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Tenants not paying rent

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245

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    #32
    Manion
    Registered Users Posts: 1,505 ✭✭✭Manion


    deplete
    /dɪˈpliːt/
    diminish in number or quantity.

    I don't know if people responding are deliberately missing the point? 300 (140 after tax) euro out of the OPs saving is depleting their savings. I'm not sure why people keep challenging this. Read a dictionary.

    Regarding hardship, I don't know anybody that wouldn't miss that money. Obviously it's a burden on the tenants, why is it so inconceivable that it's a burden on this landlord? Did someone really just suggest the OP goes back to school to get educated for a higher paying job so they could cross subsidy their tenants?

    Anyway, bbehan202 you seem to be coming at this from the point of view of principles of it rather than from the view of what makes financial sense. As you said, you have a business relationship with these people and also with an agency. Look at the market situation and do a full costings of the different alternatives and make a smart move.

    Factors to consider:
    • If you reduce rents what does that mean for what you pay the agency (if if they deduct from source, you are paying them either monthly or a year in advance).
    • If you don't reduce rent will you have to pay a months rent again to the agency to find new tenants?
    • You say you're breaking even, maybe you should reevaluate how much this agency is costing you.
    • If you reduce rents and enter into a formal agreement with them are you sure you're able to increase the rents again when the crisis is over? How will this impact your long term profitability.
    • Have you considered disposing of the property when the lockdown is lifted, if you're main objective is not to be paying more into the property each month than you get our then maybe it's best to call it quiets now and cash out?

    Detach yourself from the rightness or wrongness of the situation. This is not the time for social and morality studies. You need to make a decision that is financially the right move now and in the longer term.


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    #33
    [Deleted User]
    Posts: 7,712 ✭✭✭ [Deleted User]


    Just make sure it’s not a reduction. Let the arrears build and work something out then afterwards but if you easily go to 1400 now then the rent going forward will be 1400 and you’ll never see 1700 again.

    It also doesn’t matter how much savings the OP has (though not surprising people focus immediately on it). They shouldn’t be out of pocket for someone else.


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    #34
    [Deleted User]
    Posts: 0 ✭ [Deleted User]


    They were extremely cheeky to ask for no arrears, based on that alone I’d almost be inclined to say rent must be paid in full. They should have approached with their tail between their legs and asked for a temp reduction and offer to fully repay arrears when they can.

    Allowing to drop very temporarily with arrears being built and repayment fully expected would be as far as I’d risk going as otherwise you could end up stuck on low rent. I would not be saying it’s a reduction I would say something like you will not be chasing their arrears for a short period of time but you will be expecting all arrears to be repaid before they move out.

    It is interesting though how people expect the LL to use savings and question him on why he hasn’t a fund yet not question why the tenants don’t have a fund set aside. Times are hard and I feel sorry for anyone struggling to pay rent and would fully support a temp reduction (once arrears are repaid) if the LL is having a mortgage break but with the LL is not getting a break from his mortgage then it’s much tougher. Also not everyone is down money at the moment, if anything some are saving money due to spending less and there are chancers out there looking for reductions when they can well afford to pay rent.

    Op is there really no option of a mortgage freeze, this would be ideal as you could then easily allow a temporarily lower rent.


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    #35
    Claw Hammer
    Registered Users Posts: 6,160 ✭✭✭Claw Hammer


    Even if a landlord does not have a mortgage he could be keeping his mother in a nursing home with the rent.
    It is none of the tenants business what the landlords circumstances are.
    Any tenant who tries that on will be gone like snow off a rope in a few months when the market generally drops and they can negotiate a better deal. the op might as well hag tough, those tenants will be gone soon anyway.


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    #36
    overkill602
    Registered Users Posts: 267 ✭✭overkill602


    Deco99 wrote: »
    Disagree, I don't have an issue with trying to make sure they get full rent due. Just don't claim that €300 will break them


    delayed pisstake, should you be a LL if you come here looking for advice
    nothing to learn here in the left leaning view


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    #37
    Abel Ruiz
    Registered Users Posts: 887 ✭✭✭Abel Ruiz


    What's the issue with the bank in all of this????
    How come you can't come to an arrangement with them?
    What about the new legislation


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    #38
    Samuel T. Cogley
    Registered Users Posts: 10,684 ✭✭✭✭Samuel T. Cogley


    Abel Ruiz wrote: »
    What's the issue with the bank in all of this????
    How come you can't come to an arrangement with them?
    What about the new legislation


    My guess would be he, like loads of accidental LL's, is not on a BTL mortgage and therefore the much vaunted 'holiday' is not available without massive financial repercussions.


