The Downside to Residential Property Investments

awec · 30-09-2018 10:13pm #1

gozunda wrote: »

So why does the government demand tax on rent paid to the landlord? How is a landlord supposed to maintain a property. To pay insurance, tax etc etc etc.

And what exactly happens if and when the property market crashes and the owner gets less than when they bought it?

If a landlord only job is renting - How are they supposed to earn an income exactly? I could go on but I've never read such rubbish in my life.

Tough luck, welcome to the world of investments. People investing in property know (or should know) that it's high risk, and a highly regulated market.

But it has the potential for high reward, hence why people take the risk. When your property value goes up and you've only paid a fraction of the mortgage yourself you've made massive profits.

gozunda · 30-09-2018 10:44pm

awec wrote: »

Tough luck, welcome to the world of investments. People investing in property know (or should know) that it's high risk, and a highly regulated market.

But it has the potential for high reward, hence why people take the risk. When your property value goes up and you've only paid a fraction of the mortgage yourself you've made massive profits.

As you said 'potential' and if you've ever listened to the adverts - investments can up but can also go down.

Then of course you can buy at the height of the market and watch your asset plummet or maybe you get lucky and vice versa. Then of course chosing to upgrade or improve and maintain said investment will also involves considerable capital. And tax. But hey - what the heck - none of that matters anyway there's possible MAHOOSIVE profits and lots of similar hyperbole ..

:rolleyes:

titan18 · 30-09-2018 10:44pm

Samuel T. Cogley wrote: »

If the investment vehicle doesn;t do what the investor wants then they won't invest. We've seen that over and over again. What we're eventually going to see is the exit of the small time LL from the market and REITs take over. Now we'll see some property trickle into the owner occupier market sure, but the rental sector will be a room in someone's gaffe with no rights or €2500 a month for a one bed becuase it has a gym and a lad on tha gate.

That's exactly what will happen imo. Worse for the country then too as REITs currently pay less tax and even if that changes, they have the scale that working out ways to reduce their taxes comes easier to them.

If I thought the group of idiots in government were capable of putting together a policy, I'd say it was government policy to reduce smaller landlords and move the market to large scale ones, but it's likelier that they've no idea what they're doing and this is just one consequence of that.

Grumpypants · 30-09-2018 10:46pm

Wanderer78 wrote: »

What should we do with these bad tenants?

List them on a register so landlords know not to rent to them.

Eric Cartman · 30-09-2018 10:48pm

titan18 wrote: »

That's exactly what will happen imo. Worse for the country then too as REITs currently pay less tax and even if that changes, they have the scale that working out ways to reduce their taxes comes easier to them.

If I thought the group of idiots in government were capable of putting together a policy, I'd say it was government policy to reduce smaller landlords and move the market to large scale ones, but it's likelier that they've no idea what they're doing and this is just one consequence of that.

the end result will be REiT's who know the law to a tee, will have professional agents to manage all the lettings, remove any humanity out of it, rent 24 hours late - your carpark fob doesn't work, notices of arrears and evictions done exactly on time and iron clad , all maintenance work done by their people to the cheapest standard to keep their properties intact, tenants just installed with no regards for neighbours or suitability. More expensive for tenants, less ability to negotiate , more ways to have your deposit taken.

Eric Cartman · 30-09-2018 10:50pm

Grumpypants wrote: »

List them on a register so landlords know not to rent to them.

so where do they go live then ?
what happens when the list fills up and we as a nation discover that its all people from the same socio economic background or a certain minority ? then suddenly through no fault of its own that register looks like an oppressive tool and would be thrown right out and give those bad tenants another swing of the legal hammer to beat landlords with.

Samuel T. Cogley · 30-09-2018 10:52pm

Eric Cartman wrote: »

so where do they go live then ?
what happens when the list fills up and we as a nation discover that its all people from the same socio economic background or a certain minority ? then suddenly through no fault of its own that register looks like an oppressive tool and would be thrown right out and give those bad tenants another swing of the legal hammer to beat landlords with.

Deadbeats is limited only to deadbeats in fairness. There's plenty of people who 'can pay' not paying.

