Top tips for first time landlords

Regardless of whether you are an investor who has found an excellent income-generating rental property or a homeowner renting out your property, a cottage on your property or an extra room in your home, meeting the requirements of being a landlord is more intricate than simply signing a lease agreement and collecting the monthly rental fee, says Adrian Goslett, CEO of RE/MAX of Southern Africa.

“Owning and renting out a property can be a rather complex process that can take a fair amount of the landlord’s time, depending on the situation,” he says. “For this reason it is highly important that those considering becoming a landlord or who have already become one, consider a few aspects to help them along the way.”

Goslett provides first-time and potential landlords with five key elements to consider when entering the property rental business:

1.   Have a clear timeline set in place

While there may be some investors who are able to find a rental property that can generate a rental income that covers all the costs, generally this is not the norm. A rental property may pay for itself in the long run, perhaps once the bond is paid off or the market booms, but initially there will be a cost involved in owning a rental property. This cost could be the remainder of the bond repayment or maintenance costs, but there will be a cost.

Goslett says that is always important to remember that property should be viewed as a long- term investment - regardless of whether the buyer has bought the property to live in or rent out. “Property is a solid, appreciating asset that can be used as a cornerstone for wealth creation, but it is not a get-rich-quick purchase. Turning a rental portfolio into a profitable business is more like a marathon than a sprint,” says Goslett. 

2.   Run the numbers

It is important to remember that the bond repayment is not the only expense when it comes to a rental property.

“Landlords will need to factor in expenses such as general maintenance, insurance, rates and taxes and possibly the services of an attorney or a professional rental agent. The services of an attorney will be very useful when it comes to lease agreements, defaulting tenants and advice on the landlord’s legal rights and responsibilities. A rental agent will also be useful for screening possible tenants, collecting rent and managing the property,” says Goslett.

He notes that ideally, a landlord should be setting money aside in a contingency account for the general upkeep of the rental property or if anything requires fixing. By doing the math and budgeting for expenditure, the landlord will be able to allocate money in the correct manner.

 3.   Have a checklist

Goslett says that essentially the checklist needs to include all the items that should be checked before a new tenant moves into the property. Having a list will save time and ensure that everything that needs to be checked is gone over carefully with the tenant. It is also far easier to check the property for any potential hazards or things that need to be fixed before the tenant moves in, rather than when they are already there.

He notes that items to add to the list could include:

•         Check that the stove is in working order
•         Check all lights and electrical points
•         Ensure geyser is working correctly
•         Check for any leaks or damp that needs waterproofing
•         Check that the gutters are unclogged and clear of debris

Having a checklist will ensure that the landlord is well-organised for years to come.

4.   Utilise and have detailed contracts

Having all stipulations clearly stated upfront in a detailed contract will help to avoid any misunderstandings or complications with tenants in the future. The more detail and issues that are covered in the contract, the smoother the rental will run. It is important that all elements are included in the document so that there are no areas left open for interpretation. Aspects such as acceptable tenant behaviour, breakage costs, preferred method of payment and date that the rental is payable should be included.

5.   Choose the right tenants

While it might be tempting to rent to a friend or family member, if anything goes wrong it could have a huge negative impact on the relationship. An acquaintance or work colleague could be the perfect tenant, as the landlord will have some background information and an idea of what they are like. Goslett says that when renting to a stranger, landlords should enquire about details of their previous rental history, reasons why they are moving, their place of employment and income. It is essential that landlords contact the references given and try to verify as much of the information as possible. While it is not legal to discriminate against any tenant, it is also not wise to simply accept tenants on a first-come-first-serve basis. A rental agent will be a valuable asset when selecting the right tenant.

 “While not always an easy endeavour, owning a rental property and becoming a landlord can be a financially rewarding venture. The golden rule however, is that the principals of property investment are adhered to and the property is viewed as a long-term investment,” Goslett concludes. 

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