Is the desire to own your own home justified !

GreeBo wrote: »

Cost of buying a house is only relevant if you are a landlord who is buying new property, how many landlords are buying new property? Its certainly not all of them yet all the rents have increased.

My expectation is that rent will cover the costs of maintaining the property and *some* of the mortgage costs, I certainly wouldnt be buying a property to let expecting that rent will cover all this and mortgage as I think thats madness. Sure, some years it might, but I'd expect the vast majority of them it wouldnt and would be budgeting to pay probably 50% of the mortgage myself.

Its an investment in an asset whilst also providing a service that you get paid for (rent).

Your expectations seem to be that someone is going to buy a property for you, pay your mortgage, pay you to service the property and pay any incidental costs and at the end, hand over the property to you.

Does that really seem realistic to you?

Cost of the property is always taken into account at all times during the life time of the property, as another poster pointed out, it is all about yeild. Even if in a recession, if the yield is poor and you would make a loss if you sold. If you have potential to make greater gains elsewhere, you need to way this up.

-Well ll still need to to stump up a minimum of 30pc to get a mortgage. If say thats a 2/3bed for circa 350k. That is over 100k up front that the ll needs to pay.
-The ll also has a massive risk in a heavily concentrated asset class.Its hard to quantify this but it does come at a price for the tenant.
-The ll also has work involved in this be it managing the property, doing their taxes, dealing with delinquent tenants etc.

-For all of the above reasons, yes the tenant should pay for the remainder of the balance on the mortgage + repairs.

If it isnt worth the ll time or hassle, ll will just simply not invest and or leave which would further constrain the market > This is what is happening right now in our market. As another poster pointed out, in a natural stable market, if ll are receiving massive gains, more would simply enter the market which would cause the rental price to naturally decrease and stabilise. I wonder why this isnt happening in Ireland.

GreeBo wrote: »

But again, that only comes into it if you are thinking about buying more property to let *now*.
The current value of your existing portfolio has no relevance to your yields.

You dont compare your yield to when you originally bought the place. You compare your yield to what money you have tied up in the property at current market rate vs other investment opportunities at this moment in time.

old_house wrote: »

The key concept here is opportunity cost. If some other asset of equal value could achieve a higher return then you are effectively losing money by sticking to what you already have. Getting out of rental property and reinvesting into other asset classes while the resale value is high might be a smart decision for some landlords.

Indeed it might, but that has nothing to do with the point the other poster made which was that current asset value was somehow related to the yields available on the property.

Fol20 wrote: »

You dont compare your yield to when you originally bought the place. You compare your yield to what money you have tied up in the property at current market rate vs other investment opportunities at this moment in time.

Now you are talking about comparing yields, which again is not what was posted earlier.

Fol20 wrote: »

It is all about yield and how efficient you are at investing your money. Investing isnt always stagnant. If you want to succeed, you need to adapt and adjust your investment strategy depending on the situation. If you have a current yield on property of 10pc. of your 100k investment and then in 10 years time, this drops to only 2pc at current value, yet you could yield 15pc in another investment class, it would be a no brainer to change. This is a simple example and there are several other factors that determine your choice.

Again I dont disagree with this, its investment 101, but the fact is that yield is calculated on invested money and return, not current value of the property.

I dont know why we are going around in circles with this and why you keep changing the goal posts, its a basic fact.

Fol20 wrote: »

So you want our entire society to become more dependent on social aid while it should be going the other way. Where will the government get all of this extra expenses? It will come from people in the middle or above who are already being taxed enough as it is.

The money required for landlords can't really be afforded any other way.

Yes you can give tenants tax relief - but that's still cost.

Landlords need tax relief but that still doesn't fix legacy issues arising from the crash and Celtic tiger era mortgage repayments.

I think that social housing eligibility needs to go up to higher incomes then it does today.

Unless someone does for housing what Michael O Leary did for aviation.

Aryanna Few Stint wrote: »

Social housing eligibility is already far too high imo. Working people on decent money should not be availing of social housing they should house themselves like the rest of us have to (while also subsidizing their housing). They just have to live where they can afford.

The live where you can afford thing risks someone working in Cork having to live in Kilgarvan*.

People also can't house themselves in houses that don't exist for them. The economy also benefits if someone is renting for 1100 instead of 2 k - extra money to spend in the economy, less pressure on wages and what not.

If a landlord is entitled to make a profit - then perhaps we might consider that working people should be able to access housing solutions at a price they can afford.

Even if that requires state supports.

Part of state support might be that people like Hugh Brennan are allowed to develop housing at 200 k or thereabouts a unit for co op housing.

Need fit for purpose housing policy going forward.

*Exaggerated example perhaps but going cheap means moving out - and rents in nearby towns are driven up and you move further away to get affordable housing.

Old diesel wrote: »

The live where you can afford thing risks someone working in Cork having to live in Kilgarvan*.

People also can't house themselves in houses that don't exist for them. The economy also benefits if someone is renting for 1100 instead of 2 k - extra money to spend in the economy, less pressure on wages and what not.

If a landlord is entitled to make a profit - then perhaps we might consider that working people should be able to access housing solutions at a price they can afford.

Even if that requires state supports.

Part of state support might be that people like Hugh Brennan are allowed to develop housing at 200 k or thereabouts a unit for co op housing.

Need fit for purpose housing policy going forward.

*Exaggerated example perhaps but going cheap means moving out - and rents in nearby towns are driven up and you move further away to get affordable housing.

