To become a landlord or not

rn · 14-02-2020 8:55am #1

Hi all
Looking for bit of advice on my scenario.

Currently live on outskirts of Athlone, owner occupiers in semi D. Have just completed a new build a few kms out of town.

With our current financial situation we can afford repayments on both mortgages. So I have option of renting current place out or selling it, paying off one mortgage and taking a sizable chunk off mortgage 2. Mortgage1 is roughly half the value of house and there's 20 years left.

Rental market is currently very healthy. And so are sales, we'd be only house for sale in the estate at the moment.

Downside of rental is that taxes are very high, there are some expenses and mortgage interest to put towards tax bill. But ultimately all income will go on repaying mortgage 1. It won't be proper income until that mortgage is repaid. You are at mercy of things going wrong for tenant, you could get a bad tenant, which would probably stretch us financially.

Downside of selling is that it's the cheapest investment property I'll own. Lose chance of another income stream into household, at least in longer term.

What complicates things a bit is that during my time living there I invested a bit in the house I'd be renting putting in solar panels, expensive stove, upgrading the garden, excellent flooring and finishes etc. Ties me into more expensive repairs in the future is my worry. All technology wears out. I think if I wanted an investment property, it's better to have simpler finishes.

Thoughts on which way you would go in my situation?

sk8board · 14-02-2020 2:43pm

Hi there,
Full time landlord here.
66% of landlords in Ireland also only own one property, accidental or otherwise, so you’re certainly in a big cohort of people.

Some thoughts:
1. Do you actually want to be a landlord. Stuff will break, tenants will call, and so on. It’s not nearly as stressful if you have a plan (handyman, plumber, electrician, diy etc).
2. What would you spend any rental profit on - would you invest it elsewhere, or use it to top up spending money.
3. What is your attitude to debt - you mention if you sold, you’d go from two mortgages to rough a half mortgage. Is a debt free life attractive
4. What is your longer term financial plan - do you want to retire at 60 with a million € pension - does this property, in terms of future price appreciation and rental Profit help to get you there.

Edit: I forgot to mention risk - with your one rental, then any change in tenant circumstances could mean you are out 100% of your income, while still paying that mortgage. Choose tenants very very wisely.

Browney7 · 14-02-2020 3:25pm

Say you have 100 grand equity in the rental that you could realise.

Ask yourself the question, "if I had a spare 100 grand, would I borrow more money and invest in a property to rent out?"

PHG · 14-02-2020 4:22pm

Browney7 wrote: »

Say you have 100 grand equity in the rental that you could realise.

Ask yourself the question, "if I had a spare 100 grand, would I borrow more money and invest in a property to rent out?"

This is a great bit of advice!!

To kind of second this, what if you sell property 1 and put the money that you would have paid towards both mortgages into the mortgage payment of the new place.

How many years would you be debt free and have no repayments!! You could put all those bells and whistles from the first place into the second and enjoy it more maybe! No debt, no fuss and all your income is yours..

DankeyKang · 14-02-2020 5:14pm

I'd argue that you'd be much better off in the long run all things considered by using the equity in the first house and investing it in an S&P 500 index fund long term.

Being a landlord always sounds good on paper, but never really works out like that.

ted1 · 14-02-2020 5:16pm

Sell it and do yourself a favour.

Also sell it now and there’ll be no CGT. sell it after renting and I’m pretty sure ( but not absolutely)there’ll be some CGT.

DankeyKang · 14-02-2020 5:19pm

ted1 wrote: »

Sell it and do yourself a favour.

Also sell it now and there’ll be no CGT. sell it after renting and I’m pretty sure ( but not absolutely)there’ll be some CGT.

You're right more or less, PPR relief is only applicable on the time you lived in the property, plus the last twelve months regardless.

https://www.revenue.ie/en/gains-gifts-and-inheritance/cgt-reliefs/principal-private-residence-ppr-relief.aspx

rn · 14-02-2020 9:24pm

Great advice there folks thank. CGT doesn't apply as the house price hasn't recovered to it's 2006 value that I purchased it at.

Two great questions is if I'd 100k, what would I do with it... I'd probably stick a good bit of it in bank and invest some as outlined. I'd probably only buy a rental property if I could purchase outright.

