Rental cost-where will it stop?

Shannonsurfer101

Let’s get real, the ppl purchasing rental property are doing so to increase their asset wealth and not with a moral obligation to provide housing. To revert back to my first post, I was highlighting the rental property I saw advertised this morning. It was my own opinion that asking for 2200 a month for an asset worth 250k was extreme profiteering.

893bet

https://www.boards.ie/discussion/comment/121657101#Comment_121657101

But is it? It’s about 10 percent yield before any cost are taken into account.

Maintenance, insurance, fees etc, cost of bad tenant, cover of overholding (my sister has a rental that wasn’t planned, after getting the bad tenant out it cost 18k to put the house back together including putting in a new kitchen as half the doors were pulled off, internals broken, worktop scorched, tills broken with a hammer or similar, internal doors missing, holes in walls etc.).

Then after costs are taken out the tax man has his go (and yes, first world problem, you have to earn it to be taxed on it). But that 10 percent pre tax yield becomes 4 percent real fast.

Worth it for the landlord? I ain’t so sure. Especially now when the buy in cost is so high. Hard to know if there can be much capital appreciation in the next 10-20 years.

No skin in the game bar I was looking at an investment property as I am lucky enough to be in a position to be thinking about that kinda thing. Close to reaching the conclusion that it ain’t worth the stress.

Flinty997

https://www.boards.ie/discussion/comment/121657101#Comment_121657101

A supermarket isn't a food bank. Why do you expect a private business to provide housing at cost. Why don't you provide housing at cost?

Fol20

https://www.boards.ie/discussion/comment/121656564#Comment_121656564

Hey Sharon, Im not a one property landlord. I have more than that. As result of the constant meddling by the government though and all the stuff i mentioned above with regret, i have started the process of selling one and am considering more. I literally just did the numbers of what i make out of it, and weighed the pro and cons of staying invested in this vs where i could better allocate my resources and it was no longer worth while. I did the numbers and it was going to take me 19 years to get up to todays market rent let alone what the world will be like in 19 years time.

Im not sure what you mean by fairness by linking it to property values. If im honest, this could hurt you more than benefit you. Your intended goal is to bring down rents while my goal is to be as profitable as i can be. I mentioned a bunch of costs that have increased for ll so these need to be baked into any costs of rent to make it feasible. You need to explain your train of thought with rents being linked to asset value. Back during the height of the recession i bought one of my rentals at the lowest asset value you could get but the rental yield was circa 11 pc. Rents back then were a lot lower but so were asset values. Right now if i could get market value rent and market, the yield would be only 8pc and that with todays current market rent. If i wanted market rent for what attainable based on asset value 15 years ago, it would hurt the renter even more. Asset values have gone up higher that rental amounts.

In my eyes the best course of action is no tax waivers for ll, just let ll pay their taxes like everyone else however let us run it properly like a business. If the hard times come, let it be like any other business where the ll will fall on their sword etc but at the same time, if there is good times, they need to be had also. Whats happening now is some ll had an awful 10 years in negative equity, being forced to go bankcrupt etc while now during so called good times, they are being blocked so its a loose loose for them tbh. Anything else will create a dysfunctional market and is not good for renters and ll. At the moment both renters and ll are getting screwed.

Fol20

https://www.boards.ie/discussion/comment/121653192#Comment_121653192

Everything here is targeting renters, but given ll provide the supply, if the supply is decreasing, then even with the long leases etc, they wont have something to rent.

BlueSkyDreams

https://www.boards.ie/discussion/2058332635/rental-cost-where-will-it-stop

2,200 is cheap for a 3 bed home. Thats a 1 bed apartment in South Dublin.

Its Supply and Demand.

There is no Supply, so demand stays high. There is no strict correlation between mortages and rentals as they are 2 different markets.

3DataModem

What you are saying OP is that that property is amazing value to buy as an investor, about 8.5% yield after costs. Most apartments in Dublin are about the 6.5% range. This yield is WAY WAY higher than most other developed cities, suggesting that investors think that rents will drop over time (I agree) but also showing the bias against residential investment property that people in Ireland have.