Exactly, the rent is driven by demand, and the more the state subsidises rent the higher rents will go.

Aryanna Few Stint wrote: »

It doesn’t always happen, I didn’t say it does but it should be the expectation and if a person is entering the game this should be their minimum aim. Why else would you do it if you are forking our each month to cover costs.

A rental property needs to be paying for itself to make it a viable investment, how anyone thinks this shouldnt be the case is beyond me.

Having someone pay for say 50% of your property over the life of the mortgage should be enough of a return surely?
And then once the mortgage is gone its pretty much a licence to print money.
You just want your license on day 1.

Btw most investments have risk... where is the risk if all your outgoings are covered and more by rent?

GreeBo wrote: »

Having someone pay for say 50% of your property over the life of the mortgage should be enough of a return surely?
And then once the mortgage is gone its pretty much a licence to print money.
You just want your license on day 1.

Btw most investments have risk... where is the risk if all your outgoings are covered and more by rent?

-BTL have to put up 30pc up front so are we arguing about the other 20pc? > I would still argue that in any business people invest money in, they do expect to earn a profit and not half of the gross expenses. Why would anyone open a takeaway, consultancy firm if they dont see profit or at least balance out from a cashflow point of view.
-Not really, with the taxation in ireland, sometimes its better to use loans to your advantage. I understand what your saying though.
-The risk here is that you have a large sum of money tied up in a non diversified, highly concentrated asset that is also illiquid. When it goes well, it really goes well, when it goes bad, it can go very bad for you. Due to the nature of this asset, when it becomes bad . for you similar to last recession, some people can loose the asset, affect their credit rating, cause undue stress dealing with tenants.
-I do believe its a safer traditional asset class compared to others but there is still risks.
-If you good at budgeting, you should build up a war chest in the good times to struggle through the bad times, its hard to have this type of discipline and many dont and some may seriously struggle for 5-10 years depending on their situation in last recession, - i personally know people that changed completely from all the stress this caused them.

Obvious Desperate Breakfasts wrote: »

Free them up for people to buy, obvs. And then those buyers are no longer renters.

Simple example

The rental sector is made up of three houses in total. Each of these are currently rented out with four adults in each. You have a couple currently living in one of these house with another couple.

One of these couples buys one of these three houses. So now you have the same three houses housing ten adults instead of twelve adults.

Where do the two adults sleep now ((ie the twelve (3 x 4) is now ten (2 x 4) + (1 x2))

Obvious Desperate Breakfasts wrote: »

Free them up for people to buy, obvs. And then those buyers are no longer renters.

Yes it is better for buyers as they are looking for their own house. What happens to the renters though?

If this continues the supply of available rentals will continue to decrease. In your description, it looks like the amount of renters is also decreasing but this is not the case. We have an inward flow of migrants coupled with new renters just out of college that still need a place to RENT with the stock decreasing yearly.

FishOnABike wrote: »

The analogy doesn't really work though. Other items people can rent e.g. cars are short lived depreciating assets. Property is an intergenerational appreciating (apart from the occasional bubble) asset.

Expecting the same rules to apply to something whose value rapidly depreciates to zero and something whose longterm value (and ability to provide an ongoing income stream) increases at a rate above inflation is unrealistic.

Your logic does make sense however how about a business owner. Their asset can go up and down however they expect profits from that business. Its unrealistic to expect a ll to suffer for 30 years and then to finally come out the other side then start earning money. Even if someone is playing the long game, putting yourself through undue sacrifice of that nature is too much. You need to encourage people to invest in this asset class or btl will continue to decrease. Right now as you can see in another thread created today, rental supply decreased at 2pc last year. if its decreasing at that level at the highest ever rents, how can it survive when he get to the bad times again.

Fol20 wrote: »

Your logic does make sense however how about a business owner. Their asset can go up and down however they expect profits from that business. Its unrealistic to expect a ll to suffer for 30 years and then to finally come out the other side then start earning money. Even if someone is playing the long game, putting yourself through undue sacrifice of that nature is too much. You need to encourage people to invest in this asset class or btl will continue to decrease. Right now as you can see in another thread created today, rental supply decreased at 2pc last year. if its decreasing at that level at the highest ever rents, how can it survive when he get to the bad times again.

Yet this is what anyone contributing to a pension fund is doing.

Expecting a property to pay for itself with a monthly positive cash flow and ending up owning the property outright after 30 years without having to put any ongoing money into acquiring the property is akin to expecting to be able to take money out of a pension fund making no ongoing contribution for 30 years and still have several hundred thousand euro in the pension fund when you retire.

Yet still people pay into pension schemes sacrificing current accessible income for a future return, which, in the case of defined contribution schemes, cannot be guaranteed. Investing in property should be no different, some ongoing contribution should be expected by the investor to realise the longterm return.

How much would one have to contribute monthly to a pension scheme over 30 years to have an inflation proof monthly income equivalent to €1500 to €2000 per month in today's money?

Obvious Desperate Breakfasts wrote: »

That might be what happens though. There are no guarantees. If the market rate rent never covers all your costs, it’s the long game. If you think landlords should be guaranteed profits then minimum rent controls must be what you’re suggesting.

Im completely against any type of controls as it stifles the market as what we are observing right now. Normally with massive gains, you would see more enter the market which would naturally balance things out. Due to rent controls among other things, we are still seeing a declining market when if it was functioning properly, you would expect it to be increasing.