I'm liking the idea of being debt free or near debt free. So I'm leaning towards selling, recouping as much furniture as possible from current house. And then ploughing maybe 75% of the cash into new house mortgage. Take down that monthly repayment.

cosybeach · 15-02-2020 10:22am

The anti landlord sentiment in ireland is and about to get a lot worse
Any return on your investment is resented
This is an etf that will return 20-30% please do some research its name is EQQQ

Treppen · 15-02-2020 11:06am

cosybeach wrote: »

The anti landlord sentiment in ireland is and about to get a lot worse
Any return on your investment is resented
This is an etf that will return 20-30% please do some research its name is EQQQ

Can you guarantee it "will return 20-30%"?

cosybeach · 15-02-2020 11:55am

Treppen wrote: »

Can you guarantee it "will return 20-30%"?

https://www.hl.co.uk/shares/shares-search-results/i/invesco-markets-eqq-nasdaq-100-ucits-etf

can only gaurantee death & taxes

But if its between this and rent a place to a tenant in ireland as i have in the past I know now where i would put my money.

cute geoge · 15-02-2020 12:03pm

I have always worked hard and debt free money in the bank etc. I have invested in various shares but would be lucky if i would break even on them after 15 or so years investing .I purchased 2 bed town house last year at good price cash in local town ,first time land lord .Imo it is the easiest way to add wealth ,way bigger headache when you hear news of your shares after diving anyway .Shares just dont drop in price they can just decimate to next to zero .There should be no headaches with regards to maintenance with a op house and just look at it as your pension .Very easy cash out if your circumstances change !!!

Happyhour · 15-02-2020 3:38pm

Can I have advice please
I rent privately but for half the price of market.. i make nothing and actually after insurance etc am slightly out of pocket. The tenant has suggested Hap as I may make more. They know I am struggling financially and I like that they are good tenants.
My questions are is it financially viable how much tax do you pay.
Should I say I stay in the country òr out (currently in UK) . What is the difference financially and also I am on tracker will I get away with not declaring it's for rent...
Please help...thank you an unsure landlord
I should say they pay 500 for 2 bed house really 3 as attic converted but legally 2 and neighbours rent for 1100 . Tenant has been told they can have 1050.

garrettod · 15-02-2020 7:48pm

Hello,

Anyone considering getting into residential property on a small scale these days, is nuts.

Between tax, maintenance, personal time taken up dealing with issues, there's no real annual income to be had from rent.

Values of houses have pretty much peaked given restrictions on borrowing, enforced by the Central Bank.

Demand for housing will stay high for the next few years, given high employment, lack of housing, but because its such a high priority for the next government, you won't get anything other than disincentives, rent freezes etc.

Cash in now, get your debt down to zero ASAP. Then save a bit, see what your priorities look like then : -

Pensions offer significant tax breaks on Day 1, so are often worth investing in.

As someone above already mentioned, the stock market always does better than property (or other asset classes), in terms of returns, over the longer term.

Quoted stocks are also far easier to cash in, if you need to sell in a hurry! .... Look into Exchange Traded Funds (ETFs), that track the likes of the S&P500.

Residential investment is now for the big boys, those with large numbers of properties, who are able to take a very long term view.

Del2005 · 15-02-2020 10:23pm

cute geoge wrote: »

I have always worked hard and debt free money in the bank etc. I have invested in various shares but would be lucky if i would break even on them after 15 or so years investing .I purchased 2 bed town house last year at good price cash in local town ,first time land lord .Imo it is the easiest way to add wealth ,way bigger headache when you hear news of your shares after diving anyway .Shares just dont drop in price they can just decimate to next to zero .There should be no headaches with regards to maintenance with a op house and just look at it as your pension .Very easy cash out if your circumstances change !!!

The next government is going to need a left leaning party and since they all canvassed on giving tenants more rights, life long tenancies etc, cashing out won't be as easy, especially since banks won't lend with sitting tenants.

sk8board · 16-02-2020 10:09am

cute geoge wrote: »

I have always worked hard and debt free money in the bank etc. I have invested in various shares but would be lucky if i would break even on them after 15 or so years investing .I purchased 2 bed town house last year at good price cash in local town ,first time land lord .Imo it is the easiest way to add wealth ,way bigger headache when you hear news of your shares after diving anyway .Shares just dont drop in price they can just decimate to next to zero .There should be no headaches with regards to maintenance with a op house and just look at it as your pension .Very easy cash out if your circumstances change !!!

in essence you’ve invested all your money in one share - one vertical (property).
However one thing it isn’t is ‘very easy to cash out your money if circumstances change’ - property is a specifically illiquid asset class.
It won’t go to zero as a share might, but equally if many people are selling you will take a long time getting that cash out, and likely for a lower price (basic market dynamics). Best case scenario, if you decided today to cash out, it could take 3-4 months to see money in your account.