Dav010

https://www.boards.ie/discussion/comment/121656564#Comment_121656564

But you would be ok with taking advantage of a skills shortage which led to you getting a 20% wage increase?

We are all part of the same hypocrisy, we want more income, but criticise others for doing the same, you are just adding in a bit of virtue signalling for good measure.

listermint

https://www.boards.ie/discussion/comment/121657662#Comment_121657662

That's exactly the problem and it needs to be tackled

Ray Palmer

https://www.boards.ie/discussion/comment/121656572#Comment_121656572

No.It is a very simple question. If you can't understand it maybe you can explain what is difficult for your comprehension.

SharkMX

https://www.boards.ie/discussion/comment/121653699#Comment_121653699

I agree. Ive been saying that for 20 years.

Ray Palmer

https://www.boards.ie/discussion/comment/121658152#Comment_121658152

and it still hasn't happened so maybe you have been wrong for 20 years. Has this happened in London or Paris?

RichardAnd

https://www.boards.ie/discussion/comment/121658152#Comment_121658152

I've been hearing of the exodus from Dublin of MNCs for about 8 years now. Things have only got worse and worse, and it still has not happened. I think that as long as the tax options are so good, these companies will remain. Of course, a shortage of avocados, soy milk or pink hair dye could finally drive them overseas...

Flinty997

It's going to take a massive hard recession (unlikely) or a change in govt to change policy on housing.

But SF will find they are going to have compromise on their ideals to finance their vision of economics.

Shannonsurfer101

Morning Fol, I’ll try explain my thinking behind linking rent based on the property’s market value. Atm we’re all paying the LPT, the bands are very broad. If it became more detailed to reflect property’s true value, owners could revise the value every 2 years and remove the RPZ cap. Property’s now indexed linked would mean both the tenants and owners receive fair value for the said property. 

A very rough example. 

Asset value     Rent capacity limit 

200k               1000

250k.              1500

300k.              1800

350k.              1900

Property’s could charge an extra 100 a month for every 50k increase in value after. 

This is just an idea to promote discussion

Flinty997

https://www.boards.ie/discussion/comment/121658278#Comment_121658278

Two properties might have the same capital value but completely different rental yields.

Expensive one bed flat, Vs 4 bed house in a modest area. Property in the suburbs Vs one beside a college.

Your completely ignoring demand supply as a driver of price.

As such it's a nonsense.

RichardAnd

https://www.boards.ie/discussion/comment/121658238#Comment_121658238

My predictions for the political area are that SF will get into power when the next election is held. However, in a similar vein to what happened to Labor, it will become very clear that they will not depart from globalist policy. Come the election after (towards 2030), I would not be surprised to see them reduced to a handful of seats.

The rest of Europe is starting to move towards centrist parties as the patience of native population runs out when it comes to things like immigration, the lockdown fallout and the increasing bizarre social policies of liberal governments. Ireland is a bit strange in that we don't even have a nominally conservative party. Thus, by 2030, there could be a major power vacuum that needs filling. It will be interesting to see what comes of that, and it's possible that entirely new political parties will exist.

Regarding a recession, I don't see where one is going to come from. The only thing that would put the breaks on the current economic model would be a 2008 style deflationary recession where the money-supply contracts. We'll see what happens...

Ray Palmer

https://www.boards.ie/discussion/comment/121658278#Comment_121658278

Not much use for discussion as it is obvious from a cursory glance rent would be less than the mortgage. Same question applies why would anybody invest? If you want discussion add a breakdown of how much it would cost a landlord rather than what you would like to pay. Right now you are suggestion below cost rentals

What do you do for a living so we can decide if you are overpaid?

SharkMX

https://www.boards.ie/discussion/comment/121658224#Comment_121658224

Whooosh!

I have definitely been wrong for 20 years. Going on 21. I'll hardly be wrong 22 years :)

Ray Palmer

https://www.boards.ie/discussion/comment/121658640#Comment_121658640

Seems it went over your head. Name where it has happened before? You could be wrong 100 years and have no proof it has happened. Seems it is something you want to happen

SharkMX

https://www.boards.ie/discussion/comment/121658671#Comment_121658671

Oh thats an even bigger Whoosh! :) seriously?

