Before you decide to rent out your home or buy to let, there are some key things prospective landlords should consider, says Paul Stevens, CEO of Just Property.
“Being a landlord does not stop when the lease is signed. It involves effort and commitment. Tenants need to be managed to ensure they abide by the terms of the lease and look after your investment, the property needs to be maintained and bills must be paid,” says Stevens. “These issues must be actively managed. However, if ignored, it can swiftly get out of control. That said, property has proved to be an excellent investment over time.”
With forethought, planning and careful management systems in place, he says that being a landlord can be a richly rewarding way to build legacy wealth for yourself and your family. “As a tenant, every cent that you pay in rent goes towards enabling someone else to grow wealth through property. As soon as you can reasonably and responsibly purchase a property, you should do so. Start small or in partnership with somebody you trust and build from there.”
Supporting Stevens’s stance, the latest PayProp Rental Index reports an upward trend in rental growth: “During the second quarter of 2022, we tracked rental growth of 2.5%, 2.6% and 2.7% in April, May and June, respectively.”
“The last time all nine provinces showed positive year-on-year growth was in Q3 2017,” notes Stevens. The latest figures from the PayProp Rental Index 2022 Q2 are:
- Eastern Cape 4.4%
- Free State 1.9%
- Gauteng 0.3%
- KwaZulu-Natal 3.0%
- Limpopo 4.7%
- Mpumalanga 5.2%
- Northwest 3.9%
- Northern Cape 9.0% *by far the highest of the nine provinces
- Western Cape 3.0%
For those thinking of taking advantage of the recovery in the rental market, Stevens recommends taking some time to consider the following questions:
1. How much is enough?
Property can be an excellent investment, but you need to take a long-term view in order to achieve real value. You also need to be realistic about whether you can afford to be a landlord, Stevens warns.
When doing your sums, ask yourself whether the rent will cover your bond, rates, insurance, and maintenance. You will also need to be able to put extra aside for those times when you might have a vacancy or an expensive repair. “It is inevitable that unexpected costs will arise,” warns Stevens, “so make sure you have budgeted the money and the time for both routine maintenance and emergency repairs.”
2. Do you have the time?
It takes time to market a property and show prospective tenants around. And once your tenants have moved in, you will need to be able to respond rapidly to their requests and complaints. Sometimes maintenance issues cannot wait. If a geyser goes, for example, you need to be there with your plumber as soon as you can to prevent damage to your property and your tenants’ belongings. Good tenants are worth keeping happy, and a quick response is important to them; at the same time, your property is a significant investment, and you want to minimise potential damage. Ongoing property management and maintenance require a significant number of hours and can be difficult if you have a demanding full-time occupation.
3. How will you screen your tenants?
Getting stuck with a bad tenant can be mentally, emotionally, and financially disastrous. Therefore, you must not cut corners when vetting your tenants – thorough credit checks must be done, and all references should be followed up.
“Only with strict tenant vetting and monthly management procedures can landlords have peace of mind that their tenants are likely to pay their rent on time, every time,” says Stevens. “Bear in mind that Just Property rental portfolio managers, for example, look at more than just a credit score – factors like account payment patterns, nature and age of judgements are also considered when vetting tenants.”
Just as essential is a professionally drawn-up lease that is both fair and watertight. A good understanding of South Africa’s landlord-tenant laws is important. These are governed by the Consumer Protection Act, the Rental Housing Act, and the Prevention of Illegal Eviction from and Unlawful Occupation of Property Act, as well as Common Law.
4. Should you hire an outside property manager?
You can choose to manage your rental property yourself or hire a managing agent to do it for you. Managing your rental can be quite taxing, and it’s best to have a professional agency with skilled and experienced individuals doing the work for you.
Services offered should include:
- Property marketing, viewings and tenant vetting that includes the due diligence of credit and other checks before tenants can move in.
- Comprehensive contracts and advice regarding the legal obligations of landlords and tenants.
- Proactively managed rental collection and handling of defaults.
- Prompt attendance to maintenance & management issues that saves you time and money.
- Clear processes, established routines, standardised documentation and regular feedback maintain high service standards.
- The option of rental income insurance that covers tenant non-payment, early cancellation, and legal fees in case of eviction proceedings. We have a product called RENTSECURE that is exclusive to all Just Property landlords and ensures that their retinal income is protected.
“Just Property offers all this and more to our landlords. We are the biggest rental company in South Africa’s real estate market, with a long history and excellent track record. We’ve built on our experience of what landlords and tenants need, so make sure your managing agent matches up!” he laughs, adding that Just Property’s Ultimate Landlord’s Guide is free to all landlords.
“We are very positive about the rental market,” Stevens concludes, “and our agents will be very happy to discuss the outlook in their areas and offer advice, whether you’re a client of ours or not. We truly believe that property offers a unique wealth-building opportunity for South Africans, and we want to make that happen.”
For more information on Just Property, please visit www.just.property or call (087) 583 3333.
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