for two year and even do a couple of short rentals to students then sell as an rpz with no limits there may be a small profit if the market keeps going up but Int rate may bite u

MacDanger

https://www.boards.ie/discussion/comment/117770423#Comment_117770423

Would you have a link to one of these ads where the rent is mentioned? I'm also in the market and have never seen a single ad mentioning previous rent

agoodpunt

https://www.daft.ie/for-sale/apartment-apartment-40-the-lansdowne-block-pembroke-square-dublin-4/2879768

Ray Palmer

https://www.boards.ie/discussion/comment/117770272#Comment_117770272

Well how do you think the PRTB know? As it is a legal requirement I assume the solicitors have to know so while an estate agent may not advertise in each case they are going to give the information asked as it is part of the sale and the value of the house. They don't want sales falling through and delays cost them money.

If you only point is that the buyer will never know then you missed reality and the requirements of RPZ

JimmyVik

https://www.boards.ie/discussion/comment/117770272#Comment_117770272

Its the law.

Their solicitor will ask.

Its a standard question now.

Has it been rented?

When was the last rent review?

How much was the rent?

You could try lying. Im not sure what the punishment is if you get caught. Maybe there is none.

So if your rent is below market value then immediately your pool of buyers excludes anyone thinking of renting the property.

Geuze

https://www.boards.ie/discussion/comment/117766365#Comment_117766365

It is impossible to be in negative equity for the lifetime of the mortgage.

At some stage, after enough repayments, the mortgage balance will be below the house value. It must happen.

Surely there can't be anybody still in negative equity in Ireland, approx 12 years after the house price falls started?

(Maybe there is a confusion between negative equity and capital loss?)

Geuze

https://www.boards.ie/discussion/comment/117766277#Comment_117766277

Yes, they are cashflow negative, yes.

When I put 500 pm into savings, that is cashflow negative.

But I am building up an asset.

I have full sympathy with landlords regarding bad tenants.

Geuze

https://www.boards.ie/discussion/comment/117766632#Comment_117766632

There has been a large increase in rents over the last ten years.

Costs have not increased as fast.

Therefore rental profits have risen.

Especially if you have a tracker mortgage.

MBE220d

https://www.boards.ie/discussion/comment/117770143#Comment_117770143

I know where your coming from, but have these clowns not seen what happens when you interfere in the private market,

If they make the entire country into an RPZ all it going to do is to increase the rent, the dogs on the street know that, but if that's what they want, so be it.

If one of my tenants moves out tomorrow how does anyone know what rent they pay me, I can rent again for at least another €200/300 pm if I want.

The problem we have nowadays is we have too many smart ass college politicians running the country, who never ran or managed a business in their lives who just keep pandering to another shower of muppets who wouldn't survive a week in the private sector.

mrslancaster

Cousin & her OH had their own places & when they got married they rented hers. They are thinking of selling & EA said its unlikely an investor would be interested based on the rent so only first time buyers, the council or housing agencies would be interested. Probably better for FTB's & social tenants but doesnt it means less houses available for private renters who will have no option but to rent high-priced new build apartments from REITs?

Jmc25

Re the very common line on here of "small landlords being scapegoated for the government's failure to solve the housing crisis and regulation is now excessive."

Let's say the government had properly grasped the housing issue some years ago and we weren't were we are today. Would that landscape be more attractive for small landlords - more importantly, the type of Celtic tiger investor/accidental landlord who have left the market in recent years?

On the one hand, many regulations such as RPZs etc would not have been introduced and the rental market might look a bit more like it did when these people bought second properties in the mid 2000s.

But, in a functioning market you'd have to believe rents significantly less expensive than they are today.

So on the one hand, less regulation, but on the other, significantly less income. I don't believe that scenario would be more attractive to the particular type of landlord who have been leaving the market.

To landlords with a longer term view, yes it might be. But generally speaking, I think the LLs that have left the market entered it under false pretences of making easy money during the Celtic tiger and got stuck in a game they weren't cut out for. Similar story with accidental landlords from that time period.

MacDanger

https://www.boards.ie/discussion/comment/117770633#Comment_117770633

The PRTB know because it's a legal requirement to tell them but that information is not publicly available.

I wasn't aware that there was also a legal requirement to inform a prospective bidder of the previous rent charged?

MacDanger

https://www.boards.ie/discussion/comment/117770902#Comment_117770902

"It's the law"? What is the law?