Graham · 30-09-2018 10:55pm

Mod Note

Thread Split

Grumpypants · 01-10-2018 11:11am

Eric Cartman wrote: »

so where do they go live then ?
what happens when the list fills up and we as a nation discover that its all people from the same socio economic background or a certain minority ? then suddenly through no fault of its own that register looks like an oppressive tool and would be thrown right out and give those bad tenants another swing of the legal hammer to beat landlords with.

Believe me, it won't be, there will be just as many "professionals" on that list as anyone else. It should be managed by the RTB. If a tenant wrecks a house the RTB gets involved and does an investigation. If they deem the tenant at fault then it should be registered, linked to their PPS, and made available to future potential landlords and have their wages/social welfare docked to repay the damage.

If you buy a car you can check to see if it has been written off or stolen. Why not allow the landlord to do a check and make a risk assessment in the same way.

If you look at car insurance, If a customer has 8 convictions for speeding through school zones and 3 insurance scams on their record, then an insurance company can do a risk assessment on the business transaction and decide what is an appropriate cost to charge you for your car insurance.

Why can't this be done for landlords? Why are they the only ones who have to make a blind good faith guess on a massive transaction with an incredibly expensive asset?

Right now a tenant can cause tens of thousands of euros worth of damage and just move. The RTB can investigate, side with the landlord, decide to award the landlord money but he will never get it. Once the tenants moves house the RTB will just say we have no new address for them. That's it, the landlord eats that cost. There is no legal or civil recourse.

Where do they go? I don't care. It isn't the private landlord's job to pay to house the dregs of society.

PhoenixParker · 01-10-2018 11:22am

Eric Cartman wrote: »

the end result will be REiT's who know the law to a tee, will have professional agents to manage all the lettings, remove any humanity out of it, rent 24 hours late - your carpark fob doesn't work, notices of arrears and evictions done exactly on time and iron clad , all maintenance work done by their people to the cheapest standard to keep their properties intact, tenants just installed with no regards for neighbours or suitability. More expensive for tenants, less ability to negotiate , more ways to have your deposit taken.

Why would a REIT take that approach?

If you own a property and expect to do so long term then the cheapest fix is the worst option. You want a good solid fix that'll last. Its cheaper in the long run

You want long term decent tenants who wont cost you money in repairs, annoy the neighbours or cause them to move out.

Turning over a peoperty costs money - repairs, clean up, agency fees, void period.

A good reputation as a REIT landlord would minimuse costs and void periods.

Ray Palmer · 01-10-2018 11:31am

awec wrote: »

Tough luck, welcome to the world of investments. People investing in property know (or should know) that it's high risk, and a highly regulated market.

But it has the potential for high reward, hence why people take the risk. When your property value goes up and you've only paid a fraction of the mortgage yourself you've made massive profits.

What is this fraction they pay? Anything that is not the entire amount is a fraction so I find it such a weak statement. 90% is a fraction of an entire mortgage.
Even a good investment in a rental will see the landlord pay about 50% of the mortgage directly. They start with paying the deposit which tends to be 20%+. Then they pay about 53% on tax on the rent which means most top up the mortgage payments as the rent after tax doesn't cover it.

You really need to look at the actual figures and not make such off the cuff claims of landlords only paying a fraction of the mortgage.

Renting property out should not be a high risk venture but the government adding costs and increasing taxes made it so. Small landlords are leaving the market and many that would have invested are not. Result is less rentals when we need more.

abcabc123123 · 01-10-2018 3:41pm

Seems to be taken as a given that REITs are bad, can someone articulate why?

Samuel T. Cogley · 01-10-2018 4:15pm

abcabc123123 wrote: »

Seems to be taken as a given that REITs are bad, can someone articulate why?

They're able to take entire blocks, removing even the possibility of owner occupiers acquiring a home and then dictate huge (even relative to current rents) because they provide 'luxury' accommodation.

Eric Cartman · 01-10-2018 4:17pm

abcabc123123 wrote: »

Seems to be taken as a given that REITs are bad, can someone articulate why?

Its not that theyre bad , but everything people hate about small landlords reit's do too, everything people like about small landlords (less reference checks, a bit of leeway on rules, not getting an eviction notice for being a few days late) isnt available with a reit,

As much as its limited now, in a reit controlled market you'd see houses that allow smoking, take pets, allow some building modifications / changes completely gone, the rules are the rules.

listermint · 01-10-2018 4:23pm

I rented from a REIT apartment for 2 years and 2 years prior to that owned by the bank directly.

