Rent freeze?

AlmightyCushion · 13-12-2019 2:30am

Fol20 wrote: »

Tbh, if you look at any other business, they all need to be cashflow positive. Yes, principle pay down is part of the profit but this cannot be used until the property is sold which could be 2-30 years down the line.

Try asking a small business owner to have negative cashflow for 20 years but the potential headaches and risks that go along with this with a chance that he may come out ahead when he is close to retirement.

Beauf - This is the post I was referring to in my previous post. Fol20 expects to be cashflow positive over the life of the mortgage not including the value of the property they will own at the end of the mortgage.

beauf · 13-12-2019 2:42am

Hes talking about cash flow. You can't use the profits you get from capital appreciation in 25yrs to pay the bills you have today.
Most LL have one property. They are making up the shortfall (if there is one) from the wages they receive in their job.
If the shortfall exceeds their ability to maintain it, the business is unsustainable. Regardless of its potential a quarter of a century in the future.

beauf · 13-12-2019 2:54am

Its a balancing act. If costs are too high, and cashflow negative. You might be better paying off your own mortgage faster, than the interest on two properties (one rental and one your own place) for twice as long.

AlmightyCushion · 13-12-2019 2:59am

beauf wrote: »

Hes talking about cash flow. You can't use the profits you get from capital appreciation in 25yrs to pay the bills you have today.
Most LL have one property. They are making up the shortfall (if there is one) from the wages they receive in their job.
If the shortfall exceeds their ability to maintain it, the business is unsustainable. Regardless of its potential a quarter of a century in the future.

Yes I understand that. A landlord in that situation might not be able to or want to make up the difference. However, it doesn't mean that the investment is losing money or that's it not going to give them a good return.

In Fols original post that started this his argument was actually based on being cashflow neutral and that it isn't profitable as a result. That is just straight up wrong.

AlmightyCushion · 13-12-2019 3:03am

beauf wrote: »

Its a balancing act. If costs are too high, and cashflow negative. You might be better paying off your own mortgage faster, than the interest on two properties (one rental and one your own place) for twice as long.

Completely agree. My posts were aimed at Fols example where they considered being cashflow neutral not profitable.

beauf · 13-12-2019 3:37am

It's not sustainable is more correct. Great comfort that the landlord is making a technical profit If they can't afford essential or emergency repairs or service the mortgage.

Grumpypants · 13-12-2019 8:51am

It’s also based on the fallacy that rental income is a passive income that just appears. Like it’s interest on a lotto win. It’s not. It is money paid for a service provided. Landlords work for it.

The rent rarely covers the mortgage due to the excessive high tax charges on this income. Even at the high end 2k rent gives about 1k income. If your mortgage is 2k then you top it up by 1k. To earn that you do 2k worth of work.

So you need to provide multiple services that nets you 4K. Then you pay 2k in tax and 2k to the bank. And you get about 1500 in equity.

AlmightyCushion · 13-12-2019 8:52am

beauf wrote: »

It's not sustainable is more correct. Great comfort that the landlord is making a technical profit If they can't afford essential or emergency repairs or service the mortgage.

What is the solution though? Giving them a massive tax break, like some are suggesting, isn't the solution. We have a skills shortage in the IT and construction industries as well, companies are really struggling to get staff. Should we make all IT and construction workers be tax exempt? It would work out great for me and others in IT but completely shít for every one else.

AlmightyCushion · 13-12-2019 9:03am

Grumpypants wrote: »

It’s also based on the fallacy that rental income is a passive income that just appears. Like it’s interest on a lotto win. It’s not. It is money paid for a service provided. Landlords work for it.

The rent rarely covers the mortgage due to the excessive high tax charges on this income. Even at the high end 2k rent gives about 1k income. If your mortgage is 2k then you top it up by 1k. To earn that you do 2k worth of work.

So you need to provide multiple services that nets you 4K. Then you pay 2k in tax and 2k to the bank. And you get about 1500 in equity.

If someone is putting 1k into their bank account or paying their mortgage of 1k they also have to do 2k worth of work. Why should that be any different to a landlord putting it into a property investment?

