# Why are investors leaving the buy to let market?



## D2WW (11 Apr 2016)

There is a report in today's Times from Sherry Fitzgerald saying that "for every one private investor who has bought in the market during the year to date, two have exited the market,” Ms Finnegan said, adding that it was having “a debilitating impact on the rental sector.”

Any opinions on why this is the case?
I ask because I'm thinking of getting a one or two 3 bed semis' to rent out as a cash buyer.


----------



## Palerider (11 Apr 2016)

Too many risks, too much tax at over 50% if you get your full rent paid promptly, a big if that,  too much maintenance costs when tenants change over, too much paperwork and governance and PRTB useless when it comes to owners rights and tenant accountability. Costs for accountant whilst not essential needs to be costed, insurance costs etc etc , I've drilled into this as I'm sitting in near cash in prize bonds which are also useless but there pending choosing a final investment choice, my yield assuming I get paid with a rental and little vacancy was 3%ish so I need to factor in solid appreciation and I like others don't see that in the short term.

Good luck to you, you are braver than me...


----------



## Brendan Burgess (11 Apr 2016)

Palerider said:


> Too many risks, too much tax at over 50% if you get your full rent paid promptly, a big if that, too much maintenance costs when tenants change over, too much paperwork and governance and PRTB useless when it comes to owners rights and tenant accountability. Costs for accountant whilst not essential needs to be costed, insurance costs etc etc ,



Great summary.


----------



## dereko1969 (11 Apr 2016)

Haven't read the article but presume some of those exiting are/were accidental landlords? Though Palerider's points are true is it any harm if the accidental landlords leave and the market is left more to professional landlords?


----------



## Delboy (11 Apr 2016)

dereko1969 said:


> Haven't read the article but presume some of those exiting are/were accidental landlords? Though Palerider's points are true is it any harm if the accidental landlords leave and the market is left more to professional landlords?


Most of the investment properties however are being bought by owner/occupiers according to the report


----------



## Sarenco (11 Apr 2016)

Palerider's analysis is spot on – for taxable investors, the risk/reward analysis very rarely justifies becoming (or remaining) a residential landlord in the current environment. 

The risks are just not worth it in the vast majority of cases.

D2WW could invest in a basket of highly diversified REITs with a net yield of around 3%.  Could s/he beat this return by investing directly in rental properties?  Probably not without taking on a lot of uncompensated additional risk and a world of stress and hassle.


----------



## Fella (11 Apr 2016)

Looked a property investing myself and it's just not worth the hassle , I've been buying REITs like sarenco mentioned seems much easier and shares also , I'm sitting on a lot of cash myself no idea what to do it with , it's funny how all the free advice I get off people is to buy a few houses rent them out and clean up . Nobody talks about the hassles.


----------



## Steven Barrett (11 Apr 2016)

Fella said:


> Looked a property investing myself and it's just not worth the hassle , I've been buying REITs like sarenco mentioned seems much easier and shares also , I'm sitting on a lot of cash myself no idea what to do it with , *it's funny how all the free advice I get off people is to buy a few houses rent them out and clean up *. Nobody talks about the hassles.



That's the Irish obsession with property. Usually that free advice has absolutely no analysis on the actually returns. 

The dividend yield with Vodafone is 5.7%. You can buy shares with yields that high to diversify. No hassles, can sell in a couple of days.


Steven
www.bluewaterfp.ie


----------



## losttheplot (11 Apr 2016)

Fella said:


> it's funny how all the free advice I get off people is to buy a few houses rent them out and clean up . Nobody talks about the hassles.


I bet those offering the free advice don't have rental properties. I've heard that too and when you mention tax etc, it's normally greeted with a blank stare.


----------



## coolhandluke (11 Apr 2016)

Most of the people i find raving about property investment, are not paying any taxes on them.


