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Mountain Man1

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Hi Brendan et al,
This is my first time to post a message so I hope I am posting in the appropriate section. I am writing this piece re forthcoming proposed rent controls from an accidental landlord perspective so would appreciate your thought on a dilemma I see down the road next year for myself and my current tenants who are on rent support. This is based on purely what I am hearing at the moment in the news etc.

I am what you would class as an accidental landlord for the last 8 .5 years and have an investment property in Dublin. During this period I have been on an interest only mortgage which is up for review next Feb with the bank . Over a number of years I had to gradually reduce the monthly rent by €100 each year due to tenants coming & going coupled with market forces at various times over that period. In essence, I had to put forward €600 or so from my own pocket just to meet interest only . No different to any other landlords in similar circumstances & I fully accept my responsibilities etc .As market conditions improved I have gradually increased monthly rent back by €100 - always in line with market conditions and have examples of properties in local area as evidence or even reached out to local estate agents for validation. For the last 4 years or so I have had tenants on rent support.

Here lies my issue - I now see that my investment property is €100 or so below market conditions in the local area and have had this verified by local estate agency and sites like Daft.ie .I was planning to increase the rent by a further €100 next May when tenancy comes up for renewal.I cannot continue to absorb €100 as I have recently become unemployed , have v young kids etc. I see a dilemma down the road her for both my self and the current tenants who are a family on rental support with me for the last 2 years. It looks like I will not be able to increase the rent next year and I will likely have no alternative but to end the tenancy and advise tenants I am selling up but only to rent it back out 1 month later at the higher rent of €100 to new tenants. For some reason I think you are going to see more landlords consider the same approach. However, if there was going to be some provision in the new legislation to be approved by cabinet that will conversely allow landlords who are renting a property below market value at the moment to have the right to increase the rent to market conditions at time of next tenancy review . I would personally prefer them to stay next year but in line with rent at market conditions.

I suppose I would appreciate your thoughts & insight on this scenario and do you see this approach happening with some landlords next year ?
 
Mountain Man1 said:
Hi Brendan et al,
This is my first time to post a message so I hope I am posting in the appropriate section. I am writing this piece re forthcoming proposed rent controls from an accidental landlord perspective so would appreciate your thought on a dilemma I see down the road next year for myself and my current tenants who are on rent support. This is based on purely what I am hearing at the moment in the news etc.

I am what you would class as an accidental landlord for the last 8 .5 years and have an investment property in Dublin. During this period I have been on an interest only mortgage which is up for review next Feb with the bank . Over a number of years I had to gradually reduce the monthly rent by €100 each year due to tenants coming & going coupled with market forces at various times over that period. In essence, I had to put forward €600 or so from my own pocket just to meet interest only . No different to any other landlords in similar circumstances & I fully accept my responsibilities etc .As market conditions improved I have gradually increased monthly rent back by €100 - always in line with market conditions and have examples of properties in local area as evidence or even reached out to local estate agents for validation. For the last 4 years or so I have had tenants on rent support.

Here lies my issue - I now see that my investment property is €100 or so below market conditions in the local area and have had this verified by local estate agency and sites like Daft.ie .I was planning to increase the rent by a further €100 next May when tenancy comes up for renewal.I cannot continue to absorb €100 as I have recently become unemployed , have v young kids etc. I see a dilemma down the road her for both my self and the current tenants who are a family on rental support with me for the last 2 years. It looks like I will not be able to increase the rent next year and I will likely have no alternative but to end the tenancy and advise tenants I am selling up but only to rent it back out 1 month later at the higher rent of €100 to new tenants. For some reason I think you are going to see more landlords consider the same approach. However, if there was going to be some provision in the new legislation to be approved by cabinet that will conversely allow landlords who are renting a property below market value at the moment to have the right to increase the rent to market conditions at time of next tenancy review . I would personally prefer them to stay next year but in line with rent at market conditions.

I suppose I would appreciate your thoughts & insight on this scenario and do you see this approach happening with some landlords next year ?
Click to expand...
Is the
 
Mountain Man1 said:
However, if there was going to be some provision in the new legislation to be approved by cabinet that will conversely allow landlords who are renting a property below market value at the moment to have the right to increase the rent to market conditions at time of next tenancy review . I would personally prefer them to stay next year but in line with rent at market conditions.