Dividends from shares also attract this excessive tax as does pretty much any type of work. Why should landlords not pay this excessive tax? I'd love for my income and dividends to be taxed a lot lower.

Grumpypants · 13-12-2019 9:06am

AlmightyCushion wrote: »

What is the solution though? Giving them a massive tax break, like some are suggesting, isn't the solution. We have a skills shortage in the IT and construction industries as well, companies are really struggling to get staff. Should we make all IT and construction workers be tax exempt? It would work out great for me and others in IT but completely shít for every one else.

No nothing of the sort. Just make it fair.

If I’m a landlord with 1 house I pay 58% tax. If I’m a REIT that uses offshore money to buy a hundred apartments I don’t pay anywhere near 58%. That’s very unfair.

If I rent a room I get 14k tax credit. If I rent a house I get 0.

If they gave a 10k tax credit to single house landlords I’d gladly drop my rent from 1200 to 800. I’d make a return, my tenant would be delighted too.

AlmightyCushion · 13-12-2019 9:14am

Grumpypants wrote: »

No nothing of the sort. Just make it fair.

If I’m a landlord with 1 house I pay 58% tax. If I’m a REIT that uses offshore money to buy a hundred apartments I don’t pay anywhere near 58%. That’s very unfair.

If I rent a room I get 14k tax credit. If I rent a house I get 0.

If they gave a 10k tax credit to single house landlords I’d gladly drop my rent from 1200 to 800. I’d make a return, my tenant would be delighted too.

How is that fair? A landlord with 2 or 3 properties gets nothing but you get a 10k tax credit.

The same scenario you describe happens for most people. If I develop a widget and sell it, the income I earn on it is subject to a lot of tax. Whereas a large off shore multinational will pay nothing. Where is my 10k tax credit?

Also, while you may drop your rent, plenty will not.

beauf · 13-12-2019 9:18am

AlmightyCushion wrote: »

If someone is putting 1k into their bank account or paying their mortgage of 1k they also have to do 2k worth of work. Why should that be any different to a landlord putting it into a property investment?

Dividends from shares also attract this excessive tax as does pretty much any type of work. Why should landlords not pay this excessive tax? I'd love for my income and dividends to be taxed a lot lower.

The title of this thread is about rent freeze. Which has only come up because the shortage of affordable rental supply, and high tents.

If you think this will fix that problem despite all evidence to the contrary. Then it's a great idea. Anyone who cared, has either left or is planning to leave. It's like car crash TV watching it though.

beauf · 13-12-2019 9:24am

AlmightyCushion wrote: »

What is the solution though? Giving them a massive tax break, like some are suggesting, isn't the solution. We have a skills shortage in the IT and construction industries as well, companies are really struggling to get staff. Should we make all IT and construction workers be tax exempt? It would work out great for me and others in IT but completely shít for every one else.

There is no solution. There is no appetite for sustainable growth or a functioning housing system It will keep going until the next crash which might be sometime. Dublin is now no different to any of the world's expensive capital cities. Worse in a lot of respects.

AlmightyCushion · 13-12-2019 9:30am

beauf wrote: »

There is no solution. There is no appetite for sustainable growth or a functioning housing system It will keep going until the next crash which might be sometime. Dublin is now no different to any of the world's expensive capital cities. Worse in a lot of respects.

The only real solution is increasing supply and while it is happening, unfortunately it is a slow process.

overkill602 · 13-12-2019 9:38am

If you removed tax on rent few LLs would drop the rent sure but within a year an increase in supply would rip the arse out of existing rents
those in high rent or poor quality would stamp with there feet...

we had 2years and 3 rent control lot of new regs less supply, time to do something positive for once, less of this communist crap just drives us back to the dark ages

Its a bunch of criminals that proposed this idiocy

beauf · 13-12-2019 9:45am

Supply of the lower end is increasing slower than the top end. All these policies like a rent freeze just exacerbate this.

It's another one of these look as if you are doing something while actually not doing something policies. Quite clever really.

Quite a difficult thing to counter politically.

