Give renters a break, landlords warned..!!

[kathryn d]

The article is just another media beat up, preying on public conscience.

Exactly… all it said was "Don’t be mean and take advantage of people… If you aren’t doing that, but just increasing rent to cover increased costs, then it's fine" in different words..
OF COURSE its made out like investors are the bad guys, they are selling the story to non investors and that's what they want to read…
Surely she works for a current affair.. Who can be bothered spending so much time arguing a case against this crap, it’s a losing battle to fight against illogical emotive banter

Here in Canada, when a landlord is required to provide heat(because of the heating source of the buiding)iit is getting very expensive.
We we purchased our 11 unit in 2005 the previous owner had paid 47c litre for heating oil, for that winter.She used 17000 litres.
It has continuously increased.The last fillup was 93c a litre.
We use in an average winter 11000 litres.
That's an increase of $5000+ a year.

This year many landlords have declared bankruptcy or are starting to sell. It will be interesting to see if the rents reflect the costs.

 

[steveadl]

I don't agree with negative gearing, because if I invested in a small business, I couldn't deduct the initial losses against my normal income. So why should I be able to for property? Effectively it diverts a whole lot of investment out of increasing our economy and jobs through small businesses and corporate investments, and into bidding up prices on property and subsidizing rents, both of which I can't see a great benefit in doing.

The majority of rental dwellings are owned by private investors. Would you prefer that private investors were'nt encouraged into the market, and all rental dwellings needed to be supplied by the govt?

What's a cheaper way for a country to provide housing for renters - give private investors a few tax $$$ back from what they're paying anyway. Or keep those taxes from income and be forced to house every family in Aust. that chooses to rent?

I can tell you which one is cheaper for the govt. and society in general.

 

[alexlee]

I don't agree with negative gearing, because if I invested in a small business, I couldn't deduct the initial losses against my normal income. So why should I be able to for property? Effectively it diverts a whole lot of investment out of increasing our economy and jobs through small businesses and corporate investments, and into bidding up prices on property and subsidizing rents, both of which I can't see a great benefit in doing.

That said, I know there are practical problems with taking it away. Most IPs are loss making speculation, which only can be held due to tax breaks. So I think the deductability should be reduced gradually, say 10% per year for 10 years (e.g. in 2009, only 90% of your loss is deductible, instead of 100%). This would give people plenty of time to adjust - and if necessary, time to sell an IP, get the best price, and realise that enormous capital gain (half of the tax on which is forgiven, another perk which rewards speculation on capital gains ahead of business investment).

I don't disagree with the logic (i.e. that property investment, and tying more 'money' into property isn't the most efficient use of resources). We would benefit a lot more if we put more money into research or investing in productive resources.

However, I just don't see the political will to do any of the above. I don't argue with rules I can't change. I try to benefit from them.

Though as the others have said, if the private market doesn't provide rental accomodation, you'll need alternatives. A lot of big cities actually provide a lot of government-subsidised housing (including New York, London and Hong Kong). That would probably involve rent control or govt owned housing. Will that cost more or less than providing tax breaks to investors so that they'll own IPs? Who knows. But it's not a matter of 'let's just slowly cut the tax breaks and the cost will divert in more usefil directions. There would be new costs created.

If the govt announces even a gradual cut to -ve gearing, most people (since the bulk of the IP market is made up of people who only own one IP) would simply not buy. As IP construction falls, rental stress would get worse. Politically, the govt would have to provide some sort of alternative, and that would cost money.
Alex

 

[kum yin lau]

Hi, I do the right thing by my tenants. I spend $30K, I raise rents. Simple. If they don't accept, they move. None of them did.

I advertised 1 property, 30 people responded. My sister's Melbourne apt went up in rent from $450 to $600 a week. Not kidding you. Happened last fortnight.

My latest new house costs me $1500 pw in interest. i charge my tenant $280 pw. Guess who's complaining? Her husband works in the mines & they're happy as anything & the house & compound are expected to be squeaky clean.

Govts & journos can say all they like - it's market forces that drive us.