I suppose I would appreciate your thoughts & insight on this scenario and do you see this approach happening with some landlords next year ?
Click to expand...
What’s stopping you from increasing the rent to the market rate at the end of the current tenancy?
 
Mountain Man1 said:
I suppose I would appreciate your thoughts & insight on this scenario and do you see this approach happening with some landlords next year ?
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Firstly the new rules are not in yet. I don't believe they can be retrospective, so that doesn't prevent you rising the rent in the future to the market rent. And that will then be apparently fixed for two years.

But this is not your main problem, you've subsidising the mortgage, which is interest only, by 600€ a month. How did you buy a property when you had to put in so much of yur own money. You've not even paying the capital down. This is a totally cash hole it looks like and worse the bank are probably going to look for capital next review in February. I don't understand if you are now unemployed how you are paying the €600 ?

Can you tell us the value, what else you own, whether the investment is solely in your name etc. Sounds to me it's time to let the bank have it and for you to go throught insolvency maybe.
 
Thanks for the comments & questions.

I actually have 2 investment properties ....one in Dublin and the other in the North West ( former primary residences at 2 different times). Both investment properties are consolidated into a single account with mortgage of €474k ( Dublin investment property has mortgage of €287k & other investment property has mortgage of €187k). Both properties have been on interest only since 2005/2005 over 25 year period. No capital has been paid off. At the moment, I am only making a personal contribution of €100 per month towards both the mortgage on both properties . My contribution plus the rent received meets 100% of the interest payment. Total interest payment each month is circa €2k. During the downturn I had to reduce the rent over a number of years but have now got it back "near" to market rate in the Dublin area.i anticipate the bank will apply pressure to pay some capital when current interest only arrangement expires in Feb 16 and hence my desire to increase the rent in Dublin investment property by a further €100 when the tenancy is then up for review.

In addition, I have a primary residence in Dublin where I have a 30 year mortgage taken out in 2007. I have managed to make all payments on full interest & capital since day 1 and never miss a payment . I am still able to do this for the moment as I recently became unemployed but received a redundacy . The mortgage on primary account is with same bank but a different account number and not cross secured. Monthly payment is €2.7k . My wife is currently working. All properties are in both names. All properties are on SVR . I suppose I have to be hopeful I will get a new job within the next 6 months . Otherwise, this will certainly change the whole landscape.

Hope this gives some context of my situation and hence my original point re pushing up the rent on one of my investment properties by €100 when tenancy comes up for review in May 2015 as this will help my situation a little and also keep the family on rental support in my Dublin investment property.
 
Investment 1
Mortgage 287K
Value:
Mortgage interest rate (around 5% it looks like) SVR
Mortgage amount: around €1200
Top up: €50
Term: 25 years - end year 2030
Rent:
NE:


Investment 2
Mortgage 187K
Value
Mortgage interest rate
Mortgage amount: € 800 SVR
Top up: €50
Term: 25 years - end year 2030
Rent


PPR
Mortgage
Value
Mortgage interest rate
Mortgage amount €2,700 SVR
Top up
Term: 30 years - end year 2037

Mistake 1: Thinking the PPR is not liable for the investments
Mistake 2: Wasting time on a € 100 rent increase when there are bigger fish to fry

Questions:

1. I cannot believe a bank gave you another mortgage in 2007?
2. What bank is it
3. How much is your wife earning
4. Are you putting your redundancy towards the PPR
5. Are you rent tax compliant?
6. Any clause in the mortgage of the investments taht allows them to charge investment interest rather than SVR
7. Do you definitely have interest only mortgages on the investments, for the lifetime of the mortgages?
8. The family on rent support whom you want to increase their rent on, are they not already at the social welfare rent ceiling?

Problems:
No capital being paid
Possible massive NE in the non Dublin property
No money to pay off property in the future, but that's ok if they are worth the amount of the mortgage at the time
But then you're totally wasting your time with these
Possible non tax compliant, afraid to ask, did you pay NPPR?
 
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Thanks for the questions. I have filled in with further details. Hope this helps somewhat further and appreciate your perspective.