AlmightyCushion · 13-12-2019 9:56am

overkill602 wrote: »

If you removed tax on rent few LLs would drop the rent sure but within a year an increase in supply would rip the arse out of existing rents
those in high rent or poor quality would stamp with there feet...

we had 2years and 3 rent control lot of new regs less supply, time to do something positive for once, less of this communist crap just drives us back to the dark ages

Its a bunch of criminals that proposed this idiocy

We already have a massive pent up demand for property that we still can't supply. Adding more demand will just lead to increased prices which just makes things worse. You're adding fuel to the fire.

ted1 · 13-12-2019 10:57am

AlmightyCushion wrote: »

You're forgetting the equity the landlord gained in the property over the years.

You invested €150k at the beginning (my example had €50k but it doesn't really matter) and after 25 years you have a property worth €824k. You have made a gain of €674k. That is an insane return.

If you are cashflow positive every month/year (as Fol20 argues a landlord should) your investment would be making an even better return. Even if you factor in this investment is cashflow negative to the tune of 10k a year. That means this has cost them 250k over the life of the mortgage.

They are still up 424k. That is still a great investment.

Capital Gains tax will taje 33%

AlmightyCushion · 13-12-2019 11:04am

ted1 wrote: »

Capital Gains tax will taje 33%

Just like it does every investment.

ted1 · 13-12-2019 11:25am

AlmightyCushion wrote: »

Just like it does every investment.

So then why not deduct it from your ridiculous figures 674 goes to 451 very fast.

Geuze · 13-12-2019 11:32am

AlmightyCushion wrote: »

There is a difference between profitable and cash flow positive. A person letting out a property could have to top up the rent to pay the mortgage and yet still be profitable because a large chunk of the mortgage payments are going towards paying off the house. That equity you are building up every month by paying the mortgage is profit. You just choose not to see it as such.

Yes, many people make this mistake.

An investment property may be cashflow negative, due to capital repayments.

But those capital repayments are saving, and are building up the acquisition of an asset.

Many landlords are massively profitable, but may be cashflow negative, as cash is being saved / used to repay debt.

Grumpypants · 13-12-2019 11:36am

AlmightyCushion wrote: »

How is that fair? A landlord with 2 or 3 properties gets nothing but you get a 10k tax credit.

The same scenario you describe happens for most people. If I develop a widget and sell it, the income I earn on it is subject to a lot of tax. Whereas a large off shore multinational will pay nothing. Where is my 10k tax credit?

Also, while you may drop your rent, plenty will not.

Here you go, tax break to start a little widget company. Then you can also write off loads of stuff like wages, rates, rent and travel expenses, unlike landlords.

https://www.revenue.ie/en/starting-a-business/initiatives-for-startup-businesses-and-smes/tax-relief-for-new-startup-companies/index.aspx

And at no point will the government try to introduce legislation to limit the amount you can charge for your widget. Unlike landlords.

Single house landlords makes up the majority of the market. Giving a tax credit for 10k if you charge 10k in rent. (If you charge 10,001 you pay tax on it all) Ensures the rent reduction is passed down.

I could take that €400 hit and make a better return. The tenant would have €400 extra. In my case that tenant is actually the government as I provide social housing.

So you get a functioning market where people can make a modest but fair return. An affordable market where people can rent a home. You reduce the cost of social housing by millions. You get more money in the ecconomy, you get more houses being built, you get more people moving here as it has a normal cost of living.

But screw that idea. Lets tax landlords out of the market. Give huge tax breaks to their competition, the offshore companies who flood billions out of the country. They then Jack up rent prices to maximize their return. Making housing unaffordable and putting thousands of people out on the streets.

13-12-2019 11:39am

ted1 wrote: »

Actually it was the opposition

This bill was put forward by the opposition and so far hasn't cost me any money.

