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 Post subject: Accidental landlord: “Most of us just want to break even”
PostPosted: Tue Nov 08, 2016 12:51 pm 
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http://www.irishtimes.com/life-and-styl ... -1.2859160

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"No-one mentions the tenant who demands a kettle and toaster, citing a legal obligation for a landlord to provide the basics."

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 Post subject: Re: Accidental landlord: “Most of us just want to break even
PostPosted: Tue Nov 08, 2016 12:59 pm 
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"Once you start looking, you find ‘accidental landlords’ everywhere."

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 Post subject: Re: Accidental landlord: “Most of us just want to break even
PostPosted: Tue Nov 08, 2016 2:02 pm 
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Great - so by "breaking even" I assume she means that she's happy to subsidise all of the mortgages payments each month, and then when the house is sold at the end of the mortgage, she'll recoup what she was paying in to it over the years? No?

Ah right... I forgot Irish "break even" is generally: I'd like that the monthly mortgage and costs should be entirely covered every year by the rental income (after tax) that I earn off the place. And then when I sell up at end of mortgage the hundreds of thousands of euros are mine! ALL MINE!!
Shur' a rental house is supposed to be completely free to me!


THAT, is Irish break-even. :-GC


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 Post subject: Re: Accidental landlord: “Most of us just want to break even
PostPosted: Tue Nov 08, 2016 2:57 pm 
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Some analysis on the rental returns for a landlord.

Assumptions
LTV: 50%
Mortgage Interest Rate: 4.4%
Mortgage term: 20 years
Rental yield: 8.5%
Marginal tax rate: 52%
Occupancy: 100%

The rental yield of 8.5% was calculated to give a cash flow neutral result based upon 50% LTV mortgage repaid over 20 years.

So who gets what out of the rent?
Government Taxes and levies 31%
Interest 25.7%
Service and maintenance costs 24.5%
Mortgage capital repayment 18.8%

The mortgage capital repayment represents a 3.2% net return on the landlords equity investment.


Last edited by Luan on Tue Nov 08, 2016 3:58 pm, edited 1 time in total.

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 Post subject: Re: Accidental landlord: “Most of us just want to break even
PostPosted: Tue Nov 08, 2016 3:04 pm 
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Too Big to Fail

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Posts: 4752
^^ useful, but surely an "accidental" landlord must have >100% LTV (and presumably a much lower interest rate) or else they'd just stop whinging and sell up?

What do the numbers look like with 100% LTV and 1.5% interest?

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 Post subject: Re: Accidental landlord: “Most of us just want to break even
PostPosted: Tue Nov 08, 2016 3:55 pm 
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Eschatologist wrote:
^^ useful, but surely an "accidental" landlord must have >100% LTV (and presumably a much lower interest rate) or else they'd just stop whinging and sell up?

What do the numbers look like with 100% LTV and 1.5% interest?

Not much different

100% LTV @ 1.5% is equal to 50% LTV @ 3% (circa two thirds of the assumed landlord funding rate of 4.4%)

So the interest costs falls to circa 17% of rental income with the government and landlord elements increasing to 35% and 23% respectively. (The saving in interest cost is roughly split 50/50 between the landlord and government)


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 Post subject: Re: Accidental landlord: “Most of us just want to break even
PostPosted: Tue Nov 08, 2016 4:06 pm 
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Luan wrote:
Not much different

100% LTV @ 1.5% is equal to 50% LTV @ 3% (circa two thirds of the assumed landlord funding rate of 4.4%)

So the interest costs falls to circa 17% of rental income with the government and landlord elements increasing to 35% and 23% respectively. (The saving in interest cost is roughly split 50/50 between the landlord and government)

I suppose where the calcs fall down is that at 100% LTV the yield is infinite because the equity is zero. :D

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 Post subject: Re: Accidental landlord: “Most of us just want to break even
PostPosted: Tue Nov 08, 2016 4:12 pm 
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Eschatologist wrote:
Luan wrote:
Not much different

100% LTV @ 1.5% is equal to 50% LTV @ 3% (circa two thirds of the assumed landlord funding rate of 4.4%)

So the interest costs falls to circa 17% of rental income with the government and landlord elements increasing to 35% and 23% respectively. (The saving in interest cost is roughly split 50/50 between the landlord and government)

I suppose where the calcs fall down is that at 100% LTV the yield is infinite because the equity is zero. :D

However the key takeaway is just how deeply the government has its snout stuck into the tenants pocket.

31% of rental income (or 164% of the landlord take) goes to the government as per my example and 35% in the case of the accidental landlord.


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 Post subject: Re: Accidental landlord: “Most of us just want to break even
PostPosted: Tue Nov 08, 2016 6:15 pm 
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With full respect to LL's eventual mastery of the 'Goal Seek' function in Excel, he is right that 'accidental' landlords probably face lower (tracker) rates, and because of boom-time purchases have higher LTVs and face lower rental yields.


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 Post subject: Re: Accidental landlord: “Most of us just want to break even
PostPosted: Tue Nov 08, 2016 7:57 pm 
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Posts: 994
That make me a doubly so "deliberate landlord" ^tm ? 8DD

~10% goes to management company who manage "most" of the shit that being a landlord entitles, also another few grand sunk to bring the places to a livable modern standard. That of no benefit to me but hopefully would keep the tenants happy for long time to come :) I've lived in some terrible rented accommodation in past so I probably have a kinder heart than "accidental landlords", from my point of view if the tenants are happy there is less chance any issues would arise. Hopefully my enthusiasm doesnt get demolished in future by horror tenants that one hears about all the time.

Since my main income puts me into the higher tax bracket before counting any rent income, I lose half of each euro received to the government.

