More evidence of a massive landlord exodus due to the new rules

[DannyBoyD]

if you have money to invest, putting it into your pension or paying down your own mortgage

Indeed. But when those options are maxed out, what next?

I've made money in equities in the past, but as time goes on I find I no longer have the appetite for the volatility.

I'm still in the property business, aware of the risks, mitigate that as best as I can.

As someone who is on the record as welcoming sensible regulations, I'm increasingly irritated by the lack of clarity of process & due diligence from the RTB.

 

[ClubMan]

But when those options are maxed out, what next?

Key Post - Overpay mortgage or contribute to pension or do something else?

This comes up in a lot of different threads, so I will set out some principles here to kick off the discussion. I will edit it in the light of feedback. There are many options with your savings in excess of your emergency cash fund Pay down your mortgage Build up a fund to enable you to trade...

www.askaboutmoney.com

 

[Premos]

As someone who is on the record as welcoming sensible regulations, I'm increasingly irritated by the lack of clarity of process & due diligence from the RTB.

I think most of us are.
We have decided I think to rent again our apartment, well at least we will put it for rent after doing the work needed between rentals, so probably early January. However as much as the renters, a major concern is the RTB rules and the approach taken when issues arise particularly in terms of technicalities. It's clear that despite taking a lot of care, I could have failed in the past. For us, it's a short term consideration. I would intend to be out of it by 2029.
At this stage, it allows us to diversify as our pensions are maxed out, mine for the next few years, and we also have some separate equity investments. We have no mortgage, no debt and a large cash buffer.
However, right now, it's not something I would recommend. We are somewhat conscious of the risks and are actively trying to limit them. If in January, after advertising, it looks too risky, we will rethink our options. Anyway, the work we are doing now would be necessary to put it in the market and reach the full potential of the property.

 

[DannyBoyD]

@ClubMan

From the post you linked

Pay down your mortgage
Done

Build up a fund to enable you to trade up
Done - no desire / need to move

Maximise your pension contributions
Done

Build up a fund for your kids' education or some other long-term need
Done

Build up the deposit to buy an investment property
This is where we came in!

Invest directly in the stock market - i.e. outside a pension fund
As per my previous comment

 

[TomEdison]

Build up a fund to enable you to trade up
Done - no desire / need to move

Build up the deposit to buy an investment property
This is where we came in!

OK. From a purely financial point of view, trading up your own residence is likely to deliver a better return (CGT-free!) than investing in an investment property. Plus, it avoids the grief of being a landlord. So why would somebody not want to do this?

One possible reason is lifestyle — there might be limited opportunities to invest more capital in the house you already have and, for family or other reasons that are good reasons to you, you don't want to move to a different house.

Another reason is liquidity. If you invest money in your home, the only way to realise that investment is to sell your home and trade down. You might want an investment that you could access with rather less drama.

If you want something that's less volatile than general equities but less hassle than a residential letting property and more liquid that your own home, possibilities might include

- Equities screened for low volatility - infrastructure stocks (electricity transmission, toll roads, airports, telecoms). Demand for essential services is fairly stable, and many of these companies operate long term concessions in regulated markets so their business model is fairly stable. I'm pretty sure that you will be able to find managed funds that specialise in stocks of this kind, that aim to provide equity-type returns but with less volatility.

- commercial and industrial property. Again, you'd want to do this through a diversified managed fund.

 

[JamieB_]

Indeed. But when those options are maxed out, what next?

I've made money in equities in the past, but as time goes on I find I no longer have the appetite for the volatility.

Same here. Mortgages paid off, Pensions maxed for many years now. I have all my spare cash now in index funds bar whats still in the rental property. As soon as i get that back its going into index funds too. As I get older im not interested in anything that can keep my money tied up long term, and property is then now.

Just editing after I saw TomEdisons post. We moved house a couple a few years ago. Main reasons. Nicer area to retire in. House will do us into our old age. Plenty of garden. The house is such that it could easily be split into an apartment on one side and plenty of house left. Massive attic, easy to convert. So if the kidsever needed to live in the garden, no problem, if they needed to live in the attic, no problem, if they needed an apartment next door, no problem. If they didnt and we ever hit hard times and needed to get rental income without the RTB being involved, no problem, but honestly i doubt it will ever come to that at this point.

 

[DannyBoyD]

why would somebody not want to do this

1. Do not need a larger property
2. I like the location
3. I like the house
4. I like the community

Good enough reasons for me!

 

[Premos]

So why would somebody not want to do this?

Thought about this just before COVID. Not for financial reasons but more for space. We like our house, we like the location
Looked a little bit around... Found nothing of interest and then COVID hit. After that, we considered it was too late to have a move like this as our children were getting older. At the time, we did not see as much the issue with the PRS either. Rent were increasing at 4 per cent with low inflation. We didn't hear as much about the RTB.
Now, I don't want to move. The eldest could move out in 2 years... My house is where I want it, reasonably sized... I think we were also from a generation impacted by the crash. I bought my PPR in 2006. Most of our neighbours are in what one could call starter homes but stayed put after the crash.
Finally I think that downsizing to access liquidity is difficult both emotionally and practically.

 

[Greenbook]

Indeed. But when those options are maxed out, what next?

Most people though are not maxed out on those options. People in the past might have saved money or inherited money, borrowed and bought a property to rent out. Or they might have traded up and kept their first home as a rental. It's too risky to do that now especially if you have no experience in the area. You're much better off sorting out topping up your pension or paying down your mortgage.

I've made money in equities in the past, but as time goes on I find I no longer have the appetite for the volatility.

ETFs, the deemed disposal tax is a pain, but you are not picking individual stocks. Plus much less drama than the PRS.

OK. From a purely financial point of view, trading up your own residence is likely to deliver a better return (CGT-free!) than investing in an investment property. Plus, it avoids the grief of being a landlord.

Very good point.

- commercial and industrial property. Again, you'd want to do this through a diversified managed fund.

I've moved into commercial property. A share in a retail syndicate which owns part of a suburban retail park in Dublin and an own door office in Cork City. The lack of drama is astonishing.

As someone who is on the record as welcoming sensible regulations, I'm increasingly irritated by the lack of clarity of process & due diligence from the RTB.

Again, one of the real risks here. The RTB seems to make up the law itself and if any landlord's paperwork is picked over some mistake will be found. If that happens to solicitors and funds, it is bound to happen to the small landlord.

 

[Greenbook]

However, right now, it's not something I would recommend. We are somewhat conscious of the risks and are actively trying to limit them. If in January, after advertising, it looks too risky, we will rethink our options. Anyway, the work we are doing now would be necessary to put it in the market and reach the full potential of the property.

I think that is right. If you've maxed out the pension, paid off the mortgage, have other investments and a cash buffer and are not comfortable investing in anything else, then if you have a well located property that attracts mobile professionals and you are very very careful, there is some sense in staying in (at least until SF gets in to government).

But with all those caveats, you really wouldn't be recommending that a first time investor go into the PRS or that an existing landlord add more properties (unless you are genuinely one of the really big guys).

In the past, forgeting the craziness of the early 2000s, it was a conservative investment for the ordinary risk adverse person. Not anymore.