Good luck & good day to everyone,
KY

 

[crc_error]

People should complain to the RBA. We have seen rates move 1.5% or more over the last couple years. So on a $300k loan thats a extra $86 per week interest. So I see nothing wrong with passing this onto the tenant. Plus could the extra value of the underlining property has gorn up as well.

 

[BayView]

My latest new house costs me $1500 pw in interest. i charge my tenant $280 pw. Guess who's complaining? Her husband works in the mines & they're happy as anything & the house & compound are expected to be squeaky clean.

Hello Chief; Max.

Those are the second worst figures I've EVER seen.

 

[WinstonWolfe]

I don't agree with negative gearing, because if I invested in a small business, I couldn't deduct the initial losses against my normal income. So why should I be able to for property? Effectively it diverts a whole lot of investment out of increasing our economy and jobs through small businesses and corporate investments, and into bidding up prices on property and subsidizing rents, both of which I can't see a great benefit in doing.

What do you mean?
THe deductibility rules of resi PI are the same as for investing in any other commercial pursuit. though companies don't get the 50%cgt discount.

Besides, what the govt allows in deds is clawed back in cgt.

If an investor makes a net profit, it is due to supply/demand ratio falling because of :

1. population and/or frank economic growth
2. easier credit and/or increased money supply.

The former are not an issue if govts don't impede the process as they have been recently by:
- allowing an aggressive enviro/green philosophy to interfere with more efficient town planning, zoning, building code
- frontloading sub diiv infrastructure charges.
- adding exorbitantly to costs by rorting stamp duty and gst simultaneously

The latter has driven property prices during the noughties. and the tax environment should have been reviewed earlier, as well as interest rates.

Apart from that, the financial IQ of the nation has gone down the toilet, as generations of people become unthinking impulsive consumers of rubbish.

 

[skater]

I don't agree with negative gearing, because if I invested in a small business, I couldn't deduct the initial losses against my normal income. So why should I be able to for property?

Um....you CAN deduct business losses against PAYG income.

 

[WinstonWolfe]

Hello Chief; Max.

Those are the second worst figures I've EVER seen.

Think he meant interest/mth

Otherwise,

$1500 a week interest @ 8.5% = a loan of $918,000

which means his tenant has got the deal of the decade:

- a $1,000,000 house for $280 a week rent

and he worst investor in universe with 1.4% yield

 

[Perp]

I think the point is, skater, that if you have a business that makes a loss year after year, the ATO will eventually determine that you have no legitimate expectation of making a profit (eg many MLM businesses), and therefore it's a hobby and not a business, and losses aren't deductible.

Property is treated somewhat differently in that you could have a negatively geared (loss-making) property held for years and years, and continue to have tax deductibility. You couldn't do that with a business, unless the circumstances were exceptional.

 

[Token Funder]

I think the point is, skater, that if you have a business that makes a loss year after year, the ATO will eventually determine that you have no legitimate expectation of making a profit (eg many MLM businesses), and therefore it's a hobby and not a business, and losses aren't deductible.

Property is treated somewhat differently in that you could have a negatively geared (loss-making) property held for years and years, and continue to have tax deductibility. You couldn't do that with a business, unless the circumstances were exceptional.

Exactly.

The key difference with negative gearing is that we are allowed to go into "business" without any intention of making a cash-flow profit and then set those losses off against PAYG income. It's dumb (always get WTF looks when I explain the deal to my American associates)

BTW, the argument that this "subsidy" benefits renters doesn't stand scrutiny in that it has the effect of subsidising the upper limit that a given investor can pay for a property, making housing less affordable for potential renters.

To go back to a point made previously, there should be no favourable tax treatment in circumstances when an investor simply trades in existing housing stock. To the extent that tax incentives are needed to assist in housing the populace, they should only apply to the creation of new stock.

Finally, give the renters a break.

They.Are.Paying.The.Bills.

Seriously, if any other businessperson viewed their clients the way members of this forum viewed renters they'd be out of business in five minutes (either that or working in retail in the Gold Coast, but that's a whole 'nother story).

