Why do Landlords feel entitled to rent increases?

Dav010

https://www.boards.ie/discussion/comment/118576570#Comment_118576570

But LLs set rents based on the market, not despite it on the vast majority of cases. Of course there will be outliers, as there are in all markets at both ends of the spectrum. It is not unknown for some LLs to retain rents lower than market rate, that of course is their choice. But most look to the market and set prices which maximise profit. ‘‘Twas ever thus.

B_S

https://www.boards.ie/discussion/comment/118576561#Comment_118576561

Show me where I said landlords are greedy and I'll take it back.

The landlord wanted to rent the place for an extended period of time only if he could get rent X for it. This decision was made looking at the same market we were all looking at, with full knowledge of a set of circumstances particular to his situation. After a period of time, those circumstances changed. And so he reduced the rent (as far as I know).

3DataModem

https://www.boards.ie/discussion/comment/118575641#Comment_118575641

I don't expect REITS will keep places empty to keep market rents high. They will optimise for occupancy. A down month is equivalent to a 8% drop in rent for that year, and not worth it. Also an empty unit is a risk (insurance, squatting, etc) so again, they will optimise for occupancy as that's how they maximise yield.

B_S

https://www.boards.ie/discussion/comment/118576584#Comment_118576584

Based on the market, and other circumstances. But we agree. LLs set rents.

fliball123

https://www.boards.ie/discussion/comment/118576586#Comment_118576586

https://www.boards.ie/discussion/comment/118576570#Comment_118576570

https://www.boards.ie/discussion/comment/118576570#Comment_118576570

So the market changed ergo the market dictated to the landlord that he should lower the amount of rent he is paid. Jesus we are going around in circles.

Dav010

https://www.boards.ie/discussion/comment/118576592#Comment_118576592

Yes, LLs set rents based on market economics. I am sure every poster has been trying their best to explain this to you.

fliball123

https://www.boards.ie/discussion/comment/118576591#Comment_118576591

Well evidence would seem to suggest its already happening

https://www.newstalk.com/news/leaving-dublin-luxury-apartments-vacant-doesnt-break-competition-rules-review-finds-1188114

Already the are looking at implementing a vacant property tax to combat this

https://www.thejournal.ie/vacant-property-tax-3-5441551-May2021/

B_S

https://www.boards.ie/discussion/comment/118576595#Comment_118576595

I genuinely disagree. What we can say for sure about the market from the time I left the place to the time it was reoccupied, is that the market price for comparable properties was lower than I had been paying. What changed, presumably, were the circumstances and priorities of the landlord. Throughout the period it was unoccupied, it is clear that his priority was not to have people in the place if it meant charging market rent. Obviously, those priorities shifted to the point where he was willing to accept market rent for the place.

fliball123

https://www.boards.ie/discussion/comment/118576618#Comment_118576618

Yet we are talking about all landlords dropping their rent by 50% in that period, why? Did they all come to the same conclusion that this is for the greater good, or I don't need the cash? Or was it a case that the market dictated the drop in rent. Look dont bother replying we are going to have to agree to disagree.

B_S

https://www.boards.ie/discussion/comment/118576609#Comment_118576609

Like I said, we agree. Landlords set rents on the rental properties that they own.

Although it's not my experience, we hear some stories of landlords who do not increase the rents of the properties they rent to tenants, particularly if they're happy with the tenants and are happy with the return they're making. However, particularly over recent years, market economics might suggest that they should increase the rents they've been charging. Why don't they? Because landlords take a multitude of factors into account, before they set the rent.

Dav010

https://www.boards.ie/discussion/comment/118576631#Comment_118576631

I genuinely have no idea of the point you have been trying to make over the past couple of hours.

gormdubhgorm

https://www.boards.ie/discussion/comment/118136320#Comment_118136320

Extremely difficult for the likes of a small one property landlord to get the unpaid rent back as well. Normally the LL has to cut their losses and hope they leave without too much fuss fairly quickly. I realise the image of fat cats is portrayed in the media about LL's vulture funds etc.

But the majority of landlords only own one, maybe two properties at a push. Normally older individuals who use it to top up their pensions, or survival as their main source of income.

https://www.cso.ie/en/releasesandpublications/fp/fp-trsi/therentalsectorinireland2021/landlords/

https://www.irishtimes.com/business/personal-finance/the-vast-majority-of-landlords-only-own-one-or-two-properties-1.4731614

From the above article -

"Half of all landlords earn less than €10,000 on these investments after allowable expenses – such as mortgage interest, depreciation on fittings and furniture, repair and maintenance costs and letting costs. The CSO suggests these expenses can account for roughly a third of gross rental income, which means these landlords are charging up to €1,250 a month.

If their gross income is enough to see them taxed at the higher rate the net annual income from their investment is €5,150 or less. If they’re lower rate taxpayers then it could be as high as €7,150. It’s certainly better than nothing, but this group is not buying yachts on the backs of their tenants.If their gross income is enough to see them taxed at the higher rate the net annual income from their investment is €5,150 or less. If they’re lower rate taxpayers then it could be as high as €7,150. It’s certainly better than nothing, but this group is not buying yachts on the backs of their tenants."