----------



## Dermot (12 Apr 2016)

As a landlord with plans to get out of the business I am in total agreement with all the negative contributions above.  I could not find any fault with the negative contributions above.  
If you get into a problem either with the PRTB or the Courts you will be deemed to be in business and should know all the laws and regulations surrounding the renting business and it has become hugely bureaucratic over the years.
When it comes to taxation and allowances/expenses and passing down the business to another family member it is not treated as a business.  
It is and will continue to be seen to be an easy target for taxation by politicians into the future.  You are a sitting duck and politicians love sitting ducks.  The next bullet will be a wealth tax.
There are not many friends in the Media or Political world for Landlords.
It can be a slow process to disentangle yourself from the business as it is not a very liquid asset. 
You have no long term strategy from any party or Government which a serious new investor would need to enter the market.  There is and has been too much chopping and changing with the rental market for it to be an attractive long term investment going forward.
A serious plan would need something like 20 years or so and that maybe with a review (to tweak not change completely) every 10 years by a serious non compromised independent group who would know what they are talking about.
A few of the major problems that I have with the rental business are 1) not treated as a business from a taxation point of view and inheritance issues 2) The complicated (deliberately so and no need for it) way that the Tenancies Act is written and the incomprehensible administration of the law by the PRTB.
Bad Landlords and bad Tenants should not be tolerated. Delayed repairs/delayed rental payments and delayed decisions by the PRTB is wrong.  The whole process of getting a case by a landlord to a hearing with the PRTB is totally unacceptable.  There should be no room for bias in a fair system and I have read enough about decisions and listened to a few people who have got a bad deal from the PRTB to support the view that there is an in built bias within the PRTB against landlords.
When the vulture funds see the opportunity to divest themselves from the residential investment market they will be off to pick the flesh from the carcasses in another market.  They are not going to hang around in the Irish market for too long more.


----------



## kmick (12 Apr 2016)

I am currently exiting a rental property. for the following reasons albeit rents are going up rapidly right now
Mortgage Rates >5% for BTL
Regulation - Can only put up rent once every two years - means that you have to factor in what the rent will be in two years - bad for tenants
Buyer Rules - over 220k they need 20% deposit - puts a ceiling on max prices for cheaper properties
Tax Relief for Individuals is lower (75%) than if your are a business that owns property (100%) - the talk was this would go to zero over time - this was the first inkling that this was not going to go well for individuals
High Service Charge Costs - albeit in my development they are spent well and there is good governance - it is normally about a months rent
Speculation that the government will change rules regarding rent supplement tenants - landlords should be free to choose their tenants
Extra Tenants rights (good for bad landlords and good tenants , but terrible for good landlords with bad tenants)
PRTB – this expenditure can be offset against your rental income but it introduces extra rules
Property Tax – this is not an allowable deduction against your rental income like a lot of things they have introduced
Water charges - Irish water stated landlords would be chased for tenants arrears but they would not be able to tell landlords if the tenant had paid due to Data Protection. Essentially makes us liable for bad tenants
Any income liable to tax @>50%


----------



## AlbacoreA (12 Apr 2016)

Too much risk & cost for too little return.  

Its unclear if future govt policy will make this worse either.


----------



## valparaiso (13 Apr 2016)

We were told that this funds local services.

"Property Tax – this is not an allowable deduction against your rental income like a lot of things they have introduced"

Not only that the tenant who benefits from the proceeds of this tax never pays it.


----------



## Sarenco (13 Apr 2016)

Yep, LPT is effectively a wealth tax masquerading as a local authority charge.  

The Minister acknowledged that LPT should be deductible but failed to make it so.


----------



## llgon (13 Apr 2016)

Since LPT has been introduced rents have increased a lot.  Could it's introduction be part of the reason for that increase?  I think that it might be so one could argue the case that it is the tenant who is paying the LPT. 

Furthermore, maybe tenants are paying double the LPT everyone else is paying to give the landlord's his/her LPT payment once 50% tax etc. is paid?


----------



## trasneoir (14 Apr 2016)

llgon said:


> I think that it might be so one could argue the case that it is the tenant who is paying the LPT.


As a renter: a rental property is worth exactly what somebody is prepared to pay to rent it. From this perspective, LPT comes of the landlord's bottom line just like any other expense _except_ that LPT is not tax deductible.


----------



## llgon (14 Apr 2016)

The main factor that will determine what somebody is prepared to pay to rent a property is the cost of renting similar properties. I think it would be more relevant to take a wider view of the market.