 

[steveadl]

Exactly.

The key difference with negative gearing is that we are allowed to go into "business" without any intention of making a cash-flow profit and then set those losses off against PAYG income. It's dumb (always get WTF looks when I explain the deal to my American associates)

I can't speak for your intentions - but I intend for all my properties to make a profit! I am however willing to wait a few years for it to happen to each of them becasue I buy in a capital city.

I think every investor would expect and intend for their properties to turn cashflow positive at some point if they decide on holding long enough.

 

[skater]

I think the point is, skater, that if you have a business that makes a loss year after year, the ATO will eventually determine that you have no legitimate expectation of making a profit (eg many MLM businesses), and therefore it's a hobby and not a business, and losses aren't deductible.

I'd say that depends. For instance, we had many businesses over the years & lost many thousands of $$ in doing so. Every year, for I can't remember how long we used to add more losses to be deducted against future PAYG income. One year I asked my Accountant at the time. "Are there many people as stupid as us?" referring to the fact that we kept on trying to make money, but ended up losing it all. He said that there were & they either gave up trying & went back to PAYG, or they eventually made it. This was during a time when we were finding employment extremely difficult.

Fast forward, one of the Businesses eventually did well enough for us to use up all those credits & start our Roller Skating rink, which in turn failled spectacularly & created much more losses. I think it took Hubby a couple of years in the workforce, earning a good salary to soak up all the losses on his side of the equation. My side still has losses, & that is after selling a property (no CGT on my half).

We always had the expectation that the Business(s) would show a profit. They just never did. The same expectation goes with my properties. I have the expectation that they will make a profit, & many of them have.

Finally, give the renters a break.

They.Are.Paying.The.Bills.

Seriously, if any other businessperson viewed their clients the way members of this forum viewed renters they'd be out of business in five minutes (either that or working in retail in the Gold Coast, but that's a whole 'nother story).

Do you have any properties? Have you ever had to deal with tenants? There certainly are some good ones, the majority are fine & do the right things, but the bad ones, boy, until you experience it first hand, you have no idea what some of them can be like.

And by the way. The bad ones are NOT paying the bills. They're not even paying the rent.

AND as far as another business is concerned with the way they treat their clients, well.........if their clients regularly received stock (rental property) & didn't pay for it, then they would be charged with theft. If they went into a shop & caused massive damages, do you think they would be smacked on the hand told they are a naughty boy & sent home with no punishment. NO! THEY WOULD NOT! The police would be called, they would be charged & (hopefully) jailled. OK, maybe I'm dreaming here, they might get a nasty fine & community service, but the point I'm trying to make is that they would receive punishment for doing the wrong thing.

 

[lizzie]

They.Are.Paying.The.Bills.

okay - so i should divide my land tax bill by 4 (as i only have 4 ips that incurred the bill) and send one to each of my tenants.

i am sure they'd love to pay $6750 each ...

oh, and don't forget that $8000 roof last year (and associated leaking damage expenses), and the $6,500 carpet that the tenants destroyed but only had to pay $2,200 towards - neither of which the insurance would pay for.

oh, don't forget to throw in the accountants bill and rates ... nearly missed the increasing gap between rent and mortgage payments with the recent rises - rent rises just can't seem to catch up atm.

 

[wylie]

Seriously, if any other businessperson viewed their clients the way members of this forum viewed renters they'd be out of business in five minutes (either that or working in retail in the Gold Coast, but that's a whole 'nother story).

I treat my tenants extremely well, and fairly. Mostly, they do the same for me.

Please don't paint all landlords with the same brush.

 

[crc_error]

most business do treat their clients like crap! banks, phone companies, etc come to mind!

 

[Sunder]

Finally, give the renters a break.

They.Are.Paying.The.Bills.

Seriously, if any other businessperson viewed their clients the way members of this forum viewed renters they'd be out of business in five minutes (either that or working in retail in the Gold Coast, but that's a whole 'nother story).