B_S

https://www.boards.ie/discussion/comment/118576654#Comment_118576654

From my first post:

The agency of landlords in setting rents is too often obfuscated. It's not "the market"; it's a desire on the part of landlords to extract more value from an asset that they are invested in. They should own that.

Ray Palmer

https://www.boards.ie/discussion/comment/118576456#Comment_118576456

Well lets's start with the first correction already made. Maximize profits, is not what is happening staying with the return you were getting is. I manage the property for somebody else who had neglected it somewhat and chose tenants badly. As a result she didn't raise the rent. Now they are in a care home I have to take care of it. Due to how the costs of medical care and the fact she owns another property she has to pay for her care. So when checking out the property and rental income we could see her finances weren't in great shape. We could let the government basically seize her property to pay for her care, consider how much tax she has paid while renting too.

So yes we made a choice based on the restrictions placed by the government. Could sell the property and watch it disappear on care costs. We decided it would be better for her to get a modest return on the property value and not pay vast amounts to the government.

I asked you question about what you think is a fair return for landlords, please answer because you aren't being fair and are judging people by ignoring that. Your claim of maximum profit just isn't true. I could kick out all the tenants and do up the place but as one is vacant I am only doing that one. Another tenant will be leaving within the year and I will then do that one. Much easier to kick the last tenant out to complete the building at the same time.

Second point of correction, no the landlord is not setting the rate and is prevented from doing so by law in or outside the RPZ. It isn't controversial it is just simply incorrect what you are saying.

If you keep on saying better returns, maximise profit etc... you can give these as percentages. For example 1% to 2% return is 100% more but 2% isn't a great return compared to risk. One bad tenant puts you in financial risk on your own home. Hard to believe you are genuine when you avoid the nitty gritty and talk in such vague terms. Adding in that the asset will be worth more as a result is both naive and where you aren't being fair.

You can spend 20K on a property and it will only increase in value by 10k that is how investment in property works. You rarely get an even return on your investment and making a profit on it is even rarer. Having the money to invest is an issue so if you take a loan out to do the work so the cost of that money is added as well. Then there is tax on the extra income and you know that is at least 50% or in other words fro every €1 spent has to have an increased income of at least €2. Maximise profit doesn't come into it that is just to get to a no cost stage and only get the same profit as before. So the rent goes up and the landlord hasn't gouged anyone. What do the public generally think landlords are maximising profit. I think that should explain how you are not actually looking at the facts but just deciding every landlord is making a massive profit and ripping off tenants as the try to make as much as possible. They aren't and that is why they are leaving the market.

fliball123

https://www.boards.ie/discussion/comment/118576666#Comment_118576666

and its been proved to you that landlords are dictated to by the market , drawing on a time when supply was plentiful and rents dropped and now that supply is tight rents are rising. The landlord has zero control over the market. So just to tailor this and put it to bed once and for all. The expected market rate that a landlord should expect in rent is dictated to by the market. Each landlord can charge less than the market rate if they want.

Dav010

https://www.boards.ie/discussion/comment/118576666#Comment_118576666

So you were saying it isn’t the market, now you say their decision is based on the market. If the market is the primary factor influencing how much the can charge/profit they can make, it sounds like your current viewpoint contradicts your earlier one.

B_S

https://www.boards.ie/discussion/comment/118576698#Comment_118576698

"Each landlord can charge less than the market rate if they want." 100%.

B_S

https://www.boards.ie/discussion/comment/118576699#Comment_118576699

I don't think my position is contradictory. The market rent for comparable properties is one of several factors that a landlord takes into account when setting the rent on a property they own.

fliball123

https://www.boards.ie/discussion/comment/118576704#Comment_118576704

Yet the market will dictate what they can achieve in rent and each landlord should act as a charity and charge less than what they should expect :)

B_S

https://www.boards.ie/discussion/comment/118576689#Comment_118576689

Your first paragraph describes a different motivation for increasing the rent than originally stated: "It would have just been turned around quickly but because the rent was so low there was not much point renting it as the rent had not been increased in so long." Other factors were at play, which were considered. Like every landlord, a number of factors were taken into account, and a rent level decided in light of those factors.

Within limits (i.e. the ceilings set within RPZs etc.), a landlord can set any rent they want. As stated above, they can set the rent lower than market level if they wish.

In terms of a return; what I have been saying all along, without judgement, is that landlords can decide, particularly at the moment, what sort of return they want from their rental property, and act accordingly. If they want a high return, they can set the rent high and hold out for tenants. If the prioritise having tenants in the place, set it at market level or lower. I think we have to agree to disagree as to whether or not some landlords seek to maximise profits from their investments.

Show me where I said that every landlord is making a massive profit and ripping off tenants.