----------



## T McGibney (14 Apr 2016)

llgon said:


> Since LPT has been introduced rents have increased a lot.  Could it's introduction be part of the reason for that increase?  I think that it might be so one could argue the case that it is the tenant who is paying the LPT.
> 
> Furthermore, maybe tenants are paying double the LPT everyone else is paying to give the landlord's his/her LPT payment once 50% tax etc. is paid?



The basic rules of economics tell us that the ultimate consumer of a good (in this case tenant who "consumes" a property rental) absorbs all additional costs borne by third parties in the supply to them of that good.


----------



## cremeegg (14 Apr 2016)

As a landlord the main thing that might prompt me to exit the rental market is the opportunity for a tenant to refuse to pay rent. 

I would have no effective means of enforcing my debt nor of evicting the tenant.

This has happened to me only once, and the situation continued only 2 months, but the opportunity exists for any unscrupulous person to do this to any landlord. Potentially the situation could continue for a much longer period.


----------



## D2WW (14 Apr 2016)

Well I'm glad I gave everyone a chance to vent a little! Thanks to Palerider, Dermot et al. To fill in, my original thoughts were a get a newish 3 bed semi(375-400k) in the better part of Bray. Rent would be currently around €1900.  I am aware that sites like Askaboutmoney do tend to attract people looking for answers to issues/problems, and that all those happy landlords with nice tenants don't tend to post here.
However, all the risks outlined above have made me rethink my investment. The powerlessness as described by cremeegg where "I would have no effective means of enforcing my debt nor of evicting the tenant" is a deciding factor. Also, I missed the boat in getting a property at a good price.
So, personally a good look at the farm purchase/lease out area beckons.


----------



## jim (14 Apr 2016)

Very interesting and informative thread. Thanks to all who contributed!

Can i check 1 thing? How does 1 calculate the yield? Is there a simple formula?

Thanks


----------



## Sarenco (14 Apr 2016)

The gross yield is simply the achievable annual rent expressed as a percentage of the acquisition cost (or fair market value) of a property. 

I explain on this thread in some detail how I estimate the long-term net yield on a property from this gross figure:

http://www.askaboutmoney.com/threads/buyers-remorse.196291/

So, in D2WW’s example, I would estimate that the Bray 3-bed semi might generate a long-term net yield of around 4%. 

As an alternative, and assuming you want to stick with the same asset class, you could purchase shares in a basket of REITs with a dividend yield today of around 3%.  Tenant default risk in a REIT will obviously be spread across multiple properties and collecting the rent/managing the property is obviously somebody else’s problem.  Would the additional risk and hassle of directly holding a rental property justify an extra 1% in yield?


----------



## Dermot (14 Apr 2016)

Sarenco said:


> So, in D2WW’s example, I would estimate that the Bray 3-bed semi might generate a long-term net yield of around 4%.



I would estimate that the gross yield would be about 6% assuming a midway price of €388k including acquisition costs.  This would very soon evaporate to less than 3% after taxation assuming higher rate tax.  You would have to take account whether there were borrowings involved aswell.  You also have repairs and maintenance/accountants fees/Tenant breaks/Insurance/property tax and whether there are borrowings involved or not etc.  As Sarenco has often stated borrowing at 5-5 and half per cent is not sustainable to purchase a BTL. 
For Landlords and Tenants sake Governments need to have a careful look at all the taxation issues and inheritance issues surrounding the private rental market.  All businesses need to be profitable to stay in business and being a Landlord is no different.  In order for new people to enter the business it has to be profitable and not seen as easy pickings for taxation.  It also needs to be affordable and of good quality for tenants as well.  It is quite difficult with the current regime taxation wise to do this.
Attacking landlords with taxation and a biased legal system (PRTB) may provide good headlines for left leaning politicians but ultimately provides bad outcomes for Tenants.  
I have always believed that the vast majority of tenants and landlords are between good and very good and we have a legal system that essentially punishes that sector and is incapable of dealing effectively with the other small category.


