Key Post Why I am selling my 5 investment properties.

[Boyddbookman]

Woul agree with a lot of what you're saying. However, by going abroad to realise the best returns might leave you with a bigger headache than you have now. I'd love to know where and how you intend to achieve that.

I have a little experience with a single investment property on the continent for 10+ years. The risk return model is different though as the jurisdiction allowed for unlimited short term lets. While the overheads and administration were significantly more than local BTL management, the returns on the particular single property I had were strong and justified the investment. In my experience, where I invested was a cashflow only model. Capital appreciation is pretty much non existant.

Based on my personal experience the heaviest lifting is in identifying the type of investment being pursued, raising finance for a foriegn purchase where you are not tax resident, understanding both your Irish and foreign tax obligations and having the right team on the ground (letting agent, emergency maintenance people, changeover cleaners etc). Initial buy-in costs are also far greater than in Ireland, but there are greater offset allowances in terms of expenses.

My personal view based on my very limited experience, is that foreign property investment is most definately long term i.e. 10+ years, not short term. In my experience, providing you are tax compliant and your property meets the relevant safety codes, government policy just lets you get on with running your business without interference. There is far more long term certainty which enables an investor to model future returns and plan an orderly exit. This is an attractive inducement. In Ireland, it is no longer possible to make a long term BTL investment for fear of significant rule changes.... this simply introduces too much risk and uncertainty for a landlord who may have heavy borrowing costs without any degree of comfort that the landlord will be able to sell the property for market rate in the future.

 

[Brendan Burgess]

it is no longer possible to make a long term BTL investment for fear of significant rule changes.... this simply introduces too much risk and uncertainty for a landlord who may have heavy borrowing costs without any degree of comfort that the landlord will be able to sell the property for market rate in the future.

That is it in a nutshell.

 

[noproblem]

I have a little experience with a single investment property on the continent for 10+ years. The risk return model is different though as the jurisdiction allowed for unlimited short term lets. While the overheads and administration were significantly more than local BTL management, the returns on the particular single property I had were strong and justified the investment. In my experience, where I invested was a cashflow only model. Capital appreciation is pretty much non existant.

Based on my personal experience the heaviest lifting is in identifying the type of investment being persued, raising finance for a foriegn purchase where you are not tax resident, understanding both your Irish and foreign tax obligations and having the right team on the ground (letting agent, emergency maintenance people, changeover cleaners etc). Initial buy-in costs are also far greater than in Ireland, but there are greater offset allowances in terms of expenses.

My personal view based on my very limited experience, is that foreign property investment is most definately long term i.e. 10+ years, not short term. In my experience, providing your are tax compliant and your property meets the relevant safety codes, government policy just lets you get on with running your business without interference. There is far more long term certainty which enables an investor to model future returns and plan an orderly exit. This is an attractive inducement. In Ireland, it is no longer possible to make a long term BTL investment for fear of significant rule changes.... this simply introduces too much risk and uncertainty for a landlord who may have heavy borrowing costs without any degree of comfort that the landlord will be able to sell the property for market rate in the future.

I note you haven't mentioned the country that this BTL is in. Most countries that I know of, eg, Spain, Cyprus, Turkey, Bulgaria, France, Italy, certainly do have rules and regulations that change like the seasons and in a lot of circumstances are a hell of a lot more stressful to deal with than Ireland. That's not even taking into account that you're not even there. It's all well and good having a Co on the ground that gets clients to rent the place, vets them, collects money, takes care of breakages, damage, air cons, services, furniture, tv reception, toilet problems, showers, insurance, etc, etc, etc, but there's times you need to see the actual place. Casual renters tend not to care too much about the property they stay in for a short while and long term renters in some of these countries can be a total nightmare. Saying Ireland is not a good place to have a BTL is all well and good, but where is for an investment of hundreds of thousands by a single individual, more especially so when the money to buy the asset is borrowed?

 

[NoRegretsCoyote]

It's all well and good having a Co on the ground that gets clients to rent the place, vets them, collects money, takes care of breakages, damage, air cons, services, furniture, tv reception, toilet problems, showers, insurance, etc, etc, etc, but there's times you need to see the actual place.

It looks like OP is going something different at home and abroad.

(Very) long-term lets in Ireland and short-term or holiday lets abroad.

They are different businesses and have different associated risks and rewards.

 

[Boyddbookman]

I note you haven't mentioned the country that this BTL is in. Most countries that I know of, eg, Spain, Cyprus, Turkey, Bulgaria, France, Italy, certainly do have rules and regulations that change like the seasons and in a lot of circumstances are a hell of a lot more stressful to deal with than Ireland. That's not even taking into account that you're not even there. It's all well and good having a Co on the ground that gets clients to rent the place, vets them, collects money, takes care of breakages, damage, air cons, services, furniture, tv reception, toilet problems, showers, insurance, etc, etc, etc, but there's times you need to see the actual place. Casual renters tend not to care too much about the property they stay in for a short while and long term renters in some of these countries can be a total nightmare. Saying Ireland is not a good place to have a BTL is all well and good, but where is for an investment of hundreds of thousands by a single individual, more especially so when the money to buy the asset is borrowed?