The last time the sitting government tinkered with rent regulations it cost me 100 a month.

meeeeh · 13-12-2019 12:10pm

I don't think it's in anyone's interest to have every bloody postman and plumber dabbling with property investment and rental market. I'm not sure about rental freezes because they could discourage institutional landlords nut less one off buy to let mortgage landlords we have the better. It's perfectly obvious amateurs are not wanted in property market, I suspect the extra tax collected on rental income is not that big but it discourages unwanted landlords from entering the market.

ted1 · 13-12-2019 12:28pm

[Deleted User] wrote: »

This bill was put forward by the opposition and so far hasn't cost me any money.

The last time the sitting government tinkered with rent regulations it cost me 100 a month.

It’s cost my tenants money.

13-12-2019 12:37pm

ted1 wrote: »

It’s cost my tenants money.

True.

beauf · 13-12-2019 12:37pm

meeeeh wrote: »

I don't think it's in anyone's interest to have every bloody postman and plumber dabbling with property investment and rental market. I'm not sure about rental freezes because they could discourage institutional landlords nut less one off buy to let mortgage landlords we have the better. It's perfectly obvious amateurs are not wanted in property market, I suspect the extra tax collected on rental income is not that big but it discourages unwanted landlords from entering the market.

Shouldn't matter who's investing if there are robust rules that workable and enforced in a timely fashion.

This is like turkeys voting for xmas, or sawing the branch you are standing on. The "professionals" will almost always focus on the section with the biggest margins. The top end. As they enter the market it has made the shortage worse especially at the low end, driven rents through the roof. Those with low rents, we are driving out of the market. So in fact your getting a rental market and housing sector, exactly as you ordered. You just don't realize exactly what you ordered.

For the amateur LL they should sell up and invest in these professional landlords. They will squeeze far more profit out of it than an amateur ever could.

meeeeh · 13-12-2019 12:46pm

beauf wrote: »

Shouldn't matter who's investing if there are robust rules that workable and enforced in a timely fashion.

This is like turkeys voting for xmas, or sawing the branch you are standing on. The "professionals" will almost always focus on the section with the biggest margins. The top end. As they enter the market it has made the shortage worse especially at the low end, driven rents through the roof. Those with low rents, we are driving out of the market. So in fact your getting a rental market and housing sector, exactly as you ordered. You just don't realize exactly what you ordered.

For the amateur LL they should sell up and invest in these professional landlords. They will squeeze far more profit out of it than an amateur ever could.

If they make more money that way they should. Why would you hold onto such a unprofitable investment.

Small landlords are not solution for social housing.

beauf · 13-12-2019 12:48pm

Geuze wrote: »

Yes, many people make this mistake.

An investment property may be cashflow negative, due to capital repayments.

But those capital repayments are saving, and are building up the acquisition of an asset.

Many landlords are massively profitable, but may be cashflow negative, as cash is being saved / used to repay debt.

The investment might be profitable. But you can't run a business without positive cashflow, you have to infuse it with other sources of income. if you can afford to do that over a long period of time great. But its higher risk.

If you want people to invest, its less attractive. Which isn't a problem unless you have supply problems and need people to invest.

beauf · 13-12-2019 12:52pm

meeeeh wrote: »

If they make more money that way they should. Why would you hold onto such a unprofitable investment.

Small landlords are not solution for social housing.

The private rental market in its entirety is not a solution to social or affordable housing. Small LL or REITs same difference.

The seeds of the housing crisis across the world were sown when that paradigm changed.

beauf · 13-12-2019 12:53pm

Small Landlord didn't want social housing. They were forced to take it on.

jimmycrackcorm · 13-12-2019 1:04pm

beauf wrote: »

The private rental market in its entirety is not a solution to social or affordable housing. Small LL or REITs same difference.

The seeds of the housing crisis across the world were sown when that paradigm changed.

The problem with government built housing is that instead of paying as you go for housing, public social housing is effectively handing over 300k windfalls permanently to social tenants and then paying them also the rent that is received.

Once you're in a council house, it's yours for life and very likely done of your kids will get to live there after.

beauf · 13-12-2019 1:14pm

There is no other choice.

Outsourcing it to the private market is a epic failure.

AlmightyCushion · 13-12-2019 1:33pm

ted1 wrote: »

So then why not deduct it from your ridiculous figures 674 goes to 451 very fast.

