Rent (in an RPZ) that I charge way below the market rate - is it possible to correct this?

demello

Hi.

I took the eye of the ball for a few years, and now the rent on a house I rent out is at least half of other similar properites in the same area. The house is in an RPZ. What are the options if I wish to increase the rent by between 50% and 100%?

Thanks in advance for any advice

L1011

Two and only two options: Do very substantial renovations to the house, or leave it empty for two years.

SupaCat95

https://www.boards.ie/discussion/comment/123737742#Comment_123737742

Not doubting you but define "very substantial renovations". Is that like a new Kitchen and boiler, insulation, windows or would you get away with a lick of paint and new carpets?

meijin

https://www.boards.ie/discussion/comment/123737937#Comment_123737937

https://rtb.ie/renting/setting-reviewing-rent/setting-and-reviewing-rent-in-a-rent-pressure-zone-rpz/#exempt-from

There are strict rules about what ‘substantial change’ means. To qualify for an RPZ exemption, you must meet one of the requirements below:

• A permanent extension that increases the floor area by at least 25%.
• Work that improves the Building Energy Rating (BER) by at least 7 levels.
• Work that achieves three of the following:
  • The internal layout is permanently changed.
  • The dwelling is adapted for use by a person with a disability.
  • The number of rooms is permanently increased.
  • A BER of D1 or lower is improved by at least three levels.
  • A BER of C3 or higher is improved by at least two levels.

L1011

https://www.boards.ie/discussion/comment/123737937#Comment_123737937

More than either of those (edit: see above)

SupaCat95

https://www.boards.ie/discussion/comment/123737742#Comment_123737742

TThere was never a closer definition to "between a rock and a hard place" as the choices above?

o1s1n

There's proposed legislation change to allow landlords to reset rents to market rate between tenancies. But I'll believe that when I see it.

How long are your tenants there? Any inclination they might move out sometime in the near future?

Have you ever put up the rent by the way? If they've been there years and you haven't, you'll be able to increase it by a bit.

Example from Citizens Info:

https://www.citizensinformation.ie/en/housing/renting-a-home/landlords-rights-and-responsibilities/rent-increases-in-private-rented-housing/

So, if your landlord reviews the rent every 12 months and the rate of general inflation is 1.5%, then your rent can only be increased by a maximum of 1.5%. However, if the rate of general inflation is higher than 2%, for example, 3%, the rent can only be increased by a maximum of 2%.

If your landlord has not reviewed the rent for a number of years, the 2% cap applies every year.

So, for example, if you moved into rented accommodation in December 2016 and the rent hasn’t changed since then, the general inflation rate would apply when calculating the rent increase. This is because the inflation rate between December 2016 and December 2021 was 6.6%, which is lower than the 10% that would apply under the 2% per year condition (2% per year for 5 years = 10%).

mrslancaster

…”There's proposed legislation change to allow landlords to reset rents to market rate between tenancies. But I'll believe that when I see it”…

Market rates apply for the very first tenancy now under the current rules and the new rules will also allow it for a new tenancy where a previous tenant left of their own accord. No resetting to market rates allowed following a no fault termination and no fault terminations will also be banned for large landlords of 4+ tenancies.

Tenancies that started or were renewed after June22 are unlimited but how will the new rules affect tenants with a current six year tenancy, below market rent, that started before June22. When that finishes at some point in the next few years, and if the tenant wants to renew, it will be a new tenancy started after March26, so can the rent be reset to market rates? Very complicated.

DubCount

It may be worth looking at selling the property, and buying a different property that is not restricted by a rent cap.

daithi7

This is why the government should have devoted their energies to increasing supply by :

- providing more serviced land & sites for developers

- reforming & streamlining the painfully slow & expensive planning process

However, they opted for the populist option of regulating landlords out of the market. As a result they have made a complete mess of the private rental market, increased costs & complexity for landlords , and as a result reduced the number of available properties to rent in an already stressed market.

Moronic Madness!!

Allinall

https://www.boards.ie/discussion/comment/123738183#Comment_123738183

The OP's tenants would disagree with you.

steinbock123

I found myself in the same position as the OP last year.

I calculated that it would take me 11 years of rent increases (at the allowable rate of increase) to get to the rent that I should have been charging (and would have been easily attainable).

So I sold up, and I’m not sorry I did.

daithi7

https://www.boards.ie/discussion/comment/123738188#Comment_123738188

I don't think they would if they realised that by increasing supply (by providing serviced land) and reducing planning obstacles the government would have increased the supply of rental properties in the market & hence kept market rental rates down.

However our populist government & their dumb civil servants tried to over regulate a fully functioning private rental market, & have hugely reduced supply & pushed up market rates as a result. This was all highly predictable & stupidly self defeating. Dumb governance!

Thestart

You could also move into the property yourself and rent out the remaining rooms for two years and then re rent at market rate.

You can earn €14,000 per year tax free. Thats eqequivalent to over €28000 yearly renting the full property.

At the rent your charging now the tenant will never move out. They would be crazy to.

dennyk

https://www.boards.ie/discussion/comment/123738340#Comment_123738340

The current tenants might buy a house eventually, or emigrate, or move for work, or leave for any number of other reasons, so I wouldn't say that they'll never leave, but it's unlikely they'd voluntarily leave to rent somewhere else in the same area for twice the price, for sure.

