Lower property prices so good time to be a landlord?

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theTinker

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Obviously with the significant property price falls over the last few years, Its become more plausable and potentially more profitable to invest in property to rent.

For the price of 3-4 properties not so long ago, 6-7 could be had now.

Now there's the obvious rule of no speculation on house prices so let's respect that. As far as I can see It doesn't matter if prices go up, or go down in the near future if you are renting the property long term. It's really only the rental income you are interested in comparing to the fixed price you payed for the property. This is especially true if its a 'always to rent' property.

I'd like to ask a couple of questions to people regards this.
It's obviously written everywhere that banks are not giving out mortgages easily to many now. For investment to resell, or homes(given job security), I can understand this partially. I'm sure they are also well aware prices may continue to fall. However in the near future, Would I be correct in thinking these restrictions would ease up as the banks have to start lending at some time?
Would I be correct in thinking that obviously a good time to buy is when house prices are low(no speculation on prices!) for renting as the profitable outcomes are greatly enhanced.

I will spend the rest of the night looking for figures and graphs trying to show the rental rates going at the moment, in comparison to property prices(where they stand now). I'm expecting to see a much shorter pay back time in comparison to a few years ago, and even without comparison, it should be a relatively attractive time frame.

I guess my main question is Q:Is there any negative reasons to not buy property to rent in the current downspiral OTHER than 1: they may continue to drop + 2: the usual hassle/work/risks with renting a property out. Is there any recession downturn bubble bursting specfic reasons per say?(other than previous 2)

Ill post up my rent/timeframe to pay data as soon as i find and build it!

I could be missing something insanely obvious so please feel free to have a go! :)

Also, what do people think regards any additional factors that may be influencing the rental market.
I can see a few bubble/recession factors which may affect it.

1: There was alot more property built in the boom, which led to an increase in rental property available, which obviously leads to lower rents(in theory).

2: Job security/income is not as good as previously so people are not willing to pay out as much money as they are taking a more conservative approach to finances.

However there would be a fair number of positive factors happening too.
No more property is being built so the unit# number should stay stagnant for the time being. This means any changes to rental incomes should slow (regardless of direction of change) as it nears its eventual equilbrium point. Imo.

Rent prices have always dragged regards going down in my experience, so they tend to remain good(for landlords).

Lots of people afraid or cant take out mortgages for buying, so would there be an appreciatable increase in rentees coming on stream during this burst/recession? Is there numbers or trend graphs to show number of renters over the years?(ill look about for these too).

Any other points?
 
Property taxes going up . Incomes going down putting pressure on rents. Unemployment reducing average incomes. Population of potential renters decreasing due to emigration. Rent allowances being cut. Savings being eaten up as the recession gets longer and longer. I see a lot of negatives. It depends on your view of when you believe the recession/depression will end. There doesn't look like any end is in sight for years. In fact it could get worse. However with the value and risk attaching to money being in question there is certainly some merit in owning a hard asset which can't be made to disappear with a printing press. If property is the goal then it doesnt have to be just Irish property. Keep an open mind.
 
There are absolutely conflicting views. Mine is that it is a great time to buy property. I can only speak of cities and towns in Leinster.


- Investment yield. From 8% in well-located apts, 6-8% in cheaper inner-city houses to 5% in middle-class suburban houses -far higher than any bank. More and more people are renting -mainly because they can't buy. As long as this no-buy situation continues then rents will remain high. And,incidentally,many of the NAMA proeprties are actually rented.
- Price increases. Of course, if people suddenly start buying then rents will decrease. But so what ?- property prices will increase. You win either way. As a landlord I don't care whether one wants to rent or to buy -either way i make money.
- Pent-up demand. All surveys indicate that those who rent want to buy. And with the highest ratio of young people in EU this either mean that a lot of kids will stay at home, Italian style, or they'll rent rent rent.
- No CGT for seven yrs if you buy now. A great chance to buy a rundown property for DIY types. Hitherto if you spent thousands of hours doing up a place Revenue would still screw you for CGt -only receiptable capital expenditure was allowed. It rather spoilt the time and effort spent. Now ,unlike other investments, you can make a good profit and keep very penny. (and you can get cheap labour pay them cash. no redeipts . but that's wrong of course)
- stamp duty almost gone . And property charges won't affect prices-people still have to live somewhere.

If anyone can think of a better investment at present I'd love to know about it...
 
Good discussion so far. There seems to be more pros than cons from what i think, and can see. however i'll be far more disconcerning later when i can run through a proper pros and cons list of it.

The property tax is here now and is increasing, however its currentily miniscule in comparison to profitablity at the moment. It may(likely) increase in future if it survives its first year, this will start eating into profits, but nothing 1 bedroom for 1 month wouldnt cover. For single room places, this is a bigger issue as they are less profitable.

I have been reading extensively over Daft reports on inflow and outflow and stock levels.
Im both intrigued and confused by one thing in the reports. It greatly shows the level of rental stock as coming down in quantity, however there doesnt seem to be a corresponding trend in the inflow or outflow.
3 Questions.

1: Why is the stock level not being affected by the inflow/outflow and vice versa. IT has completely leveled off years ago according to http://www.daft.ie/report/Daft-Rental-Report-Q3-2011.pdf

and 2: Where is all the stock property going? Its came down by a few thousand over the last while, I doubt this is due to sales at those numbers!?