----------



## Sarenco (14 Apr 2016)

I wonder will the current flight of landlords from the rental business turn into a flood over the next couple of years as: (a) many remaining interest-only deals come to an end; and (b) increasing numbers of "accidental" landlords start to emerge from negative equity and are therefore in a position to sell?

If this comes to pass, our increasingly tight rental market will become positively asphyxiated.  This can only result in upward pressure on rents as a shrinking number of landlords desperately try to cover their costs.

The real losers in all this will be tenants, many of whom are already in the lower income groups in our society with limited ability to absorb further increases to their rents. 

The strange thing is that this evolving crisis in our rental market is almost entirely the result of conscious decisions taken by our last two governments.

I guess tenants don't deserve the same protections as defaulting borrowers.


----------



## jim (15 Apr 2016)

Thanks Sarenco and Dermot - that is very enlightening.

I am in a situation where I have some cash on hand that I want to invest. I have, for a long time, being strongly considering getting a second property as a buy to let in addition to already having my PPR. Based on all of the above though I cannot justify taking this route and so I want to explore other options. The REIT option sounds good as does investing in shares in general. I am personally quite risk-tolerant so shares do interest me. I currently have zero investments other than my PPR.

The problem for me is I don't have a clue how to buy shares or an REIT. I know there are other forums here that probably deal with it but how easy is it and is there a link that I can jump to and ill do my own research? I am happy to invest in such a way that I can select my shares, if this is possible, as opposed to having someone pick my shares for me.

Thanks.


----------



## elcato (15 Apr 2016)

I think there is a good summary of why landlords are leaving but in fairness there is money to be made by using a good agent and letting them deal with it. The main reason I am leaving is purely for the tax regime as I am PAYE so looking at my tax bill every year depresses me. I suppose the fact that there has been a recovery to normal prices is also a factor. I used an agent in the last five years and it was pretty much stress free. Prior to that I did it myself and it had it's ups and downs.


----------



## Fella (15 Apr 2016)

I've looked at becoming a landlord a few times , I am not sure if the government want more landlords or not but they have made it very off putting. Why do they feel the need to tell someone how much rent they can charge , let the supply and demand sort these prices out , as soon as I read "you can't increase rent for x amount of time" I just stopped looking. 
Tax is a disgrace as well how are you supposed to make a decent income from it when you have to pay 50%+ tax. I think people should be given a chance if you have one house to let it could be taxed at a low rate , this would give someone a chance to become a landlord and potentially have an income in retirement etc. but as soon as you go beyond 1 house maybe tax at full rate then.


----------



## T McGibney (15 Apr 2016)

Fella said:


> Tax is a disgrace as well how are you supposed to make a decent income from it when you have to pay 50%+ tax. I think people should be given a chance if you have one house to let it could be taxed at a low rate , this would give someone a chance to become a landlord and potentially have an income in retirement etc. but as soon as you go beyond 1 house maybe tax at full rate then.



The tax rate on rental income is way more than 50% when you count the costs you can't claim as deductions such as 25% of the mortgage interest, travel to/from the property to maintain it and collect the rent, and any improvements you make to the property.

I calculated a few years ago that one of my customers, an accidental landlord who let out his former home, was paying an effective tax rate of 70% on his rental income.


----------



## elcato (15 Apr 2016)

T McGibney said:


> and any improvements you make to the property


Noto to go off topic, but surely making improvements which don't require new structures is covered as oppose to extensions etc.


----------



## newirishman (15 Apr 2016)

Fella said:


> I've looked at becoming a landlord a few times , I am not sure if the government want more landlords or not but they have made it very off putting. Why do they feel the need to tell someone how much rent they can charge , let the supply and demand sort these prices out , as soon as I read "you can't increase rent for x amount of time" I just stopped looking.
> Tax is a disgrace as well how are you supposed to make a decent income from it when you have to pay 50%+ tax. I think people should be given a chance if you have one house to let it could be taxed at a low rate , this would give someone a chance to become a landlord and potentially have an income in retirement etc. but as soon as you go beyond 1 house maybe tax at full rate then.



Well, it is income and therefore taxable. And don't agree that there should be different rules for rental income.
I don't agree with the fact that only 75% of interest payments are deductible though.