Ray Palmer

https://www.boards.ie/discussion/comment/117770984#Comment_117770984

Not true and you assume rentals have mortgages. Prsi is now 6% to pay that increase alone rent has to go up over 12% to remain the same monetary value to the landlord. Insurance has also gone up too. Additional charges like LPT along with the RPZ restrictions. For ever €1 additional cost to the landlord the rent must increase by above €2 to remain the same without even considering inflation. You are also ignoring the period where many landlords were renting at a loss and have to recoup those losses.

Basically you haven't done your maths nor paid attention to the increasing costs. As pointed out additional costs means a greater cost to the tenant. The government can easily fool people by adding costs to small landlords and make the public think this is good while they don't notice it will be them paying it not the landlord. It was funny to watch the PRTB charge added to the landlord and the government saying they can't charge the tenant for it. All worked well while rent had dropped and there were plenty of places to rent. The minute rent started going up the tents rent started paying for the charge along with repaying for the loss from years it couldn't be passed on. All predicted and came to pass with people saying they deserve and extra charge. This is the same as people praising landlords leaving the market not seeing how this is bad for them and cheaper rent. Rents will go up as a result and there will be less choice

Ray Palmer

https://www.boards.ie/discussion/comment/117772150#Comment_117772150

You are fully aware that RPZs rules apply to renting a property that is the law. Now if you want to argue that the seller doesn't have to reveal this information how do you think the buyer can comply with the law? Even saying there is no legal requirement to give this information what landlord would buy in a situation where the seller won't say? I am pretty sure if you will go into the full legalities it is there but if not it doesn't matter because it will effect those interested in the purchase meaning less demand and a cheaper price. Your initial issue was how would they know and the point remains it effects the sale price. Do you really think many landlords are going to not want this checked out and check with their solicitors/accountants?

It doesn't matter if it is law and any seller would be foolish not to reveal relevant details to the value of their property to prospective buyer landlord or not.

MacDanger

https://www.boards.ie/discussion/comment/117772453#Comment_117772453

Oh right, not the law then. Thanks

handlemaster

https://www.boards.ie/discussion/comment/117770984#Comment_117770984

All to simple a view. This has been discussed to death on previous threads.

JimmyVik

https://www.boards.ie/discussion/comment/117771022#Comment_117771022

New tenant finds out through a friend of a friend what rent the previous were paying.

They wait for a year or 2. They then take a case with the RTB.

Its up to the landlord to prove what rent he was getting paid before.

RTB sides with tenant. Tenant gets a nice chunk of back excess rent paid back from the landlord, plus rent going forward is at the reduced rate. And cant be increased more than inflation every year. Landlord also has the pleasure of a €20k fine to pay, just to make it worth the RTBs time.

A landlord would be foolish to try and get away with this sort of thing. The longer you get a way with it the bigger the bite out of your arse when you do get found out.

agoodpunt

https://www.boards.ie/discussion/comment/117772800#Comment_117772800

The 10 year is a one sided argument always ignored as it was when rents where rock bottom and usc, property tax and increased prsi came in...

It was a govt stealth tax on renters that would be pasted on eventually having already remove tax allowence to renters

MBE220d

https://www.boards.ie/discussion/comment/117773438#Comment_117773438

From experience if your fair with a tenant and they have been paying below market rate the don't go around mouthing about what they were paying.

Saying that, if they did what's stopping me from saying they were getting a reduced rent because they do the lawns and generally maintains things around the house, how can PRTB prove that.

There are plenty of ways around these types of things when you have laws and regulations that only work one way.

Ray Palmer

https://www.boards.ie/discussion/comment/117772531#Comment_117772531

Not what I said but still irrelevant as your question and objection were answered the rent paid has to be revealed

Flinty997

You want to be an idiot to buy a business and not ask to see what money it was making over the last 12 months.

Flinty997

https://www.boards.ie/discussion/comment/117737171#Comment_117737171

They can't get out they are caught by the Tyrrelstown Amendment.

Flinty997

https://www.boards.ie/discussion/comment/117773671#Comment_117773671

You can say what you like, won't stop the RTB making a judgment against you. You can then challenge it in court and lose a ton of money.

At the end if the day it's a business. It's it's getting massive fines and incurring huge legal costs it's not worth it.

If you avoid all this stuff it's a viable business. Or if the risk is spread over a large number of units.

MacDanger

https://www.boards.ie/discussion/comment/117774678#Comment_117774678

"The rent paid has to be revealed" - absolutely, it has to be revealed to the RTB but it's not a requirement to reveal it to any potential bidder as you've already admitted