3: What is that huge dip in inflow/outflow at the 4th quarter of every year, student accomdation filling up?
 
bullworth said:
Property taxes going up . Incomes going down putting pressure on rents. Unemployment reducing average incomes. Population of potential renters decreasing due to emigration. Rent allowances being cut. Savings being eaten up as the recession gets longer and longer. I see a lot of negatives. It depends on your view of when you believe the recession/depression will end. There doesn't look like any end is in sight for years. In fact it could get worse. However with the value and risk attaching to money being in question there is certainly some merit in owning a hard asset which can't be made to disappear with a printing press. If property is the goal then it doesnt have to be just Irish property. Keep an open mind.
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Hi bullworth, thanks for the opinons and points. Do you mind if I ask your opinion and reasoning for some of these.
Firstly, Im in complete agreement with the value of storing wealth in a hard asset that a printing press cant touch, i dont know if property is the best for it, but I certainly think its a strong contender. Perhaps if it stops reducing in price, it will be the #1 best bet, with perhaps a stronger currency or gold a close second.
I'm also in complete agreement that the recession is a long term thing with no short end in sight.
However, Would you elaborate your reasoning on a few of the points you made.
1. Incomes going down pressuring rent. Theres been a big drop in wage and employment levels for the last 4 years, however, the last 2 years, all 8 quarters have been steadily holding thier rental incomes. Im purely judging from the numbers based on the reports im googling, dafts is the most well known, http://www.daft.ie/report/Daft-Rental-Report-Q3-2011.pdf page 7. It shows 8 quarters of steady rent. Do you think that these conditions of stable rent are likely to change soon and if so, why? or why not already? Your reasoning seems sound, but the numbers seem to indicate its complete it equalisation.

2. Property taxes, Do you think these are increasing fast enough to make signicant change in the profitability at the moment/near future. Are you refering to the household charge or others.? With stamp duty almost gone, would this not counter act pretty much all these together? Also obviously the significant decrease in prices would counter all taxes for at least a decade to come no?

Do you think the continueing of the recession in its current pace will also dramatically affect the profitablity in becoming a new landlord. eg, would continuing decline not make the prices of investing in a property lower, and I see clear historical data that shows rent decline lags drastically behind this. Infact, this is the key trend pushing for my thinking on this topic.

Thanks for any response, much interseted to hear reasoning on these things incase im missing something.
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Would anyone have a daft report on rental from 2006-2004 Q3 preferably. I dont know if they even did them back then?

Or suggest another source of data for rental properties per size and location?
 
theTinker said:
1. Incomes going down pressuring rent. Theres been a big drop in wage and employment levels for the last 4 years, however, the last 2 years, all 8 quarters have been steadily holding thier rental incomes. Im purely judging from the numbers based on the reports im googling, dafts is the most well known, http://www.daft.ie/report/Daft-Rental-Report-Q3-2011.pdf page 7. It shows 8 quarters of steady rent. Do you think that these conditions of stable rent are likely to change soon and if so, why? or why not already? Your reasoning seems sound, but the numbers seem to indicate its complete it equalisation.
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Well I can't see disposable doing anything except decreasing whether through eventual income tax rises or more stealth taxes. As they say you can't get blood from a stone. I would also question the impartiality of any report from an organization which has a vested interest in the health of Irish property. We surely learnt that lesson from the media cheerleading of property prices during the boom ? Then there is the huge overhang from NAMA which makes the Irish crash even more uncertain. Then there is the fall in prices and why wouldnt rents fall alongside it ? You expressed the belief that the recession/depression will endure for years. Has there ever been anywhere in the world where property prices and rents have risen in a recession/depression lasting so long ?



theTinker said:
2. Property taxes, Do you think these are increasing fast enough to make signicant change in the profitability at the moment/near future. Are you refering to the household charge or others.? With stamp duty almost gone, would this not counter act pretty much all these together? Also obviously the significant decrease in prices would counter all taxes for at least a decade to come no?
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I am referring to all property related taxes. And in fact to taxes in general stealth or otherwise. The 100 euro will probably be a minimum with others paying a lot more next year as there will be a reasoning that even the poorest afforded to pay their 100 euro last year so why not keep them paying off the unguaranteed bondholders etc.


theTinker said:
Do you think the continueing of the recession in its current pace will also dramatically affect the profitablity in becoming a new landlord. eg, would continuing decline not make the prices of investing in a property lower, and I see clear historical data that shows rent decline lags drastically behind this. Infact, this is the key trend pushing for my thinking on this topic.
Click to expand...

If prices continue to decline then you will lose as much in capital as you gain in rent. Plus I can see capital gains and inheritance taxes increasing when you eventually do decide to sell. I can also see increased regulation as we become more a society of renters than owner occupiers. With declining incomes, more vacant properties due to emigration and properties coming onto the market (because a lot of people are still in denial about selling their property for the market price plus there is the huge NAMA overhang) and declining disposable incomes I can't see it being very easy to
pass the cost onto the tenant. I can also see increased 'tenant friendly'' regulations making it hard for the owner to avoid investing in keeping the standard of accomodation high unlike in the past where damp walls and substandard accomodation wasnt unheard of.
As I said before , you believe like myself that the recession and decline in living standards will endure for years therefore can you find an example where rents have remained static or risen during a recession ? With the increase in stealth and wealth taxes I can't see it being easier to make money as a landlord. If property helps you sleep at night thats well and good but maybe you should consider diversifying the types of property you invest in. For example you could buy some forest land, plant it and claim whatever grants are currently available. You can always then be certain of a secure and cheap means to heat your home in retirement no matter what happens to oil, gas and electricity prices which will probably rise well beyond inflation in the future at current trends.
 
Hi Folks

The Property Pin is the ideal place for you to discuss this.

You can't have a discussion of buying property without discussin property prices.
 
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