The main problem is not tax - the main problem is that many of the part-time landlords have a way too high LTV on there BTL in my opinion.
I would argue that anyone who owns one or two BTL's which are funded by a mortgage > 30% LTV shouldn't be in the business in the first place. 
If the Investment doesn't provide you the return after tax that you want, why the heck did you do this in the first place? 

There are of course the "accidental" landlords that previously lived in the place but had to move (for whatever reason), and now can't sell due to NE, but that's not what you are referring to here.

With regards to "how much rent" they can charge: on most of the continent where renting is the usual way of living, rents are very often (close to always) CPI index linked, contracts tend to be longer term (3 years at a minimum.  This takes those mad swings out of the rental market, and makes everything much more predictable.

If I would still be renting in Dublin, and the landlord would tell me that he will increase the rent by a 10+ % from one year to the next I'd tell him were to go - problem is of course that everyone pushes the rents up so people are screwed one way or the other.


----------



## T McGibney (15 Apr 2016)

elcato said:


> Noto to go off topic, but surely making improvements which don't require new structures is covered as oppose to extensions etc.



Technically not. See the old textbook example on replacing wooden windows with PVC or installing a new shower. Some Revenue inspectors may allow these by concession but they're technically not allowable if push comes to shove and in a self-assessment system it is risky to claim them.


----------



## T McGibney (15 Apr 2016)

newirishman said:


> I would argue that anyone who owns one or two BTL's which are funded by a mortgage > 30% LTV shouldn't be in the business in the first place.
> If the Investment doesn't provide you the return after tax that you want, why the heck did you do this in the first place?



I don't mean this at all personally in your case, but this is precisely the attitude which the Govt adopted towards individual property investors in 2009 and which their successors shared, and which has brought the market to the abyss. It is also similar to the "let them eat cake" attitude of former Environment Minister Gormley who decided that bedsits were unacceptable and had them shut down, effectively turfing a whole generation of vulnerable people onto the streets and into temporary accommodation if they were lucky.

It's all fine and well condemning individual small-time investors and hunting them out of the market, as both governments have deliberately tried to do, but it's not at all acceptable to do so in such a manner that stifles new investment in the rented market to the point that it creates and sustains a severe and worsening inflationary shortage of available properties.


----------



## Gerard123 (15 Apr 2016)

Very good post.

Most landlords are providing a very valuable service in housing tenants rather than the Govt needing to.  The recent news that the prefabricated houses would now cost €240,000 and not €100,000 as said at the start is an eye opener.  For houses that would last 10 years that's 24 grand a year.  A fraction of that would allow these tenants to be housed in the private sector while also allowing landlords to make a fair, but not excessive, return.  Yet landlords are being pilloried and  taxed/charged to the hilt.  Such short term and counter productive thinking.  All for a few headlines, while leaving tenants to suffer. 

There is no pot of gold when it comes to landlords, most are small, struggling under debt and other charges, etc.  Govt policy is being driven on the back of a fairy tale.  Once again Irish society has seen that when the Govt intervenes in the property market place excessively, the outcome is a disaster.  In this case it is real people who are suffering.  And all being backed up by left leaning and oft hypocritical politicians and other parties.  Independent politicians and SF indeed, making noise before the election, now ducting for cover and avoiding any participation in Govt at the very time when they could be involved. 

Part (not all) of the solution to the housing crisis is to allow the private rented sector to establish itself on a proper commercial footing, scale back the excessive charges, restore the full interest deduction and allow BTLs become a worthwhile part of the market again, rather than driving people out.  Incentivise people sensibly (not excessively).  This is the best for tenants, landlords and longer term the country and society. 

Oh and pigs will fly.................


----------



## cremeegg (15 Apr 2016)

jim said:


> Very interesting and informative thread. Thanks to all who contributed!
> 
> Can i check 1 thing? How does 1 calculate the yield? Is there a simple formula?
> 
> Thanks



No simple formula but see this key post.

http://www.askaboutmoney.com/threads/is-profitable-property-possible-at-the-moment.184415/


----------



## Bronte (18 Apr 2016)

T McGibney said:


> Technically not. See the old textbook example on replacing wooden windows with PVC or installing a new shower. Some Revenue inspectors may allow these by concession but they're technically not allowable if push comes to shove and in a self-assessment system it is risky to claim them.



