How do the new rent controls affect selling and buying a rental property?

Brendan Burgess

Brendan Burgess

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Le's say I want to buy a property to rent.

If it is already being rented out
I will need to verify the actual rents being paid recently as I won't be able to charge more than 4% above these levels.

I will always be vulnerable to my new tenant making a claim that I was overcharging them and that the rent was actually lower.


If a decent Landlord has not been charging full market rents...

If I want to buy this, I will pay a lot less than I would pay for a property which has not been let in the last two years.

Or, I could buy it and keep it empty until the two years have elapsed
  • Certain rental properties within a Rent Pressure Zone will be exempt –
(a) those that are new to the rental market (i.e. they have not been rented at any time in the last two years), and

Maybe sellers should keep their properties empty if they are trying to sell them
A property which has not been let in the last two years will be worth more than a property which has been let. So if it has been empty, maybe keep it empty before selling it.
 
It will definitely push decent landlords out of the market.

Or it may turn decent landlords into profit maximising ones.

Brendan
 
I would think that the major issue for potential new landlords, is that fact that the political class have shown that they are wiling to ride roughshod over the interests of landlords to offer sweeties to tenants. Its not so much the numbers as the atmosphere.

The fact that only a limited % of interest is tax deductible, that LPT is not tax deductible as an expense, that new user charges on property, water, must be paid by the landlord not the occupier, all show that the government has no regard to any principal in thus area other than do down the landlord.

The discussion on AAM when this was announced was how unjust towards landlords the measure was. Elsewhere the discussion was, 4% is too high and why just Dublin and Cork. Its not just the government that is against landlords, the public buy into this too.

The position of landlords who have been under renting to keep good tenants, is particularly unfortunate. It reminds me of the old saying, no good deed goes unpunished.
 
Brendan Burgess said:
It will definitely push decent landlords out of the market.

Or it may turn decent landlords into profit maximising ones.

Brendan
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Even you buy into this bad landlord idea. You would never contrast, decent shopkeepers with profit maximising ones, or decent mobile phone companies with profit maximising ones, or decent car manufacturers with profit maximising ones.

Any business that is not profit maximising is not a good business. It leads to sub-optimal utilisation of resources, and in the case of a company at least, a failure in the fiduciary duty of the directors toward the shareholders.

You know all this Brendan, and yet some one as economically literate as you, is not only making a distinction between decent landlords and profit maximising ones but suggesting that the two are mutually exclusive.

Potential landlords run away, there is nothing here for you save opprobrium.
 
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cremeegg said:
You know all this Brendan, and yet some one as economically literate as you, is not only making a distinction between decent landlords and profit maximising ones but suggesting that the two are mutually exclusive.
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Hi cremeegg

When I first wrote it, I had "it may turn decent landlords into indecent ones"

Agreed that there is no contradiction between decency and profit maximisation.

In my experience, there are many private landlords who do not charge the maximum rent for a number of reasons
  • they know that their tenant can't afford it
  • They are good tenants and they don't want them to move (although this is not much of a fear these days)
  • They have become friendly with their tenants
  • They just want a good return and don't need to max out on the return.
Maybe "generous" would be a better word than decent.

But my point is that these people will think twice before accepting anything less than the maximum. I could offer you a good deal because you are a friend of mine or have been a good tenant. But that deal passes over to the next tenant who might be much more difficult.

Brendan
 
Brendan has nailed this one big time.

And the proof here is, colleague of mine has been a terrific LL, he hasn't under charged his Tenants, he has charged them a fair rate, under market rate. They too have been great tenants, so for the past number of years, all has been good.
This is the first time I have heard of him now talking about maximizing his returns. He is been driven to become what he has always detested, a greedy LL.

We all know there have been excellent LL, and truly shockingly bad ones, the balance will now tilt towards the latter I believe.
 
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I can imagine accidental landlords meeting up with other likeminded individuals in the pub, house parties, etc, over Xmas and deciding that in their situation, a bird in the hand may be worth 2 in the bush and stay with a goodish tenant who gives them no hassle, pays on time, etc, etc, but the professional landlord will max out on his profits at every opportunity, ie, no sympathy in business mindset. As with everything else in this country, we're going to have a "them" and "us" situation. So, as this business plays out with goverment intervention, new tricks will be thought up and implemented, then start to enter the equation. How all this love in with goverment and tenant ends up is anyone's guess. One can see tears and turmoil eventually as a plentiful supply of houses begin to come on the market and eat into the rental market.
One thing that never ceases to amaze me is the rather large refusal rate of acceptance of social housing in a scarce market. There are plenty of apartments for sale around central parts of Dublin city, at not unreasonable prices, yet no goverment or housing agency attempt to purchase same for tenants. I still think the market itself would have found its own floor, Mr Coveney thinks otherwise. We'll see?
 