Investment 1
Mortgage 287K
Value:€220k
Mortgage interest rate (around 5% it looks like) SVR 5.15%
Mortgage amount: around €1200 Correct. It is consolidated with investment 2 .
Top up: €50 . It was never topped up
Term: 25 years - end year 2030. Actual end date March 2032
Rent: €1,300
NE: Circa €67k


Investment 2
Mortgage 187K
Value €100k
Mortgage interest rate Per above its SVR at 5.15%
Mortgage amount: € 800 SVR
Top up: €50 It has never been topped up
Term: 25 years - end year March 2032 per above
Rent €600


PPR
Mortgage €515k
Value €340k
Mortgage interest rate SVR 4.5%
Mortgage amount €2,700 SVR Correct
Top up- never topped up
Term: 30 years - end year 2037. Correct March 2037

Mistake 1: Thinking the PPR is not liable for the investments.
Mistake 2: Wasting time on a € 100 rent increase when there are bigger fish to fry

Questions:

1. I cannot believe a bank gave you another mortgage in 2007?
2. What bank is it. All mortgages with KBC
3. How much is your wife earning €48k
4. Are you putting your redundancy towards the PPR. Yes, at the moment until I find a new job. I may only be able to support this from redundancy for max another 6 months
5. Are you rent tax compliant? 100%. Returns always completed on time and in line with all legal requirements inc PRTB etc
6. Any clause in the mortgage of the investments taht allows them to charge investment interest rather than SVR. Not that I can see. It only refers to the interest rate % and amount due on the investment properties.
7. Do you definitely have interest only mortgages on the investments, for the lifetime of the mortgages? Not for the full duration of the mortgages. I have the mortgages around 8 years and the most recent agreement for 3 year extension commenced in Feb 2013 and will expire Feb 2016. I believe at that point the bank will want to see some capital being paid . At the moment the rent received covers €1900 of €2000 interest only arrangement. I am sure with full interest & capital this will increase significantly to approx €3.2k or more after Feb which is not sustainable for me if I have to start paying any principal.
8. The family on rent support whom you want to increase their rent on, are they not already at the social welfare rent ceiling? I have a direct contract with them for €1300 which they pay directly into my account monthly. I believe they are topping up the ceiling amount. I have no idea how they do this and where they get the extra from. They were having so much difficulty trying to get a 3 bed house. They are also on disability benefit so I guess funds are also coming from there .

Problems:
No capital being paid
Possible massive NE in the non Dublin property
No money to pay off property in the future, but that's ok if they are worth the amount of the mortgage at the time
But then you're totally wasting your time with these
Possible non tax compliant, afraid to ask, did you pay NPPR? No problem. Yes, paid all NPPR,LPT etc
 
How are you an accidental landlord? Why did the bank give you interest only?

I think I'd be thinking of sitting down with the bank with a view to offloading the two investments and then seeing where you are at. Now that you are unemployed might be a time to go insolvent.

Would your wife and you not be better off getting rid of everything and renting on her salary and going bankrupt? Is the idea of selling the family home divorce talk?

I don't see any sense in you paying your redundancy into a moneyless pit unless there is light at the end of the tunnel.

(Your tenants are diddling the system, but that's minor in all of this I understand there is a not well known way of getting around the ceiling, as in if you increase the rent higher than the ceiling, if they are a family, the welfare people have options to increase the amounts allowed)

What is it your want? What would be your ideal scenario ? It sounds like 8 years of hell so far to me.

No way is a mere mortal going to be able to pay, Home: 2700 plus 1, 2,600 plus 2. 1,700 = 7K a month less 2K rent = 5K extra.

As a landlord myself I can tell you that you are way out with your subsidy of €100 euro a month (which I called the top ups). You've left out costs, lpt, tax, insurance.

KBC bank.

Need to know what they are thinking. Can kicking it looks like to me. Keep you paying the interest and the NE is being worn down and then they will make you sell and keep you on the hook forever.
 
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Investment 1

Mortgage 287K
Value: 220K
Mortgage interest rate 5.15 % SVR
Mortgage interest: €1200
Mortgage capital and interest €2,600
Term: 25 years - end year 2032 – 17 years - capital payments potentially €1400
Rent: €1,300
NE: 67K

Investment 2

Mortgage 187K
Value: 100K
Mortgage interest rate: 5.15 % SVR
Mortgage interest € 800
Mortgage capital and interest €1,700
Term: 25 years - end year 2032 – 17 years - capital payments potentially €900
Rent: €600
NE: 87K

PPR

Mortgage: 515 K
Value: 340K
Mortgage interest rate 4.5 % SVR
Mortgage amount €2,700
Term: 30 years - end year 2037
NE: 175K

Income: 48K
Redundancy:
 
Bronte said:
Would your wife and you not be better off getting rid of everything and renting on her salary and going bankrupt? Is the idea of selling the family home divorce talk?