I'd just like to add to this that I've claimed for new windows and showers etc.  And yes I'm aware of the old textbook rules about windows but am prepared to argue my case if ever audited.


----------



## T McGibney (18 Apr 2016)

Bronte said:


> I'd just like to add to this that I've claimed for new windows and showers etc.  And yes I'm aware of the old textbook rules about windows but am prepared to argue my case if ever audited.



The thing is, as well as being smart and articulate, you are sufficiently confident to stand your ground against unfair authority. Most people aren't.


----------



## Bronte (18 Apr 2016)

T McGibney said:


> The thing is, as well as being smart and articulate, you are sufficiently confident to stand your ground against unfair authority. Most people aren't.




Well then Tommy they would be well advised to hire someone like you ! LOL.


----------



## galway_blow_in (18 Apr 2016)

cremeegg said:


> As a landlord the main thing that might prompt me to exit the rental market is the opportunity for a tenant to refuse to pay rent.
> 
> I would have no effective means of enforcing my debt nor of evicting the tenant.
> 
> This has happened to me only once, and the situation continued only 2 months, but the opportunity exists for any unscrupulous person to do this to any landlord. Potentially the situation could continue for a much longer period.



there are no consequences for delinquent tenants in this country


----------



## galway_blow_in (18 Apr 2016)

jim said:


> Thanks Sarenco and Dermot - that is very enlightening.
> 
> I am in a situation where I have some cash on hand that I want to invest. I have, for a long time, being strongly considering getting a second property as a buy to let in addition to already having my PPR. Based on all of the above though I cannot justify taking this route and so I want to explore other options. The REIT option sounds good as does investing in shares in general. I am personally quite risk-tolerant so shares do interest me. I currently have zero investments other than my PPR.
> 
> ...




were it me , i would consider investing in an equity fund which covers the high dividend companies in the FTSE , the FTSE 100 is choc full of high dividend paying companies , 4% should be easily achievable ,  id probably wait until close to the brexit vote as the pound is likely to weaken further against the euro , that way you can afford to buy more , the uk is not going to become a poor country even they do leave the EU


----------



## Harry Whelks (20 Apr 2016)

Hi,

I am another landlord that is selling up. I bought my apartment in 2007 for €325K and am hoping to achieve €240K by selling it.
Similar to some of the other posters on this forum the increased taxes and regulation have killed it for me.

Considering the government's tax take is 54% on rental income it was particularly galling to hear Joan Burton talking about "greedy landlords" hiking prices.
Every Budget seems to introduce yet another fee, tax or levy on rental income.

The rental prices are going up because the rental supply is reducing as landlords flee.  Let's face it, negative equity kept landlords pinned to the ropes.
Once property prices rose sufficiently there was always going to be a queue for the exits.

I contacted the Media Enquiries section of the PRTB and they supplied me with this figure for the count of registered landlords in the last three years. Sherry Fitzgerald are the only ones that are bringing this issue to public attention.

2013, 253,480
2014, 160,160
2015, 170,282

If it helps the original poster here is a detailed breakdown of how much it costs me to rent out a 2bed apartment per annum
...approx. EUR6481 to hold onto per annum.
..............................................................

Gross Rental Income: EUR15,600 (i.e. EUR1300 per month, 2 bed apartment close to Phoenix Park assuming full occupancy.

Deductible Expenses

Mortgage Interest: EUR2625 (only 75% of mortgage interest is tax-deductible; The 75% restriction dates from 2009 when the late Minister Brian Lenihan adopted a number of tax measures aiming to discourage investment in rental residential property in the wake of the Celtic Tiger crash.)

Water charges: EUR260 (water charges are a legitimate property related expense that may be deducted from gross rent for income tax purposes)

PRTB: EUR90 (The PRTB registration fee is an allowable expense to offset against your rental income.)