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    #39
    3DataModem
    Registered Users Posts: 3,943 ✭✭✭3DataModem


    When you say you are "not making profit" do you mean your rent is not higher than your costs, or do you mean the rent is not higher than your interest and costs? If you are net spending 300 per month and your mortgage is reducing by 1000 a month you are becoming 700 wealthier every month... I'd call that profit.


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    #40
    Dav010
    Registered Users Posts: 14,002 ✭✭✭✭Dav010


    3DataModem wrote: »
    When you say you are "not making profit" do you mean your rent is not higher than your costs, or do you mean the rent is not higher than your interest and costs? If you are net spending 300 per month and your mortgage is reducing by 1000 a month you are becoming 700 wealthier every month... I'd call that profit.

    No it isn’t. Tax has to be paid on the income and if the asset does not appreciate in value during ownership, there is no profit if the rental income is going to pay back the loan.


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    #41
    Grumpypants
    Registered Users Posts: 7,749 ✭✭✭Grumpypants


    bbehan202 wrote: »


    Any advice greatly appreciated.


    Offer them this: pay €1470 a month, and you will assign €700 of the deposit to topping it up by €230 a month. (If the rent is €1700, I'll assume the deposit is 1 month's rent).

    That gives them 3 months at a reduced rate, removes the loss to you. And keeps 1k to cover any damage.


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    #42
    Sheep Shagger
    Moderators, Business & Finance Moderators Posts: 6,216 Mod ✭✭✭✭Sheep Shagger


    3DataModem wrote: »
    When you say you are "not making profit" do you mean your rent is not higher than your costs, or do you mean the rent is not higher than your interest and costs? If you are net spending 300 per month and your mortgage is reducing by 1000 a month you are becoming 700 wealthier every month... I'd call that profit.

    Ah the myth about being a landlord.


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    #43
    robinbird
    Registered Users Posts: 471 ✭✭robinbird


    Sheep Shagger wrote: »
    Ah the myth about being a landlord.

    Indeed. Let's hope that FG can increase the €1,000,000,000 year in payments that they are giving them once they are properly back in power.
    If they do not have the funds to significantly increase the subsidy rents might well fall.


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    #44
    [Deleted User]
    Posts: 0 ✭ [Deleted User]


    Pkiernan wrote: »
    If you can't take a 300 euro hit, how are you going to pay your preliminary tax to Revenue?

    You've got to be looking at 6 grand at least on the rental income you're getting.

    Keep those tenants. Take the 1400.

    Couldn't be

    1700 x 12 = 20400.
    Mortgage interest reduction, wear and tear, insurance, agency fees, repairs, etc. Should be able to reduce by half depending on the interest.

    10200 net isn't costing 6000 in income tax


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    #45
    [Deleted User]
    Posts: 0 ✭ [Deleted User]


    rosmoke wrote: »
    How are you barely breaking even?
    The tenants literally pay the mortgage/house!?
    You are in a fantastic postlition if someone else pays for your house in an economic shutdown.

    Do you not what breaking even means? If the rent is only covering his mortgage and costs, that's breaking even.

    His asset value increases but that's different


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    #46
    Mrs W
    Registered Users Posts: 307 ✭✭Mrs W


    I’d ask for proof, I do some work for a landlord and he’s had a load of tenants claiming they can’t pay. Quoting the 3 month holiday that the banks are giving him as if its free and not just delayed.

    Obviously if they are genuine you could accept it and they can pay an extra 100 a month after it to repay


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    #47
    Browney7
    Registered Users Posts: 3,098 ✭✭✭Browney7


    Dav010 wrote: »
    No it isn’t. Tax has to be paid on the income and if the asset does not appreciate in value during ownership, there is no profit if the rental income is going to pay back the loan.

    Does the property spontaneously combust or burn to the ground when the loan is repaid or do they just never sell?


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    #48
    Dav010
    Registered Users Posts: 14,002 ✭✭✭✭Dav010


    Browney7 wrote: »
    Does the property spontaneously combust or burn to the ground when the loan is repaid or do they just never sell?