It is an investment property on mainland Europe, rather than a traditional BTL viz the focus of this thread. Thankfully, it is relatively easily accessible by air (at least while we are allowed to fly with impunity).

Fortunately, I have not encountered the changing regulations to which you refer or imply. In fact, my experience is that regulation, although strict, especially in terms of safety, is fair and certainly warranted with the best interest of customer safety at heart. At least, that is my on-the-ground experience. The need for the right team to support the efficient and safe running of the property is key, and expensive. As a rough rule of thumb I use, is that for a 1 week let, approximately 50% goes on marketing/ change over / repairs / replacement / sinking-fund for larger repair planning. In my particular circumstance, there was no debt to service, so the net annual yield is about 6.5% generated by only 18 weeks occupancy out of 52. I am not trying to "sell" this concept as an investment, I am sharing my personal experience over 10+ years of having an active revenue producing investment in mainland Europe. Admittedly, the annual returns were time intensive by comparison to our Irish returns, even with the help of a professional services firm.

In my limited experience, regulation of the short term letting market on the continent has been extremely stable by comparison to Ireland. By contrast, the Irish residential tenancies act has numerous amendments applied over recent years.

 

[noproblem]

It is an investment property on mainland Europe, rather than a traditional BTL viz the focus of this thread. Thankfully, it is relatively easily accessible by air (at least while we are allowed to fly with impunity).

Fortunately, I have not encountered the changing regulations to which you refer or imply. In fact, my experience is that regulation, although strict, especially in terms of safety, is fair and certainly warranted with the best interest of customer safety at heart. At least, that is my on-the-ground experience. The need for the right team to support the efficient and safe running of the property is key, and expensive. As a rough rule of thumb I use, is that for a 1 week let, approximately 50% goes on marketing/ change over / repairs / replacement / sinking-fund for larger repair planning. In my particular circumstance, there was no debt to service, so the net annual yield is about 6.5% generated by only 18 weeks occupancy out of 52. I am not trying to "sell" this concept as an investment, I am sharing my personal experience over 10+ years of having an active revenue producing investment in mainland Europe. Admittedly, the annual returns were time intensive by comparison to our Irish returns, even with the help of a professional services firm.

In my limited experience, regulation of the short term letting market on the continent has been extremely stable by comparison to Ireland. By contrast, the Irish residential tenancies act has numerous amendments applied over recent years.

Can you tell us what country this is? The 6.5% yield pa has me intrigued.

 

[AlbacoreA]

Its just not worth the hassle or the risk.

 

[noproblem]

It looks like OP is going something different at home and abroad.

(Very) long-term lets in Ireland and short-term or holiday lets abroad.

They are different businesses and have different associated risks and rewards.

I'm very well aware of the differences, but as for the OP doing something different? Yes and no would be my take on it.

 

[Boyddbookman]

For a lot of landlords it's more a feeling than a very precise set of calculations.

The RTB did a survey last year and the biggest reason small landlords gave (45%) was "no longer wish to be a landlord"

See here figure 2.62

I'm curious why you didn't increase rents by the maximum allowed in the interim.

I'm not going to attempt to work this out as it has changed so much but IIRC what was allowed was 4%pa 2017-2020, and then 2% from 2021 onwards.

That doesn't bring you anywhere close to market rent of course, but it wouldn't have left you so far behind either.

Its a fair question. There were a few reasons. Firstly, my understanding rightly or wrongly was that rent caps that were introduced in Dec 2016 were not meant to be enduring, rather they were supposed to be temporary in nature. My recollection may be incorrect now, but I think the rent caps introduced back then were to last 3 years or so. Additionally, the RTB registration cost was €90 and each time the Ts & Cs changed, the onus was on the landlord to re-register the tenancy details. After tax, re-registration costs and the thought of interrupting the tenant's quiet enjoyment, it was a decision I made not to pursue the 2% increase. In hindsight, it may not have been the best decision on my part, but I did not, and still do not want to chase down every last Euro from a tenant. I would prefer to find an investment that provides a decent return, with acceptable risk with a degree of comfort that the investor can naturally exit in an unrestricted manner. Its the path of least resistance.... just a matter of finding that path!

 

[NoRegretsCoyote]

In hindsight, it may not have been the best decision on my part, but I did not, and still do not want to chase down every last Euro from a tenant.

This is such a shame.

The rules had a very perverse effect where landlords had every incentive to increase rents to the maximum allowed even when they wanted to hold them steady.

 

[Boyddbookman]

It looks like OP is going something different at home and abroad.

(Very) long-term lets in Ireland and short-term or holiday lets abroad.

They are different businesses and have different associated risks and rewards.

Correct

 

[tallpaul]

What a fascinating insight and, I for one, am very glad that I never went down the landlord route.

It is to be hoped rather than expected that the odd Shinner lurker on this site might take some heed of the message and the actual reality of the OP and small landlords in general.

 

[PebbleBeach2020]

What a fascinating insight and, I for one, am very glad that I never went down the landlord route.