B_S

https://www.boards.ie/discussion/comment/118576713#Comment_118576713

I have never said that they should. I have said that they can.

Dav010

https://www.boards.ie/discussion/comment/118576711#Comment_118576711

If you mean setting rent within the parameters of RPZ legislation, then yes, LLs are required to provide examples of similar properties. But the rent price of similar properties is no where near as important as the influence market economics like demand/supply has on the setting of rental prices by LLs. For instance, if demand fell, maintaining rents at the highest price paid on other properties would be pointless if there was no one to rent it, so the LL would have to lower the rent to get tenants (sound familiar?) . If demand increases and the market was open/no RPZ, then LLs would not care what others were charging, they would increase the price to whatever the market could bear.

B_S

https://www.boards.ie/discussion/comment/118576758#Comment_118576758

Agreed, but this ignores the option that landlords have of leaving properties empty if they believe it's in their interests to do so. Which they have done, and continue to do, even in the RPZ environment.

Ray Palmer

https://www.boards.ie/discussion/comment/118576740#Comment_118576740

Not true you cannot set your rent how you like outside of the RPZ. You are simply wrong by making the claim they can set the rent anyway they like. In fact the law can be read that you can't reduce your rent and landlords said how they couldn't do so during the pandemic. Again you are wrong the landlord cannot set the rent high to get a higher return. This is not agree or disagree situation you are making a false statement.

Why will you not state by percentage rate? It was spelt out why that would explain your view and understanding. You are stating with judgment by claiming maximum returns. Claims of maximise profit is to say ripping off tenants. It is also not true. Yes some do the same as some shops do but you don't say all shops are over charging for super normal profits.

sk8board

https://www.boards.ie/discussion/comment/118576654#Comment_118576654

We love all opinions here B_S, otherwise it’s just an echo chamber; but after almost a decade on the sidelines, this is an oddly divisive thread for you to break your duck on, and lash out 40 detailed posts in a few hours!

I’ve been a LL for 17years, full time for the past 5+, and I can’t make head nor tail of what point you’re making either, soz.

I think we can all agree that the market is broken from both sides.

B_S

https://www.boards.ie/discussion/comment/118576916#Comment_118576916

I would be genuinely very interested to see where it is stipulated that rents cannot be reduced, or that there is a lower limit on what rents can be charged within RPZs, or anything of this nature. To my understanding, stipulations associated with RPZs are to do with the upper limit of what can be charged.

To be fair (and like the dullard I am i went back through the thread looking for this) I wasn't the first individual to use the phrase "maximising profits," but I'll concede the point. To be more accurate: landlords consider the level of profit they wish to make, along with myriad other considerations, and set their rents accordingly.

I'm not going to put a % on what I think is an acceptable return on a property investment; like I said, I've judged no-ones actions or motivations in this regard. I understand if you think it's a cop-out, but I think it's immaterial to the main point I'm trying to make. Which is that landlords set the rent of the rental properties they own.

B_S

https://www.boards.ie/discussion/comment/118576955#Comment_118576955

Believe me, I'm as surprised as you are. It's a topic that I have a view on, though, so I thought I'd promote myself to the big leagues.

Ray Palmer

https://www.boards.ie/discussion/comment/118576969#Comment_118576969

If you reduce the rent you are then stuck at that rate for 2 years. That is a major punishment.

You won't engage on what a reasonable profit is as a percentage? Makes no sense along with you completely factually incorrect on how rents can be set because you have some weird idea where there are no restrictions on what rent can be set on. The only cases where rent can be set by the landlord is for a new property or a recently refurbished places. That is not the majority of rentals than is a minority and it is still restricted by the market and costs. You just want to ignore reality and are insisting landlords can set it because of one experience. No doubt you will jump up and down and say the exceptions mean they do set the rent.

Funny how in your story you didn't note that you could leave easily for cheap rent when the landlord can't break a contract and is obliged to keep the rent low if the market increases. Do you see where tenants have the better rights here. Not only that if you are nice to a tenant with rent you then have to give the same deal to the next tenant. Costs renting and repairing property has gone up and the landlord is meant to swallow the costs.

B_S

https://www.boards.ie/discussion/comment/118577035#Comment_118577035

You're right, I will jump up and down. I have at all times acknowledged RPZ stipulations etc. What I have said, repeatedly, is that landlords set rent. They should own this. Just because there are upper limits to what they can charge does not change the fact that they have agency in this regard. If they want to set a rent above the limits imposed, they have some options, as you've described.

As for the idea that if you reduce the rent then you're punished by being stuck at it for 2 years; if this is your belief, then there is a simple answer. Don't reduce the rent. However, if after weighing up all the pros and cons, reducing the rent you charge seems like the right move, you are free as a Landlord to do so.

fliball123

https://www.boards.ie/discussion/comment/118577075#Comment_118577075

So prices for everyone are going up in all aspects of life and you expect landlords to price rent on their asset in the opposite direction? Why would anyone looking to make a profit do this?