    No Browney, properties don’t tend to combust when the loan is repaid, why would you ask a question like that?

    I suppose someone with a property in negative equity might give you a more illuminating answer to that question. But suffice to say, if the property does not appreciate in the time it is owned, or the appreciation is less than the owner has had to pay in addition to rent received. then there is no profit.

    Given the cost of buying a property, few small LLs make a profit after tax on rental income, the profit tends to come from appreciation of the asset. But if repayments can’t be met, then the asset can be lost. That is the risk you take when you invest in property.


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    #49
    TheChizler
    Registered Users Posts: 9,403 ✭✭✭TheChizler


    Niner leprauchan wrote: »
    Do you not what breaking even means? If the rent is only covering his mortgage and costs, that's breaking even.

    His asset value increases but that's different

    It's zero cash flow not breaking even. Most investments are negative cash flow until the time comes that they sell or vest, pensions, shares, portfolios. All come with risk.


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    #50
    Browney7
    Registered Users Posts: 3,098 ✭✭✭Browney7


    Dav010 wrote: »
    No Browney, properties don’t tend to combust when the loan is repaid, why would you ask a question like that?

    I suppose someone with a property in negative equity might give you a more illuminating answer to that question. But suffice to say, if the property does not appreciate in the time it is owned, or the appreciation is less than the owner has had to pay in addition to rent received. then there is no profit.

    Given the cost of buying a property, few small LLs make a profit after tax on rental income, the profit tends to come from appreciation of the asset. But if repayments can’t be met, then the asset can be lost. That is the risk you take when you invest in property.

    Simple figures to illustrate the point on this profit versus cashflow that constantly comes up on this forum.

    Loan 200k at month one
    Mortgage repayment 1000 per month (500 interest 500 capital repayment)
    20% expense ratio
    Tenant pays 1000 rent ("breaking even") so the landlord gets 800 after expenses.
    Tota Tax deductible expenses are 700 total.
    At the end of the month the landlord has a 150 tax payment from own resources (assume 50% marginal).
    So they've paid 1150 out in cash, they receive a net 800 from tenant after their expenses but the mortgage balance is 199500.

    If the house price is still worth 200k, their financial position has improved by €150 after the month without capital appreciation.

    The fact the loan outstanding balance gets reduced is always ignored by people on this forum and it's nonsense. If someone is only breaking even on an interest only basis then they are indeed losing money after paying tax and would be wise to consider their ongoing investment in the loss making venture they continue to pursue.


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    #51
    Dr_Kolossus
    Registered Users Posts: 112 ✭✭Dr_Kolossus


    And browny, you are ignoring the very real possibility that the value of the property will likely drop in the current circumstances. In which case the landlord makes an actual loss.


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    #52
    [Deleted User]
    Posts: 0 ✭ [Deleted User]


    TheChizler wrote: »
    It's zero cash flow not breaking even. Most investments are negative cash flow until the time comes that they sell or vest, pensions, shares, portfolios. All come with risk.

    It's breaking even


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    #53
    Browney7
    Registered Users Posts: 3,098 ✭✭✭Browney7


    Niner leprauchan wrote: »
    It's breaking even

    If it was an interest only mortgage or a house purchased for cash outright would it be more profitable in your definition of what constitutes profit?


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    #54
    [Deleted User]
    Posts: 0 ✭ [Deleted User]


    Niner leprauchan wrote: »
    Couldn't be

    1700 x 12 = 20400.
    Mortgage interest reduction, wear and tear, insurance, agency fees, repairs, etc. Should be able to reduce by half depending on the interest.

    10200 net isn't costing 6000 in income tax

    Also even though you are technically supposed a lot don’t pay preliminary tax.


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    #55
    Pkiernan
    Registered Users Posts: 4,315 ✭✭✭Pkiernan


    Quite a few people on here in for quite a shock when Revenue disagree about their definition of income.

    LoL


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    #56
    [Deleted User]
    Posts: 0 ✭ [Deleted User]


    Browney7 wrote: »
    If it was an interest only mortgage or a house purchased for cash outright would it be more profitable in your definition of what constitutes profit?

    What any sane person would consider profit would be positive cash flow every month i.e. additional income from your rental property. If you don’t see a way of doing this then the sums don’t work imo. Why would you open any business if you were going to have to be putting money into it all the time from another source of income, it would be madness.