I agree the figures are ridiculous. Those figures were designed to show how good an investment it would be if a landlord was cashflow neutral.

Grumpypants wrote: »

Here you go, tax break to start a little widget company. Then you can also write off loads of stuff like wages, rates, rent and travel expenses, unlike landlords.

https://www.revenue.ie/en/starting-a-business/initiatives-for-startup-businesses-and-smes/tax-relief-for-new-startup-companies/index.aspx

And at no point will the government try to introduce legislation to limit the amount you can charge for your widget. Unlike landlords.

Single house landlords makes up the majority of the market. Giving a tax credit for 10k if you charge 10k in rent. (If you charge 10,001 you pay tax on it all) Ensures the rent reduction is passed down.

I could take that €400 hit and make a better return. The tenant would have €400 extra. In my case that tenant is actually the government as I provide social housing.

So you get a functioning market where people can make a modest but fair return. An affordable market where people can rent a home. You reduce the cost of social housing by millions. You get more money in the ecconomy, you get more houses being built, you get more people moving here as it has a normal cost of living.

But screw that idea. Lets tax landlords out of the market. Give huge tax breaks to their competition, the offshore companies who flood billions out of the country. They then Jack up rent prices to maximize their return. Making housing unaffordable and putting thousands of people out on the streets.

Most landlords don't pay corporation tax as they are not set up as a company, they are sole traders. I assume you could set up as a company if you like but that is actually more tax inefficient. If my widget company was operated as a sole trader I would also not be able to use that tax relief.

Off the top of my head the government already limit what taxi drivers can charge and the fees PRSA providers can charge. There may be other situations.

The Student · 13-12-2019 1:47pm

Geuze wrote: »

Yes, many people make this mistake.

An investment property may be cashflow negative, due to capital repayments.

But those capital repayments are saving, and are building up the acquisition of an asset.

Many landlords are massively profitable, but may be cashflow negative, as cash is being saved / used to repay debt.

Remember profit is only paper profit until an asset is disposed of and all assets are carried at a fig in accounts based on the estimated value of the asset at the reporting date.

if the property has been carried in the accounts at a figure higher than its realisable value and you have been subsiding the mortgage payments with your own money (other than the rental income) then only when the asset is disposed of will you finally see if it is profitable or not.

Baby01032012 · 13-12-2019 5:40pm

I thought this was a thread on rent freezes...it’s been side tracked by an argument between two posters over who’s figures are correct on investment returns.

Fol20 · 15-12-2019 7:50pm

Baby01032012 wrote: »

I thought this was a thread on rent freezes...it’s been side tracked by an argument between two posters over who’s figures are correct on investment returns.

Just getting back on track as well. What are the odds that this will fully pass and become law?

I had not increase rents with the Rpz as I just saw that if I have not increased rent for x years. When they leave. I can up the rent. With this. It would screw me over a good bit when tenants leave

DubCount · 15-12-2019 9:34pm

Fol20 wrote: »

What are the odds that this will fully pass and become law?

Pretty low I would say. To me it looks more like FF trying to push for an election on a populist issue and creating a differential between FF and FG when the politicians hit the doorsteps in the coming months.

Having said that, I cant understand any LL not upping rent to the maximum at the moment. LLs with a good relationship with good sitting tenants got bitten once when the RPZs came in - they have only themselves to blame if it happens them again.

Idbatterim · 15-12-2019 9:53pm

From reading way too many articles on the housing crisis and actally taking a second to consider it , it’s so bloody obvious , that the “ homeless “ issue can’t be solved etc and the government are screwed because they aren’t being honest , because you can’t steap the truth in this country. The insane price of housing , is going to ensure that there is a never ending conveyor belt of people looking for social housing. I mean you don’t have to be gaming the system , they are giving many people a no stresss lotto windfall , while the other fools live in the back arse of no where , enduring a **** commute and a much reduced standard of living ...