Your investment is also completely dependant on the success (or not) of your tenant.
If they can’t pay the rent, you are down 100% of your income.

I suppose what I’m saying is - Having one individual investment property is a terrible investment choice - it’s a gamble really.

Having a portfolio of properties spreads all the risks I mention above, which is what I spent a few years during the recession accumulating. The yield calculations make little sense at today’s prices.

Also, if you’re not trained in it, diy investors should never buy individual shares (AIB etc), as you’re not an investment manager and are simply placing bets based on gut feel.

It keeps leading back to this - diy investors are better to put their money into diversified market ETFs - any other investments and you’re just lying to yourself that you know what you’re doing

cute geoge · 16-02-2020 11:39am

Wtf does a diy investor know about a diversified market etf .Some savvy investor might be able to get lucky and get in/out at right time but the average Joe aint got a clue in regards any shares investments but quiet granted can get lucky every now & again .

garrettod · 16-02-2020 3:29pm

cute geoge wrote: »

Wtf does a diy investor know about a diversified market etf .Some savvy investor might be able to get lucky and get in/out at right time but the average Joe aint got a clue in regards any shares investments but quiet granted can get lucky every now & again .

ETFs are far from rocket science and likewise, so is investing in the stock market.

Before you even leave this website, you can quickly learn a lot of the basics, ask questions where you can find the answer to something etc.

Thereafter, it's easy to access professional stockbrokers, independent qualified advisors etc.

Treppen · 16-02-2020 5:14pm

Forget about HAP.

Let it to local council for 10 years under long term lease. Give em the keys and don't see the place again until 10 years time (they might offer to extend or buy you out then). Zero maintainence.
It's usually about 85% of the daft listed rental in the area but you can haggle a bit.
Income garunteed whether or not it's occupied. Plus even if the market crashes you'll still get agreed initial rent.
Bit of initial investment to get house / appt in line with council regs.

Read the fine print though as I'm not sure it's straightforward if you want to sell up before the 10 years are over.

https://www.dublincity.ie/sites/default/files/content/HousingAndCommunity/Homeowner/LandlordLeaflet.pdf

handlemaster · 16-02-2020 9:21pm

Athlone defo sell.

Mad_maxx · 17-02-2020 11:48am

Treppen wrote: »

Forget about HAP.

Let it to local council for 10 years under long term lease. Give em the keys and don't see the place again until 10 years time (they might offer to extend or buy you out then). Zero maintainence.
It's usually about 85% of the daft listed rental in the area but you can haggle a bit.
Income garunteed whether or not it's occupied. Plus even if the market crashes you'll still get agreed initial rent.
Bit of initial investment to get house / appt in line with council regs.

Read the fine print though as I'm not sure it's straightforward if you want to sell up before the 10 years are over.

https://www.dublincity.ie/sites/default/files/content/HousingAndCommunity/Homeowner/LandlordLeaflet.pdf

I have a very cheap house ( 72 k before stamp duty and legal fees) leased to Limerick Council

Never missed a rent in twenty months and have yet to spend a penny on maintenance

However, i did inspect the property last May, the house was in a terrible state, never seen such filth, the local authority use those ten year leases to house the utterly dysfunctional

As i said, mine is a cheap house, not sure I'd do the same with anything remotely expensive

Mad_maxx · 17-02-2020 11:51am

Investing in ETF, s is no longer the attractive option it was, you can't buy American domiciled funds anymore and the European ones require you to sell after eight years and pay a high exit tax

Trish56 · 17-02-2020 5:43pm

As an ex landlord my advice would be sell and reduce the mortgage on your new home and increase your pension to the max.

If you have a young family you don't need the stress of what renting brings of tenants wrecking your house, not paying rent, neighbours calling guards in the middle of the night because of late night parties. You pay a fee to PRTB however they mainly are behind the tenant and will take years to get them out if troublesome and are in arrears. Everytime something breaks you will need either to get fixed or replaced and there is a general attitude of he/she has a property to rent out they must be loaded and no understanding that you have to pay a mortgage.

If you rent under the HAP Scheme they pay the rent in arrears and the tenants pay a small amount monthly directly to Limerick County Council who administers the scheme so if the tenant don't make that small payment, Limerick County Council do not pay you.

Think long and hard before you go down that road as you have little or no support the attitude is if you can afford to have two properties you deserve what you get. Because there is a huge shortage of houses, the government literally tells you when you can sell, increase rent and then you pay them a huge amount of taxes on the income. This is the reason why a large amount of landlords got out in the last few years.

sk8board · 17-02-2020 8:28pm

cute geoge wrote: »

Wtf does a diy investor know about a diversified market etf .Some savvy investor might be able to get lucky and get in/out at right time but the average Joe aint got a clue in regards any shares investments but quiet granted can get lucky every now & again .

