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Thinking of becoming a landlord? Here is what you need to know

While owning a rental property can be a lucrative business endeavour, letting out property for the first time and becoming a landlord is not for everyone, says Grant Rea, RE/MAX Living Rental Specialist, who works in the Cape Town City Bowl, Atlantic Seaboard and Southern suburbs.

“There is far more to the letting process than just signing a rental agreement and collecting the money. Those who are thinking of letting out a property need to know what they are getting into upfront and consider a few vital elements before they take the step to becoming a landlord,” says Rea.


He notes that the top five aspects that every potential landlord should consider are:

·         Do I manage the rental myself or use a rental agent?

·         Do I want to rent long term or furnished short term?

·         What repairs or maintenance are required both now and in future?

·         How secure is the property?

·         Do I know enough about the legalities of letting to manage the risk of letting my property?

According to Rea if the landlord decides to manage the rental property themselves, they will need to do their homework and ensure that they know the rental process well. He notes that they will also need to manage their time effectively, as maintaining a rental property and ensuring that everything runs smoothly can take time and energy.   “There is also the matter of resolving any legal issues, adhering to legal requirements and following the correct procedures. These matters can be complicated, especially if letting out property is not the landlord’s sole occupation,” advises Rea.  “A rental agent can be a valuable asset to landlords, as they understand the rental process, lease terms and the reason for them. As an intercessor for the landlord, an agent will enforce the terms of the lease and ensure that tenants do not abuse their privilege. Boundaries are important and tenants need to understand the business setting of the relationship, along with their limitations and obligations. If a dispute does arise, a rental agent will have the expertise to be able to resolve the matter. It is important to act decisively and without delay should the tenant breach the rental agreement.”

He adds that most rental agents will also have well-established accounting systems to keep track of rental payments and home inspection processes to ensure that the property remains in the same condition in which the tenant received it. Another important service that a rental agent provides is the vetting of potential tenants. Tenant selection is a vital element to the financial success of the rental. “Factors that will need to be considered during the vetting process are the tenant’s level of affordability, in other words can they afford the rental each month, do they have a clear credit history and are they gainfully employed. It is also important that the person is trustworthy and compliant and will look after the property well. This can be determined by contacting the references provided by the tenant,” advises Rea.

He says that once a tenant has been selected and it is time to enter into a contract, it is imperative that the lease agreement is structured correctly and that it is understood by all parties. The lease agreement should be highly detailed and contain all the necessary stipulations upfront to avoid any complications or misunderstandings regarding the responsibilities of each party. The agreement must contain all important elements to adequately cover both parties’ rights. No aspects should be left open to interpretation or assumption. “The lease should deal with all details regarding the tenancy such as where the deposit will be held and how disputes between the two parties will be addressed,” Rea explains.

As a general rule, Rea says that the landlord should request a deposit of at least two months rental and no less. The landlord must ensure that the deposit in held correctly as prescribed by the Rental Housing Act. “With less than two months deposit there may not be enough security for the owner to cover non-payment of rent and any necessary repairs or damages left by the tenant,” says Rea.

Adrian Goslett, Regional Director and CEO of RE/MAX of Southern Africa, says that landlords will need to have money set aside for unforeseen circumstances such as issues that are not covered by the home insurance and legal costs should the tenant default. There will also be the cost of drawing up lease agreements and seeking legal advice. Rea points out that another expense that the landlord would have to carry is the general upkeep and maintenance of the property. He advises that between 5% and 8% of the monthly rental amount should be earmarked for maintenance.

“Although becoming a landlord can be hard work, it is also possible for it to be the stepping stone to creating wealth over the long term. The key element to success is to always view property investment with the future in mind,” Rea concludes.


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