The mother is looking at renting out a property and relocating to the other family home, yet we’d be fully supportive of this. Investment will stop because the profits they make on btr etc will go from being obscene to fractionally less obscene, so they’ll cut off their nose to spite their face ? Put on an appropriate site value tax , that will sort that. The way other non banana republics have had for decades

handlemaster · 17-12-2019 4:02pm

beauf wrote: »

There is no other choice.

Outsourcing it to the private market is a epic failure.

It's a failure because of the tenants and the power they have not to pay. To create a nightmare for residents run up large debts have the full backing of the PRTB and then repeat it all over again . The private landlord is taking all the risk and the government just heaps more legislation and taxes on just so that they can be seen to be doing something. The average indo reading Joe and Mary lap this up and dont realise it only makes housing worse.

handlemaster · 17-12-2019 4:07pm

DubCount wrote: »

Pretty low I would say. To me it looks more like FF trying to push for an election on a populist issue and creating a differential between FF and FG when the politicians hit the doorsteps in the coming months.

Having said that, I cant understand any LL not upping rent to the maximum at the moment. LLs with a good relationship with good sitting tenants got bitten once when the RPZs came in - they have only themselves to blame if it happens them again.

Totally agree with the charging the max rent possible and at the earliest point. There will be not thank you letter for keeping rent lower than market rate from the revenue come looking for their 50%tax

CalamariFritti · 17-12-2019 4:11pm

Shocker: landlords against rent freeze

Claw Hammer · 17-12-2019 4:21pm

Rent freezes don't work and have never worked. The incumbent tenants gain and landlords and prospective tenants lose. It has happened every time there has been a rent freeze and will always happen.

handlemaster · 17-12-2019 6:04pm

CalamariFritti wrote: »

Shocker: landlords against rent freeze

That's the attitude I'd expect a non landlord to say. This will only make matters worse. What do you think this will serve ?

mgn · 17-12-2019 7:18pm

CalamariFritti wrote: »

Shocker: landlords against rent freeze

You should try being a Landlord if you think it's so great.

CalamariFritti · 18-12-2019 9:29am

mgn wrote: »

You should try being a Landlord if you think it's so great.

CalamariFritti · 18-12-2019 9:33am

its not really an attitude and I dont think being a landlord is great. It is the bottom ladder / entry level of living off your assets rather than your labour. And like most bottom ladder things its tough. I only expressed my not being surprised that landlords don't like it. As in water is wet.

Having said that, if it is so bad why do it then?

Assetbacked · 18-12-2019 9:41am

There is no entitlement to have a mortgage covered by the rent received from investment properties. In fact, that would be a fantastic return on investment. Getting half the mortgage covered would be an optimal return.

A rent freeze combined with the rental tax credit would benefit people who are already in tenancies as they can budget better in the next couple years as the rent freeze only would last for a short-term period until supply picks up/immigration dies down. For those people, they would welcome it.

beauf · 18-12-2019 9:57am

CalamariFritti wrote: »

its not really an attitude and I dont think being a landlord is great. It is the bottom ladder / entry level of living off your assets rather than your labour. And like most bottom ladder things its tough. I only expressed my not being surprised that landlords don't like it. As in water is wet.

Having said that, if it is so bad why do it then?

So if someone who wasn't a landlord showed you exactly the same facts that rent freeze don't work, then it would be valid. Only when a LL says it isn't. Must make taking advice from anyone with experience in anything very difficult. Just because someone has a vested interest doesn't mean they are automatically wrong.

As for living not of your labor. I'm not sure even going back to a economic system of barter does that make sense. How do you get the assets to live off them? What happens when you retire?

Fol20 · 18-12-2019 9:58am

Assetbacked wrote: »

There is no entitlement to have a mortgage covered by the rent received from investment properties. In fact, that would be a fantastic return on investment. Getting half the mortgage covered would be an optimal return.

A rent freeze combined with the rental tax credit would benefit people who are already in tenancies as they can budget better in the next couple years as the rent freeze only would last for a short-term period until supply picks up/immigration dies down. For those people, they would welcome it.

For sure they would welcome it as long as the ll doesn’t sell up. For any new tenancies or a tenant moving, how do you think it will impact them?

Rent freeze?

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