Service Charges: EUR1800
Taxable Income: EUR 10,825.
Tax @41%: EUR4438
PRSI @5%: EUR541 (payable on rental income from Jan 2014).
USC @8%: EUR866 (introduced 2011, increased from 7% to 8% in last Budget)
LPT Charge: EUR344 (introduced 2013. You cannot write off the cost of the local property tax or the NPPR charge against your rental income tax bill.)
===================
TOTAL TAX: EUR6481.

And a small chapter in closing on the PRTB.

The PRTB and regulation of the sector is a good idea but is it fair that only the landlord pays?
The PRTB can  spend €300,000 of landlords money on a bus shelter campaign advising tenants of their rights (or how to take vexatious cases against landlords for only €15 depending of course on your perspective!).
The assumption here is the same as the governments i.e. that the landlords can afford it. The tenant is entitled to free legal aid but not the landlord. The biggest problem though is that the PRTB is toothless and has no enforcement powers.
You could spend months as a landlord attending hearings (days off work, etc) and at the end the PRTB could decide in your favour. However you then have to go to the Circuit Court and spend €3000-€5000 to enforce the PRTB ruling.
I will add that I had one and only one dealing with the PRTB and I found them to be very professional and competent but it really comes down to whether the landlord and tenant are both willing to compromise.

Thanks, Harry.


----------



## Purple (10 May 2016)

Great post Harry.
Out of your rental income of €15,600 you are left with €4344.
From that you still have €656.25 of interest which is not tax deductible, your own costs of maintenance and the allowance you have to make for refurbishing the place every few years. €1000 a year seems to be a conservative allowance for that.
So, what are you really left with and, taking into account you are paying off a mortgage (turning net yield into a fixed asset), how much cash does the property generate?


----------



## tvman (10 May 2016)

I think the ability to leverage to 70-90% with property investment has always been the draw for investors owning one or two investment properties. This generates real tax advantages compared with non-leveraged investments. It also increases the expected return from the investment but in tandem with this increases risk. Every additional % of leverage increases the risk of your equity investment in the property. This increase in risk was masked during the boom by the large and consistent annual increases in property values. When property prices fell the higher risk (always present in a leveraged investment) became apparent.

The other draw for investors I think is the relatively high and stable cash generation of property (i.e. rent), compared to equity or bonds. This does not mean of course that the return from investing in property exceeds that of equities but it is more apparent to a layman.


----------



## galway_blow_in (12 May 2016)

tvman said:


> I think the ability to leverage to 70-90% with property investment has always been the draw for investors owning one or two investment properties. This generates real tax advantages compared with non-leveraged investments. It also increases the expected return from the investment but in tandem with this increases risk. Every additional % of leverage increases the risk of your equity investment in the property. This increase in risk was masked during the boom by the large and consistent annual increases in property values. When property prices fell the higher risk (always present in a leveraged investment) became apparent.
> 
> The other draw for investors I think is the relatively high and stable cash generation of property (i.e. rent), compared to equity or bonds. This does not mean of course that the return from investing in property exceeds that of equities but it is more apparent to a layman.



id have thought equities and bonds are considerably more stable in terms of generating cash , a company with a twenty year plus record of paying out dividends is surely more reliable than a tenant in a BTL , price movements in equities are however more unstable in the main than property 

over the very long term , capital returns from equities beat property by a distance ( in the majority of cases )


----------



## jim (12 May 2016)

apologies if this is slightly off topic. How does 1 go about in investing in equities on a small enough scale initially? I have some money to invest and id be happy to pick my own shares and manage them if that's possible? is it possible to have an online a/c that you can trade shares on easily?


----------



## elcato (12 May 2016)

We have already gone off topic so maybe try starting a new thread would be my advice.


----------



## Bronte (13 May 2016)

tvman said:


> The other draw for investors I think is the relatively high and stable cash generation of property (i.e. rent), compared to equity or bonds. This does not mean of course that the return from investing in property exceeds that of equities but it is more apparent to a layman.



That's a very good point.  But it's also true to say I think that some of us, myself included, do not understand equities.


----------



## Bronte (13 May 2016)

Harry Whelks said:


> I contacted the Media Enquiries section of the PRTB and they supplied me with this figure for the count of registered landlords in the last three years. .
> 
> 2013, 253,480
> 2014, 160,160
> ...