Hence I direct any angry renters to sharpen their pencils and start bugging the elected representatives :) From my point of view (I've no mortgages/loans etc...) receiving 1000euro only to hand over ~500 or so to Revenue would be the same as receiving 500 and be exempt from this taxation.


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 Post subject: Re: Accidental landlord: “Most of us just want to break even
PostPosted: Tue Nov 08, 2016 8:39 pm 
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Joined: May 20, 2014
Posts: 702
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Luan wrote:
Some analysis on the rental returns for a landlord.

Assumptions
LTV: 50%
Mortgage Interest Rate: 4.4%
Mortgage term: 20 years
Rental yield: 8.5%
Marginal tax rate: 52%
Occupancy: 100%

The rental yield of 8.5% was calculated to give a cash flow neutral result based upon 50% LTV mortgage repaid over 20 years.

So who gets what out of the rent?
Government Taxes and levies 31%
Interest 25.7%
Service and maintenance costs 24.5%
Mortgage capital repayment 18.8%

The mortgage capital repayment represents a 3.2% net return on the landlords equity investment.


What about capital allowances for furnishing the place? Surely they shelter a decent chunk of the income from tax also?


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 Post subject: Re: Accidental landlord: “Most of us just want to break even
PostPosted: Tue Nov 08, 2016 10:38 pm 
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Joined: Aug 26, 2016
Posts: 15
satechi wrote:
That make me a doubly so "deliberate landlord" ^tm ? 8DD

~10% goes to management company who manage "most" of the shit that being a landlord entitles, also another few grand sunk to bring the places to a livable modern standard. That of no benefit to me but hopefully would keep the tenants happy for long time to come :) I've lived in some terrible rented accommodation in past so I probably have a kinder heart than "accidental landlords", from my point of view if the tenants are happy there is less chance any issues would arise. Hopefully my enthusiasm doesnt get demolished in future by horror tenants that one hears about all the time.

Since my main income puts me into the higher tax bracket before counting any rent income, I lose half of each euro received to the government.

Hence I direct any angry renters to sharpen their pencils and start bugging the elected representatives :) From my point of view (I've no mortgages/loans etc...) receiving 1000euro only to hand over ~500 or so to Revenue would be the same as receiving 500 and be exempt from this taxation.


So, ultimately, in a zero return deposit environment, and in the average deposit yield ranging 20 years you get a positive yield, potential capital appreciation; and a landlord under reasonable leverage gets a yield and potential capital appreciation.

So tell me again given the serious lack of property to rent, or buy for owner occupation how in any situation that has any relevance to reality that multiple property ownership is allowed in any state that has the cheek to refer to itself as a Republic?

To a website with an educated commentariat, it should be a no brainer

The fact that educated people that really should no better can find any other reasoned conclusion is what pains me so much


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 Post subject: Re: Accidental landlord: “Most of us just want to break even
PostPosted: Tue Nov 08, 2016 11:11 pm 
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Joined: Apr 9, 2014
Posts: 1859
Caesar wrote:
Luan wrote:
Some analysis on the rental returns for a landlord.

Assumptions
LTV: 50%
Mortgage Interest Rate: 4.4%
Mortgage term: 20 years
Rental yield: 8.5%
Marginal tax rate: 52%
Occupancy: 100%

The rental yield of 8.5% was calculated to give a cash flow neutral result based upon 50% LTV mortgage repaid over 20 years.

So who gets what out of the rent?
Government Taxes and levies 31%
Interest 25.7%
Service and maintenance costs 24.5%
Mortgage capital repayment 18.8%

The mortgage capital repayment represents a 3.2% net return on the landlords equity investment.


What about capital allowances for furnishing the place? Surely they shelter a decent chunk of the income from tax also?


IIRC capital allowance are written off over 7 years. Give a typical fit-out (IKea quality) costs circa €3k this means capital allowances are available to shelter €430 of rental income.


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 Post subject: Re: Accidental landlord: “Most of us just want to break even
PostPosted: Wed Nov 09, 2016 12:33 am 
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Joined: Apr 4, 2010
Posts: 4543
Luan wrote:
31% of rental income (or 164% of the landlord take) goes to the government as per my example and 35% in the case of the accidental landlord.


So what? :roll:
Is that much more or less generous than PAYE Income Tax at 20% or 41% + USC + PRSI on an income from salary or professional fees? It's less than the 41% DIRT that for most people is imposed regardless of any other income and with no allowances.

The only point this discussion might have (assuming it has any at all), is that there is a good case for taxing all income equally: salaries, professional fees, rent, deposit interest, capital gains, capital acquisition, inheritances, gifts, lottery winnings, the whole lot; just subject it all to the same tax regime and abolish VAT entirely.
I'm not advocating flat tax, just uniform tax. All net annual inflows of personal wealth should be taxed at the same rates, with the same bands and allowances.
Transaction taxes are a dreadful idea.

Edit: The one exception I can think of to this regime is that there might be a case for imposing inheritance tax at a rate of 100% on the totality of all estates, with an allowance for funds held in trust to generate an income for dependents who would be otherwise unable to support themselves. Once those beneficiaries were held to be able to assume the same financial status as any other responsible adult, the fund would be subject to the standard 100% inheritance tax.
If there should be any bias to higher rates in taxation, it should be towards the harmful or unproductive and of all members of society, the dead are among the least productive. :D

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 Post subject: Re: Accidental landlord: “Most of us just want to break even
PostPosted: Wed Nov 09, 2016 12:51 am 
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Joined: Jun 9, 2008
Posts: 7056
The edit kind of destroyed your post.

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