That said, the OP is currently no worse off financially than when they originally opted to rent out their property, so it's hardly a disaster, and they could increase the rent within the RPZ restrictions to account for inflation since they last set it, if they really need to.

Emblematic

https://www.boards.ie/discussion/comment/123738183#Comment_123738183

The problem here is that landlords would have protested that increased supply caused by greater provision of services land, and streamlining the planning process would undermine their investment.

demello

Last year I did increase the rent as per the RTB guidelines, but the rent being paid is still less than half the market rate in that area. The options available all provide serious challenges as they involve loosing rental income. Not sure what I will do, but thanks for all the advice!

Mrs Shuttleworth

Accidental landlord here. I'm in a similar situation to the OP. Three bedroom house being rented for 900 Euro a month, tenant there years, market rent now 1400 a month, and property went into Rent Pressure Zone last month. I should have been mercenary and raised the rent but as he was a good tenant I didn't.

As a consequence I now have no option but to get him out in order to achieve market rent and having considered all matters and taxes I've decided to sell. Issued Notice of Termination end of June and he has to be gone by February.

The manifest genius of our Government.

Rocket_GD

https://www.boards.ie/discussion/comment/123739219#Comment_123739219

Or you could have just left him there? At €900 you were obviously making enough money over the years that you were satisfied with, assumed it was enough to cover the mortgage, unless this has changed the market rate is basically irrelevant to you.

Mrs Shuttleworth

https://www.boards.ie/discussion/comment/123739283#Comment_123739283

No I'm losing money. The mortgage went up to 1100 a month, I managed to negotiate with the bank interest only at 775 but that runs out in a few months. If I was getting the market rent I could meet the full capital and interest payment every month.

burgerKev

Is this necessity, as in you need an increase in cash flow for a specific reason?

Or is it greed?

L1011

https://www.boards.ie/discussion/comment/123739305#Comment_123739305

You are obtaining an asset at a very low price to you.

It's only in the last 15 years or so that it has even been possible to assume that rent will cover mortgage costs - the 00s BTL boom still required the owner to put money in monthly; or such a large deposit that the mortgage was only ever on a small proportion of the property.

o1s1n

https://www.boards.ie/discussion/comment/123739311#Comment_123739311

You seem to have confused the OP with someone operating a charity.

Mrs Shuttleworth

https://www.boards.ie/discussion/comment/123739336#Comment_123739336

This 100%. The Revenue Commissioners treats small landlords for tax purposes as a business, not a charity. That's all you need to know.

If small landlords exit the market fast because it becomes unprofitable to stay as a consequence of tightening legislation, tenants need to talk to their TD, not lash out at private small landlords.

burgerKev

https://www.boards.ie/discussion/comment/123739336#Comment_123739336

Charity would not be charging rent at all.

Charging a fair price that covers expenses should be the norm.

Outside exceptional circumstances, property is an appreciating asset.

Looking for ways to hike the rent "just because" is blatant opportunism and exploitation.

Mrs Shuttleworth

https://www.boards.ie/discussion/comment/123739357#Comment_123739357

"Outside exceptional circumstances, property is an appreciating asset."

Yes and the upcoming amendments to the legislation make now the time to cash in. Expect an avalanche of evictions in the coming quarter.

o1s1n

https://www.boards.ie/discussion/comment/123739357#Comment_123739357

'Shoulds' are all well and good in your socialist utopia but I'm afraid that's not how property investment works in this country.

Rocket_GD

https://www.boards.ie/discussion/comment/123739305#Comment_123739305

What was the mortgage previously if 900 was covering it for years and now it's 1100?

Seems to be quite a massive jump in interest rates to cause that.

DFB-D

https://www.boards.ie/discussion/comment/123739387#Comment_123739387

Maybe, maybe not.

For those who remain in, the shortage of property nearly guarantees yearly increases. Compared to low deposit rates for larger sums, there's not much else secure investments around for that rate.

For landlords with mortgages, there are practically no other investments which are secure enough to borrow against the asset value.

What the rental market needs is slow steady growth, what we got for the last few years is rapidly increasing market values, despite rent increase limits. This eventually will crash with the last entrants being burned by falling rental and asset values. That seems to be the most logical reason why investors are staying away, along with the hassle of trying to actually buy something in Ireland is ridiculous...

Mrs Shuttleworth

https://www.boards.ie/discussion/comment/123739423#Comment_123739423

The rent in that location never covered it, as I said in my first post I was an accidental landlord. The current market rent would cover it, but I'm now "not allowed" by the legislation, and I now realize I was very dumb to fall for the "ahhh sure you have a good tenant in situe" line. I should have jacked up the rent when I had the chance.

cgorzy

https://www.boards.ie/discussion/comment/123739305#Comment_123739305

Are you losing money or paying towards the mortgage? Did you pay off any of the mortgage while charging below market rate and paying towards the mortgage? What do you estimate the increase in the value of the property has been while paying towards the mortgage? What is the estimated return on any proceeds from a sale?

It could still be your best investment to keep the property even if the investment would give a better return if rented at market rate.