Flinty997

Companies and multinationals following cheap labour (accommodation is part of that) around the world is as old as the hills.

It's not really going to have an effect on housing at a national level unless it's with a severe recession, at which point its the recession having vastly more effect.

You do see it willing out small towns of its the primary employer in the area. But that's an entirely different thing.

Fol20

https://www.boards.ie/discussion/comment/121658278#Comment_121658278

I think its nice to look at that however in the real world, i dont know how realistic it is i am afraid. Asset values dont reflect how much rent a place could get. EG One place could be an absolute dump that hasnt been modernised in 50 years but asset prices would be high given the location, land value etc. I doubt renters would be willing to pay x amount for this due to the above negatives and supply and demand would kick in for this one where they might have to drop the rental amount to get someone in while for another place where the asset value is less but is in extremely good condition will attract loads of renters and should get more rent but cant do the proposed scheme. Supply and demand works in the crappy condition one as people wont rent it for that amount but its being blocked and would hurt the ll more in the latter. IE both will hurt the ll..

Likewise if its based on asset value, this means you might have a 3bed house next to 3 bed apartment where the apartment might be larger than the house but as apartments are drastically worth less, will be unable to charge a similar figure to the 3b house. I think its best to let the figures naturally charge what they can get vs artificially manipulating figures tbh.

Even right now, i have a friend that recently bought a home and wanted to let out one of his rooms to cover some of the mortgage. I told him what i thought he would get but he wanted more. Since hes looking for too much in my opinion, it has now set vacant for 2 months.

Given how economies work, i think its fair as people will only pay what the market commands and if someone looks for more, he wont get it but if you start tweaking it from what should naturally occur, it messes the entire system.

Shannonsurfer101

Your points are very valid, hopefully the market can maintain itself at a somewhat reasonable level. I feel there are people out there desperate to have the security of accommodation and are willing to pay the high figures needed. This is at a detriment to there own income, thus, could restrict there saving capacity to purchase there own home in the future.

As the saying goes ‘you need to have money to make money’

Shannonsurfer101

We’re probably not going agree on this topic. The supply and demand model for housing is broken and is creating wealth inequality. It won’t hit home for some ppl until there own children/ grandchildren are caught in the crossfire

Shannonsurfer101

Below cost rentals? Depending on how you view it. Investment in residential property should be viewed as a very long term investment for capital return and not a quick buck turnaround. You can’t expect tenants to cover anything over a 7% return on investment. Your passing all the risk on the renter by just upping rents to sky high levels.

I work two professions, farming and architecture do you think I’m overpaid?

Flinty997

https://www.boards.ie/discussion/comment/121660303#Comment_121660303

Why? If you have a property for 25 years how are the annual costs each year funded? Magic?

AchMadra

I had an exact same problem where I took a homeless HAP person and she brought a criminal of a boyfriend with her… they stopped paying their share of rent as they always had some urgent issues (like buying the latest PlayStation for their kid instead of paying rent)… The council told me it was my problem to solve… almost 8 months and a lot of grey hairs later, they were out but the left a place that had been completely renovated (40 grand spent on it) before they moved in (first tenant!) completely destroyed… and I’m in more debt…

another thing that I don’t understand … when I take a (homeless) HAP person, I’m never offered any tax incentives, yet if I’m to take a Ukrainian person then I get 800 euros per person tax free… how is that fair? Why?

Ray Palmer

https://www.boards.ie/discussion/comment/121660303#Comment_121660303

Did you even do the most basic calculation because you were talking about a negative return not anywhere 7% return ? Again you avoided answering the question about who would invest in such a case. The risks remains with the landlord no matter what the rent is.

There is no way you are an architect with such little understanding on rental property funding which your occupation relies on. It is certainly an overpaid occupation as it charges a percentage of building costs not for their time. Farming still getting tax breaks and allowable expenses?

You are still not answering the question and not engaging when challenged. Your idea won't work as you are focusing on an outcome you want with absolutely no mention of how it would be financed. I can say I think all medical costs should be free but without any way to finance the idea it is worthless just like your thoughts

3DataModem

https://www.boards.ie/discussion/comment/121655085#Comment_121655085

That's what large companies did a long time ago.