Not all landlords in trouble greedily accumulated property during the boom

“Well boo-hoo!” was the response of a colleague recently to the news that landlords are having a hard time of it lately. It seems that there is every sympathy  for the person who falls into difficulty with the repayments on their family home but very little for those who can’t service a mortgage on an investment property. But  is that entirely fair?

Not every landlord  has a bulging portfolio of property they  accumulated during the boom. Not every landlord is a mean-minded grasping Rigsby-style character that would charge tenants through the nose to live in a garden shed, if they could get away with it. In fact the figures suggest that most Irish investors  are not career landlords, they are small-time investors who  accumulated  an extra  property or three through a combination of circumstances and easy credit.

There are quite a few landlords out there who acquired their status when they traded up and decided not to sell their first property. By renting it out, they reckoned the mortgage would be taken care of and the property could be a nest egg for them when they retire or a place they could eventually pass on to their kids. With the first property ticking over some may have taken a punt on a second investment property, thinking they were doing the right thing for their future. Nothing overly ambitious – not exactly hoovering up every available property – but boy are some of them regretting it now. Because if you fall into financial difficulty with an investment property that isn’t paying its way, it is a dreadful drain on resources.  For those who are struggling to make ends meet and pay the mortgage on their family home, the problem is magnified if you also have an investment property to subsidise.

And if you bought it after 2002- 2003  with a  mortgage (ie you weren’t a cash buyer) it  is  likely to now be in some degree of negative equity so selling may not be an option. If you got a top-up loan to refurbish the place the chances are your rent mightn’t be covering the mortgage and if you have a social welfare tenant  you are likely to be  under pressure to reduce your rent. Add to that the household tax, NPPR charge, PRTB registration fees and  service charges.

A friend of mine owes €900 this year between the NPPR, household tax on her own house and  on  her investment property and a  €300 service charge on her investment property.  She held on to her first house in west Dublin when she got married , a modest three-bed, and let it out to a social welfare tenant. Now eight years and several children later the rental property is in negative equity, her husband is unemployed and she is supporting the family on a much-reduced wage. She has no idea how she is going to pay the charges on the rental property and is considering finding herself a second  job at the weekend to keep  everthing afloat. Meanwhile her social welfare tenant (because that is predominantly the market in the area  where she owns the house) is asking her to reduce the rent. As it is, the rent is €200 shy of the montly mortgage repayment because she has already reduced it  several times over the past 24 months to stay in line with local rents. Then there’s income tax payable on the property,  a hefty enough sum,  even though she’s not making a profit.

“Well boo-hoo,” you might say. Buying any property is a risk and she should never have held on to her first property  if she can’t take the heat. But couldn’t the same be said of anyone who buys a property, even as a family home? Isn’t it always a risk? How many of us really knew how things were going to turn out? And wouldn’t more of us have invested during the boom if we’d had the opportunity?