So a property that has market rent of 1500 is rented for say 1300. LL will now be locked to 1300 + 4% pa. His generosity is being forced upon him to continue. If his circumstances change and he can no longer afford to be generous he is stuck.

If he decides to sell his property, a purchaser (who wants to be a LL) will be locked to his rent so would pay less for the property. Even if the person buys the property to live in, their circumstances may change and they may want to rent the property out as they have to work abroad or they move to a larger house (or smaller house). Or they may wish to sell and the "pass the parcel" continues. In such circumstances the rent they can charge will be capped at the 1300 in my example + 4% pa for the number of years that have elapsed. So again the impact of the good deed of the landlord is passed to the next owner(s).

This has to impact the value of the property negatively.

Or am I missing something. (with all the Amendment to Amendment to Amendments, it is possible)
 
Brendan Burgess said:
I will need to verify the actual rents being paid recently as I won't be able to charge more than 4% above these levels.
Click to expand...

One obvious practical problem with the legislation is that there is no way for a purchaser to independently verify what rent was set in any prior tenancy. Do you simply rely on the word of the vendor?
 
Has this daft proposal become legislation then?

When/how do you find out if your property is impacted?

I can see myself getting out.
 
I'm in the unhappy position of having my apartment rented out at about 20-25% less than the market rate. A friend of mine asked me before about renting my apartment for the purpose of him subletting it on airbnb. If I can get the current tenant to leave (i'm in a position to move in myself for a period), can I effectively take my apartment out of the long term rental market for 2 years by turning it into short term airbnb rentals (via my friend) and then in 2 years return to the long term rental market if I wish at market rates at that time?
 
carbine said:
I'm in the unhappy position of having my apartment rented out at about 20-25% less than the market rate. A friend of mine asked me before about renting my apartment for the purpose of him subletting it on airbnb. If I can get the current tenant to leave (i'm in a position to move in myself for a period), can I effectively take my apartment out of the long term rental market for 2 years by turning it into short term airbnb rentals (via my friend) and then in 2 years return to the long term rental market if I wish at market rates at that time?
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carbine said:
I'm in the unhappy position of having my apartment rented out at about 20-25% less than the market rate. A friend of mine asked me before about renting my apartment for the purpose of him subletting it on airbnb. If I can get the current tenant to leave (i'm in a position to move in myself for a period), can I effectively take my apartment out of the long term rental market for 2 years by turning it into short term airbnb rentals (via my friend) and then in 2 years return to the long term rental market if I wish at market rates at that time?
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Excellent question. In my opinion short term rental, e.g. Airbnb, is not renting it is a completely different trade and subject to tax as earned income. This would suggest that you could do as you suggest.

I should point out that Ernst and Young have offered advice to Airbnb which contradicts this, i.e. the say that Airbnb is rental income. In my view they are flat wrong, but hey I'm just an anonymous internet poster and they get the big bucks. They are still wrong though. Here is their opinion. http://assets.airbnb.com/eyguidance/ie_new.pdf
 
If I went the airbnb route, how long would I need to move in myself to the apartment, for the purpose of removing the tenants, before I can start renting it out on airbnb?
 
Lets just say a rented property is rented to a family member at half the going rate for similar properties in neighbourhood,in my reckoning this would constitute a benefit-in-kind with tax implications for family member.If the same property is let to some other tenant[unrelated]-is this also a benefit-in-kind?Rental caps on properties priced at levels well below market rates must mean a benefit-in kind is inevitably being passed onto tenant,now have I got it totally wrong or should this not also be taxable?
 
Sarenco said:
One obvious practical problem with the legislation is that there is no way for a purchaser to independently verify what rent was set in any prior tenancy. Do you simply rely on the word of the vendor?
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The PRTB has this information. Having said that, if you've increased your rent, or decreased it, you're supposed to update the PRTB information. Their online system is to horrendous I doubt many would both to though. They are working on a new system.
 
triggs said:
Lets just say a rented property is rented to a family member at half the going rate for similar properties in neighbourhood,in my reckoning this would constitute a benefit-in-kind with tax implications for family member.If the same property is let to some other tenant[unrelated]-is this also a benefit-in-kind?Rental caps on properties priced at levels well below market rates must mean a benefit-in kind is inevitably being passed onto tenant,now have I got it totally wrong or should this not also be taxable?
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Benefit in kind does not exist as a concept outside the realm of an employment.
 
carbine said:
If I went the airbnb route, how long would I need to move in myself to the apartment, for the purpose of removing the tenants, before I can start renting it out on airbnb?
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I don't think this is correct behaviour by a landlord.
 
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