Commonwealth Bank seem to be doing okay. Seriously, a few years ago, they created the concept of premium banking, then threw in MASSIVE fees to shock non premium customers to move to other banks. Why? Well, it costs them more to keep the customers than they make from them.

e.g., the pensioner who has $400 a fortnight into her account, which saves the CBA about $1 in interest costs (assuming no interest paid to her) but then they have to keep track of her accounts, they have to have tellers to serve her etc. Those customers you don't want. The $5 they leverage on her account a month still doesn't cover their costs, but they hope it disgusts her enough, that she moves her account.

Renters are NOT paying the bills. It's been a long time since yield have exceeded interest. They're stemming losses until you can realise the capital gains.

All that said, I am currently a renter, without any IPs.

I'm all for market forces. Without intervention, the market is fairly efficient. Unfortunately, when you get odd government intervention, such as high transfer costs, tax deductions, first home buyers grants etc, you get strange bubbles, and out of whack yields.

 

[rastus2]

Yes, Cry me a river indeed.

@#$%%^^&^&*%$@# !!!!!!
cry me a river !!!!
we had such poor returns a few years ago, ITS OUR TURN NOW !!!!
I'm still paying for $1500 damage my last tenants did to the house !!!
(The children of friends, believe it or not) maybe my tenants should have had consideration of me !!!

Yup... cry me a river right back to you Savanna100

Anyone who did not buy an IP with their eye's open and due diligence can hardly cry a river on the -ve gearing (aka holding costs) of IP's when many have been warning that it is these holding costs that will cripple many buying late into any R/E boom.

It's hardly reasonable for some Investors to both bleat on about how much IP's are costing while on the same forum boasting about IP's and their capital gains.

You bought an asset that has a poor yield in the hope that Capital gains and inflation will offset that in the future.. fine, that's an investment risk you take on.

Don't expect large amounts of genuine pity if you then come across significant expenses while waiting for that bonanza of capital appreciation... these are holding costs. Deal with the reality of it or abandon the venture of R/E and the risks accompanying it.

When the opportunity to raise rents arises, fine. There is, however, a fairly large difference between raising rents and price gouging.

I'd advise you not to kill the goose that lays your golden eggs by driving tenants away. 1 weeks lost rent take a quite a long time to recover.

As some posters have mentioned, the other side of the equation is that the tenants are real people also. Some are struggling to pay bills while others are spending their disposable income on toys such as Plasma TV's etc. Much the same as Investors there is a broad range of spending patterns in the group.
Many (not all) of these people are priced out of the R/E market due to the massive investment into IP's. Don't expect any tears of pity from them if you encounter financial difficulties with your investments due to overleveraging.
They are not renting by choice, but rather because the low interest rates, -ve gearing and 50% discount on CGT has caused house prices to skyrocket way past any fundamental real value and to a point where many may never be able to buy.

I do fell sorry for those Investors who lose out either through over leverage, or bad tenant behavior ... just as I feel for those tenants who lose out due to rental stress in a tight rental market, or due to bad landlord behavior.

 

[DavidMc]

Do you have any properties? Have you ever had to deal with tenants? There certainly are some good ones, the majority are fine & do the right things, but the bad ones, boy, until you experience it first hand, you have no idea what some of them can be like.

And by the way. The bad ones are NOT paying the bills. They're not even paying the rent.

AND as far as another business is concerned with the way they treat their clients, well.........if their clients regularly received stock (rental property) & didn't pay for it, then they would be charged with theft. If they went into a shop & caused massive damages, do you think they would be smacked on the hand told they are a naughty boy & sent home with no punishment. NO! THEY WOULD NOT! The police would be called, they would be charged & (hopefully) jailled. OK, maybe I'm dreaming here, they might get a nasty fine & community service, but the point I'm trying to make is that they would receive punishment for doing the wrong thing.

Well said! I tried to give you kudos but I have to spread it around first.

 

[alexlee]

Ah well. Do we really care about how the media labels us anyway? I invest to make money. I don't do it for acceptance by society.
Alex