The point is that a diy investor shouldn’t touch stock-picking. They haven’t a clue and are buying based on gut feel. “Aib shares are currently ‘cheap’, so I’ll buy some cause they can only go up”, right? etc etc.
an ETF is literally as simple as buying ‘the world’, and if the world market goes up 6% every year, we’ll that’s not a bad return for someone with no knowledge of how the market works or how individual shares are actually valued.

Also, calling someone a diy investor assumes some basic knowledge to being with!

Mad_maxx · 17-02-2020 8:28pm

Trish56 wrote: »

As an ex landlord my advice would be sell and reduce the mortgage on your new home and increase your pension to the max.

If you have a young family you don't need the stress of what renting brings of tenants wrecking your house, not paying rent, neighbours calling guards in the middle of the night because of late night parties. You pay a fee to PRTB however they mainly are behind the tenant and will take years to get them out if troublesome and are in arrears. Everytime something breaks you will need either to get fixed or replaced and there is a general attitude of he/she has a property to rent out they must be loaded and no understanding that you have to pay a mortgage.

If you rent under the HAP Scheme they pay the rent in arrears and the tenants pay a small amount monthly directly to Limerick County Council who administers the scheme so if the tenant don't make that small payment, Limerick County Council do not pay you.

Think long and hard before you go down that road as you have little or no support the attitude is if you can afford to have two properties you deserve what you get. Because there is a huge shortage of houses, the government literally tells you when you can sell, increase rent and then you pay them a huge amount of taxes on the income. This is the reason why a large amount of landlords got out in the last few years.

just to point out as i agree with your post otherwise

the long term lease scheme is different from HAP in that the owner of the property doesnt even select the tenant , never mind deal with them , i get paid under the long term lease scheme no matter whether the person living in the house is not keeping up their end of the arrangement with the council , the local authority are the landlord under the long term lease scheme , i pay property tax and insurance as well as structural maintainence , i never meet the person living in the property

sk8board · 17-02-2020 9:04pm

as a LL, but mainly with an investor hat on, I can’t see any rational Investment reason why the 120,000 LLs with one rental take on so much risk in just one asset.

There’s a long piece in UK newspapers today that one-property LLs are selling in droves, but multi-rental Landlords are actually buying more, spreading their risk more, the simple premise being you can rent e.g 4 places, have one bad tenant and only lose max 25% of (pre-tax) income for that period.
It creates a more professional market too, a good thing, whether you agree with large LLs or not.

Ireland is doing the same, pushing out one-rental owners who don’t actually want to be LLs, the Gov just aren't publicising it.

triona1 · 17-02-2020 9:23pm

Its actually a shame, im trying my best to find any landlord to accept me im allowed hap not by choice i came from my forever home,left everything behind my kids also because I needed to thinking this would all work out,44 years of age and im not fussy ill take anywhere but this thing about wanting to live near family is nonsense id live in a shed/a box and im from Dublin 18 im only saying the area because it doesn't matter where you are from we need landlords because nobody else is helping.

beauf · 17-02-2020 10:27pm

sk8board wrote: »

as a LL, but mainly with an investor hat on, I can’t see any rational Investment reason why the 120,000 LLs with one rental take on so much risk in just one asset.

There’s a long piece in UK newspapers today that one-property LLs are selling in droves, but multi-rental Landlords are actually buying more, spreading their risk more, the simple premise being you can rent e.g 4 places, have one bad tenant and only lose max 25% of (pre-tax) income for that period.
It creates a more professional market too, a good thing, whether you agree with large LLs or not.

Ireland is doing the same, pushing out one-rental owners who don’t actually want to be LLs, the Gov just aren't publicising it.

That's an overly simplistic view of it.

Used to be less risk as you could get your property back quicker. Now it takes ages and the risk has exploded. Also you used to be able to refuse tenants,, now that's not so simple.

Also the risk isn't just rent. It's damages and costs incurred which are generally unrecoverable.

Lots of larger landlords with lots of tenants and multiple properties get fined. So it's not size that makes professionalism but enforcement.

It's not just LLs who don't want to in the business who are being pushed out or just those with single properties.

I also guess that's it's actually pushing out the cheaper properties. Hence the rising rents. A lot of people used a rental as pension. I wonder how they will replace this in the future.

Anyway this is old news. It's been happening for years. No going back now. Seems to be working out...

To become a landlord or not

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