The REIT were super professional, had an on site maintenance guy who was sound, fella from the west of ireland. Lovely guy and their staff were great to deal with if we need something done. Bought our own coach "can we get you to store your one", "Yes no problem". "Fridge died it has no power." Replaced!

No problem with them.

awec · 01-10-2018 7:22pm

Eric Cartman wrote: »

Its not that theyre bad , but everything people hate about small landlords reit's do too, everything people like about small landlords (less reference checks, a bit of leeway on rules, not getting an eviction notice for being a few days late) isnt available with a reit,

As much as its limited now, in a reit controlled market you'd see houses that allow smoking, take pets, allow some building modifications / changes completely gone, the rules are the rules.

This is just not true.

Eric Cartman · 01-10-2018 7:29pm

awec wrote: »

This is just not true.

It is for a lot of them, they are a professional business, theres no humanity in it, doesn't have to be. Sure there are smalltime landlords who do it too but in general you can call them up and explain an issue and get some time before it escalates.

PhoenixParker · 01-10-2018 8:45pm

Id take the risk of an eviction notice for rent a few days late (in my control) to eliminate the risk of beimg kicked out because random relative x wants to move in/ the landlord has decided to sell up/ the landlord hasnt paid the mortgage and the bank is repocessing.

All common scenarios with small time landlords that are rare with REITs.

PhoenixParker · 01-10-2018 8:57pm

I would love to see more housing in thos country provided by a REIT/housing association hybrid model.

Low or no profit, whole apartment blocks owned, rents to everyone. Opportunities to move up or down apartment size in the same block, furnished to your desired level, big enough to employ inhouse maintenance, strict rules on anti-social behaviour, very limited rent increases encouraging long term occupancy, any profit reinvested in growing the portfolio.

Samuel T. Cogley · 01-10-2018 10:19pm

PhoenixParker wrote: »

I would love to see more housing in thos country provided by a REIT/housing association hybrid model.

Low or no profit, whole apartment blocks owned, rents to everyone. Opportunities to move up or down apartment size in the same block, furnished to your desired level, big enough to employ inhouse maintenance, strict rules on anti-social behaviour, very limited rent increases encouraging long term occupancy, any profit reinvested in growing the portfolio.

That's not gonna happen. No REIT is going to got the low profit route. Housing assocations might be a possibility but they've seen little to no sucess as far as I can see.

PhoenixParker · 01-10-2018 10:25pm

Housing associations keep a low profile but a number seem to be doing very well. They're very big in the UK. It would probably need some legislation but I think it's a very viable long term solution.

One thing it would do is make development non-developer lead which i s a key component of any long term solution.

Subutai · 02-10-2018 12:08am

Eric Cartman wrote: »

It is for a lot of them, they are a professional business, theres no humanity in it, doesn't have to be. Sure there are smalltime landlords who do it too but in general you can call them up and explain an issue and get some time before it escalates.

A professional business has to comply with the provisions of the Residential Tenancies Act. Landlords can't just give a notice to evict a tenant with Part 4 rights for arrears, they must first serve a 14 Day Warning Notice, provide adequate time to pay back, and only then can they serve the 28 day notice of termination.

Eric Cartman · 02-10-2018 1:20am

Subutai wrote: »

A professional business has to comply with the provisions of the Residential Tenancies Act. Landlords can't just give a notice to evict a tenant with Part 4 rights for arrears, they must first serve a 14 Day Warning Notice, provide adequate time to pay back, and only then can they serve the 28 day notice of termination.

Correct but a small landlord mightent serve the notice immediately, a reit would have it to you the next day after a failed payment and possibly disable carpark/ communal door cards

PhoenixParker · 02-10-2018 7:37am

Eric Cartman wrote: »

Correct but a small landlord mightent serve the notice immediately, a reit would have it to you the next day after a failed payment and possibly disable carpark/ communal door cards

They couldn't do that on a 14 day warning notice.

The_Conductor · 02-10-2018 7:43am

awec wrote: »

This is just not true.

Letters of arrears etc- are automatically generated- if/when periodic rental payments are late. Little/no intervention is needed- its all automatic. There are no sob stories, no excuses, no explanations- if something is late- there is an immediate cause and effect- a formal letter issues.