I'd like to thank you Harry for that very detailed post.  Some things stood out for me

- shocking the numbers leaving the sector
- vexed the PRTB spent my money on a €300,000 campaign


----------



## trasneoir (15 May 2016)

Bronte said:


> 2013, 253,480
> 2014, 160,160
> 2015, 170,282
> 
> - shocking the numbers leaving the sector


Is it? "A lot of accidental landlords got free in 2013 when banks started to lend a little", is how I'd read this.


----------



## Logo (15 May 2016)

Thank you Harry Whelks for an informative post. You say that the water charge is a deductible expense of €260... "water charges are a legitimate property related expense that may be deducted from gross rent for income tax purposes". I always assumed that the user (i.e. tenant) paid for the service?


----------



## Purple (23 May 2016)

I think the socialist approach has had a major negative impact the cost of rent and the number of landlords in the market.

Take, for example, local services tax or property tax as it’s called. My landlord pays it for the house I live in. It would cost me far less if I paid it rather than him.

The house I live in is worth around €500,000 so the LPT is €900. This is tax deductable. The NPPR charge is €200. This is not tax deductable. Therefore he had to earn €425 to end up with that €200 so that’s a total of €1325 he had to get from me in rent to pay those taxes. I in turn have to earn nearly €3000 to pay my landlord that €1325.


The fact that my landlord has to pay income tax on his costs, be they the NPPR charge or the 25% of his mortgage interest costs which are not allowable as a cost, adds directly to my rental income.


It is absurd to suggest that landlords should somehow absorb these costs, particularly in a market where demand far outstrips supply.


The solution from our last Minister with responsibility for housing was to increase rent allowance, thereby increasing government spending and so the tax burden and so tax rates and so the amount of money I and my landlord have to earn to pay our after tax taxes. I understand why he did it; he’s a socialist and so by definition doesn’t understand how markets work.


What I find most surprising is that anyone is surprised landlords are leaving the sector. Why would they stay when they are treated like social pariahs who exploit the poor and vulnerable when in reality they provide a social good.


----------



## Sarenco (23 May 2016)

Hi Purple

I agree with your general argument but, on a point of detail, LPT is not tax deductible for landlords and the NPPR hasn't been levied since 2013.  Minister Noonan has acknowledge that LPT should be tax deductible but he hasn't actually done anything to make it so.

The inability to deduct 25% of interest payments or LPT, plus the fact that USC (before deduction of capital allowances) and PRSI are now levied on net rental income, is undoubtedly causing landlords to quit the sector in ever increasing numbers.

The result?  Spiralling rents.


----------



## cremeegg (10 Jun 2016)

Just one more reason why a landlord might want to get out of the business. many of your competitors are being subsided by the government, they are not playing their mortgages.

From Brendan's post http://www.askaboutmoney.com/threads/central-bank-publishes-quarterly-arrears-figures-for-q1.199259/


Buy-to-let (BTL) mortgage accounts in arrears over 90 days decreased by 3.5 per cent during the first quarter of 2016. At end-March there were 14,924 BTL accounts in arrears over 720 days, with an outstanding balance of €4.4 billion, equivalent to 17 per cent of the total outstanding balance on all BTL mortgage accounts.


----------



## noproblem (10 Jun 2016)

Harry,
I'm surprised you haven't allowed for insurance in your expenses plus having to buy new appliances, etc?


----------



## trasneoir (10 Jun 2016)

cremeegg said:


> Just one more reason why a landlord might want to get out of the business. many of your competitors are being subsided by the government, they are not playing their mortgages.


You are saying that blocking repossession on mortgages in arrears amounts to a subsidy?
To split hairs:
Where a landlord has got arrears, and the government does not allow the bank to repossess their asset, then the whole mortgage amounts to a government loan - it would no longer exist but for government intervention. 
If the state were to order a write-down on arrears/interest, _then _I'd call it a subsidy.


----------



## robert 200 (10 Jun 2016)

Has anyone included USC , management fees , bank charges in their calculation on net profit?


----------