I don't see any sense in you paying your redundancy into a moneyless pit unless there is light at the end of the tunnel.
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Good advice! huge levels of negative equity here and no capacity to reduce the capital on 989k of borrowing. Given the high levels of negative equity you are wasting money in applying any personal funds to reduce the capital on your main mortgage. redundancy funds are surely needed to supplement your living expenses until you get replacement employment. Insolvency is not attractive but given the debt position here it must be looked at now. Also given your unemployment situation, there is little that can be done to you in an insolvency situation.
 
44brendan, what would the banks view be in the case above please. Is it can kicking?
 
Bronte said:
44brendan, what would the banks view be in the case above please. Is it can kicking?
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this can has been kicked well down the road already. taking a bank perspective I would tend to nurse this position along as long as the primary mortgage is being paid. It is quite clear that taking an aggressive stance on the BTL debt where patently there is no capacity to meet an element of capital payments will lead to an impasse with the client and a realization of the negative equity in the properties. All indications are now that there is no affordability to maintain the existing repayment schedule beyond a limited period and that ultimately MARP will come into play on the HL.
I.e. Best option from bank perspective is to nurse the present position along as long as possible but this is no benefit to the client who is eroding his redundancy fund!
 
As I thought. Tks 44b. I presume then at the next review they wil try and squeeze but will continue the Interest Only for another few years.

He'd be better off using his redundancy to get a good advisor to plan bankruptcy/insolvency.

(HL is home loan)
 
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He would be better off stopping all payments and redirecting them into a seperate bank account to save for a deposit for the rental property as well as a safety net for when the time comes for the repo man. While people may see this as pulling a fast one on the bank, it's quite clear here that the bank are doing what Bronte and 44B are saying and just togging along to the tune and basically fleecing him. Don't bury your head with the bank, just respond honestly that you cannot pay. Keep the head and don't let any threats get to you. Eventually they will write it off.
 
kennyb3 said:
Accidental landlord with 2 investment properties - that was some accident.
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interesting that he says in an earlier post that both properties were previous PPR. I'm aware of people during the boom who were moving up the ladder and were told by their banks, why sell your existing house, you can rent it out and we'll give you a 2nd mortgage, I wonder if that is what has happened here?
 
thedaddyman said:
interesting that he says in an earlier post that both properties were previous PPR. I'm aware of people during the boom who were moving up the ladder and were told by their banks, why sell your existing house, you can rent it out and we'll give you a 2nd mortgage, I wonder if that is what has happened here?
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That makes sense, and it's probably what happened, especially seeing as it's the same bank that was imprudent in lending on his current home. You've reminded me of my brother actually, he was told the very same and told they'd give him more than half a million if I remember correctly to buy a regular nice family home in not an urban area and he thought the banker he was speaking to was nuts. Boy is he glad now.

The term 'accidental' was annoying me this week because of all the landlords on Joe Duffy describing themselves as 'accidental'.
 
Bronte said:
That makes sense, and it's probably what happened, especially seeing as it's the same bank that was imprudent in lending on his current home. You've reminded me of my brother actually, he was told the very same and told they'd give him more than half a million if I remember correctly to buy a regular nice family home in not an urban area and he thought the banker he was speaking to was nuts. Boy is he glad now.

The term 'accidental' was annoying me this week because of all the landlords on Joe Duffy describing themselves as 'accidental'.
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I'm aware of someone who had such a conversation with his bank manager and walked out when he realized he'd be carrying €1m in debt. Bank manager couldn't understand why they wouldn't do as he was suggesting, likewise he is glad now. Some of the people (like the OP) are not "accidental" landlords. They made bad business decisions.
 
It was exactly like that thedaddyman, my brother even said what you wrote, the banker couldn't understand why he wouldn't take it. It was a mad country back then. And I got a mortgage on an investment myself that was a commericall loan instead of a mortgage so the bank could avoid proper paperwork as they were in such a hurry to dish out the money to me. Great interest rate for me though. I recently fixed (on the money markets or something) and the paperwork and procedure was more ardous then getting the loan 10 years ago.
 
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