Due process is followed, to a 'T'- however, there is little/no leeway- and there is no appealing to 'humanity'- its a business, period.

The bigger issue with REITs etc- that even people who aren't tenants have- is the manner in which they are structured so they don't pay tax on rental income (whereas a small scale landlord can be saddled with up to 52% tax and charge demands). A far fairer scheme would be the German model- whereby a straight 2.5% of the property value could be offset against any costs annually- or the old Irish proposal- to simply apply the prevailing rate of witholding tax to all rental income- at source- as the tax rate- and not allow any deductions whatsoever.

The Irish tax system is littered with inequities- the manner in which the REITs and certain other businesses can legitimately use it to avoid tax (not avoid, not evade)- is a deep seated inequity- which means the average taxpayer in the country pays more than they would otherwise do.

beauf · 02-10-2018 7:54am

PhoenixParker wrote: »

I would love to see more housing in thos country provided by a REIT/housing association hybrid model.

Low or no profit, whole apartment blocks owned, rents to everyone. Opportunities to move up or down apartment size in the same block, furnished to your desired level, big enough to employ inhouse maintenance, strict rules on anti-social behaviour, very limited rent increases encouraging long term occupancy, any profit reinvested in growing the portfolio.

You won't because it's the least profitable business model. Also it would require govt involvement and look how the govt has handled it so far.

beauf · 02-10-2018 8:00am

PhoenixParker wrote: »

Id take the risk of an eviction notice for rent a few days late (in my control) to eliminate the risk of beimg kicked out because random relative x wants to move in/ the landlord has decided to sell up/ the landlord hasnt paid the mortgage and the bank is repocessing.

All common scenarios with small time landlords that are rare with REITs.

There are other thinks like mass evictions with reits that required legislation to counter. They also focus on the top end of the market. Which is probably more profitable but puts more pressure on rent prices..

beauf · 02-10-2018 8:09am

What's the point of this thread anyway. REIT have been increasing in the Irish market for years. We are just repeating the UK and London experience. Look at the profits they are reporting here.

People wanted them in the market in bigger numbers. They have got it.

mdebets · 02-10-2018 8:41am

The_Conductor wrote: »

The bigger issue with REITs etc- that even people who aren't tenants have- is the manner in which they are structured so they don't pay tax on rental income (whereas a small scale landlord can be saddled with up to 52% tax and charge demands).

While often repeated, that's just not true. While the REIT pays lower corporation tax at the beginning, they don't exist, to just make money, they exist, to give the earned money to someone (employees, shareholders, owners). They then have to pay the same income tax as the small landlord has to pay. So a REIT actually pays more tax (all other things being the same then a small time landlord).

mdebets · 02-10-2018 8:48am

Eric Cartman wrote: »

It is for a lot of them, they are a professional business, theres no humanity in it, doesn't have to be. Sure there are smalltime landlords who do it too but in general you can call them up and explain an issue and get some time before it escalates.

You can get the same treatment from a REIT. They know, every change in tenant costs them money and increases the risk to get a bad tenant. Therefore, they might give tenants more time to pay, if they know, that it will cost them less in the long term, same as a smalltime landlord would, probably even more so, as a single late payment might not endanger their whole business, as it could be for a smalltime landlord, who has no money reserves to get him over a bad time.

The J Stands for Jay · 02-10-2018 8:54am

Ray Palmer wrote: »

What is this fraction they pay? Anything that is not the entire amount is a fraction so I find it such a weak statement. 90% is a fraction of an entire mortgage.
Even a good investment in a rental will see the landlord pay about 50% of the mortgage directly. They start with paying the deposit which tends to be 20%+. Then they pay about 53% on tax on the rent which means most top up the mortgage payments as the rent after tax doesn't cover it.

You really need to look at the actual figures and not make such off the cuff claims of landlords only paying a fraction of the mortgage.

Renting property out should not be a high risk venture but the government adding costs and increasing taxes made it so. Small landlords are leaving the market and many that would have invested are not. Result is less rentals when we need more.

The rational investor realises the massively increased risk of the geared investment. Residential property is high risk mainly because of the high levels of gearing that no-one would use for any other investment.

The Downside to Residential Property Investments

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