It is to be hoped rather than expected that the odd Shinner lurker on this site might take some heed of the message and the actual reality of the OP and small landlords in general.

I doubt it. I've never met or spoken to a landlord who said they would be voting SF so the shinners don't seem to have any meas in appealing to that cohort of voters.

 

[Seagull]

This is such a shame.

The rules had a very perverse effect where landlords had every incentive to increase rents to the maximum allowed even when they wanted to hold them steady.

That's one of my main issues with rent controls. It removes the flexibility from the relationship. Where there is a long-standing good relationship between the landlord and tenant, the landlord should be able to reward the tenant, by not increasing the rent. The issue is that that is then carried over to a new tenant. There needs to be a way to reward a good tenant without it being to the detriment of the landlord. Perhaps allow a reset of the rent at the end of a long let, or allow any potential increases that weren't applied during the tenancy to be applied to the new tenant.

 

[NoRegretsCoyote]

The issue is that that is then carried over to a new tenant.

The rule is that the new rent cannot be above the old rent no matter how far below market rent it was.

This was designed as an anti-abuse measure so that landlords wouldn't get rid of tenants on a low rent to replace them with tenants at market rent.

But it applies equally to when a good tenant voluntarily leaves under no pressure from the landlord. This makes no sense.

I think the real effect has just been to drive landlords out of the market.

 

[Seagull]

The rule is that the new rent cannot be above the old rent no matter how far below market rent it was.

This was designed as an anti-abuse measure so that landlords wouldn't get rid of tenants on a low rent to replace them with tenants at market rent.

But it applies equally to when a good tenant voluntarily leaves under no pressure from the landlord. This makes no sense.

I think the real effect has just been to drive landlords out of the market.

That is partly why I said it should be at the end of each tenancy. The real effect is that landlords have no option but to increase the rent at the maximum rate, or drop way below the market with no chance of ever getting back to parity. That doesn't exactly help good tenants who wouldn't otherwise be getting rent increases.

 

[lff12]

A property is only worth what someone is willing to pay. If Sinn Fein are elected and introduce their plan to sell with tenants in situ then the value of the property will only be a multiple of the rent.

Also with all the anti landlord stance why would any one buy it?

So a good return now will be diminished when it comes to selling with tenants in situ.

I think thats only one of the fears - its expected they will impose an eviction ban & effective tenant-in-situ sales but also likely to affix rent caps or imposed rent cuts. That said, both could be challenged in court, and there's no absolute guarantee that they will actually win enough seats to form a government.

 

[Daithi7]

Boyddbookman said:
"it is no longer possible to make a long term BTL investment for fear of significant rule changes.... this simply introduces too much risk and uncertainty for a landlord who may have heavy borrowing costs without any degree of comfort that the landlord will be able to sell the property for market rate in the future...."


This post & the OP's outline of the current (lack of a) business case for small landlords is very insightful. Sadly, the risk reward is simply gone for small landlords now. Also patient small landlords who were happy to leave rents as is for steady tenants, until a change of tenancy say, were severely punished for this generous largesse to their existing tenants, which is stupid.

It seems to me the government have taken a really hard nosed decision that so what if small landlords leave the rental market in droves, for many of the reasons the OP has so succinctly outlined, the property will still be sold to an owner occupier. So by forcing the small landlord out of the market the current legislation is creating an unsustainable supply of 2nd hand, former rental properties to would be purchasers to some way mitigate for the massive lack of supply in new houses , which is the actual issue that needed solving by the government !!!

The government have got this so wrong, it's not funny imho. Firstly, an owner occupier is likely to be a much less intensive user of a property than renters e.g. say a couple buy a 3/4 bed semi that was previously let to 3/4 sharing professionals. This means 3/4 sharing renters, have all been displaced to accommodate just 2 owner occupiers. That's a really stupid outcome in a time of crisis scarcity imho, yet this is exactly what government policy has repeatedly encouraged.

Secondly, by effectively forcing landlords to increase their rents every year, or else forego these increases to ongoing rent ad infinitum, policy has effectively punished all those patient landlords out there, and their tenants also!!
Previously, most landlords were happy to increase the rent very little while tenants were in situ. Then once a tenant moved out, they'd redecorate the property and let it back out at our close to market rent. This worked for longer term tenants and their landlords. However, current government policy explicitly does not allow this any more, (I.e. LL's are being forced to increase their rent each & every year). This is really dumb imho.

Furthermore, LLs have the risk of permanent tenancies being imposed on them, decreasing the value of their property in perpetuity below those that can charge full market rent, which is unfair and biased

Finally, defaulting, bad & under paying tenants are all now given highly preferential treatment by the rtb at the direct expense & considerable risk to the landlords. This is also stupid.

The net effects of all these measures is less & less private landlords willing to risk staying in the business of supplying the housing needs of others, because of ever more, poor, one sided legislation, resulting in far less avaliable properties to let, further reducing scarce supply & increasing costs to would be renters ever more.

That's just really stupid. Like really, really, really stupid!!!