    People will come back and say it’s an investment but it’s much more than than its operating a rental business and an investment. The investment is done in the hope of capital appreciation and a rental business aiming to be profitable day to day and supplement your income from your day job (I.e. cover mortgage and all expenses and leave extra over to save or spend).


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    #57
    dennyk
    Registered Users Posts: 1,643 ✭✭✭dennyk


    Accepting their offer of a reduced rent with no arrears could be used against you; when you ask them to pay the original amount again, they may go to the RTB and claim that the reduced amount was a rent review and that it is now their actual rent, and you won't be able to raise it again for 1-2 years (and then only by 4% if they're in an RPZ).

    Instead, you could allow them to accumulate arrears without taking action right now, and come to an agreement with them allowing them to pay off the arrears (in addition to their full rent, of course) over a reasonable period of time once their situation is better. This would not be a rent review; the periodic rent they owe does not change because they are in arrears or because they've only made partial rent payments of their own volition, even if the landlord hasn't taken action against them for the arrears they owe. Also, if they balk at actually paying off the arrears later, you can always move to give notice at that point if necessary. There is still a risk that you might never recover the arrears you allow them to accumulate (or at least not without great difficulty and hassle), so keep that in mind, but it is still less risky than ending up with a permanently lower rent (possibly for a very long time, if you're in an RPZ) should an RTB judgement about your "rent discount" being a rent review go against you.


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    #58
    Pkiernan
    Registered Users Posts: 4,315 ✭✭✭Pkiernan


    Lexie Black Oaf wrote: »
    What any sane person would consider profit would be positive cash flow every month i.e. additional income from your rental property. If you don’t see a way of doing this then the sums don’t work imo. Why would you open any business if you were going to have to be putting money into it all the time from another source of income, it would be madness.

    People will come back and say it’s an investment but it’s much more than than its operating a rental business and an investment. The investment is done in the hope of capital appreciation and a rental business aiming to be profitable day to day and supplement your income from your day job (I.e. cover mortgage and all expenses and leave extra over to save or spend).

    Revenue tax you on your rental income.

    You may not deduct the mortgage payment (except for the interest portion) from your declared rental income.

    For example.

    Rent is 1000 per month.
    Mortgage payment is 900 per month of which interest is 300 per month.

    Revenue will tax you as if you earned 700 per month.

    You will be taxed at full margin rate + PRSI + USC on 8400 per year.

    You may not agree, but that is the reality.


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    #59
    Sheep Shagger
    Moderators, Business & Finance Moderators Posts: 6,216 Mod ✭✭✭✭Sheep Shagger


    Niner leprauchan wrote: »
    Couldn't be

    1700 x 12 = 20400.
    Mortgage interest reduction, wear and tear, insurance, agency fees, repairs, etc. Should be able to reduce by half depending on the interest.

    10200 net isn't costing 6000 in income tax

    If he's in the upper tax bracket 6k wont be far off his tax bill on the net of 10k

    It is VERY difficult to make an after tax profit in this country on a single rental property. Scary how so many people think it is free money.


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    #60
    [Deleted User]
    Posts: 0 ✭ [Deleted User]


    Pkiernan wrote: »
    Revenue tax you on your rental income.

    You may not deduct the mortgage payment (except for the interest portion) from your declared rental income.

    For example.

    Rent is 1000 per month.
    Mortgage payment is 900 per month of which interest is 300 per month.

    Revenue will tax you as if you earned 700 per month.

    You will be taxed at full margin rate + PRSI + USC on 8400 per year.

    You may not agree, but that is the reality.

    I’m not arguing with how revenue tax income from a let property, yes it’s unfair as the full mortgage payment should be deductible along with many other deductions standard for or other businesses but not allows for rental businesses but I know how it works.

    I thought the conversation was about what constitutes profit.


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    #61
    Browney7
    Registered Users Posts: 3,098 ✭✭✭Browney7


    Lexie Black Oaf wrote: »
    I’m not arguing with how revenue tax income from a let property, yes it’s unfair as the full mortgage payment should be deductible along with many other deductions standard for or other businesses but not allows for rental businesses but I know how it works.

    I tonight the conversation was about what constitutes profit.

    Your desire for the repayment of borrowed capital to be tax deductible is fantasy land nonsense


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