select
|

What landlords need to know

With the ever growing demand for rental properties in the current market, many opportunities have presented themselves for property investors with rental portfolios or those wanting to purchase their first buy-to-let property, says Adrian Goslett, CEO of RE/MAX of Southern Africa.

However, he notes that although many rental properties are yielding good returns on investment, it is important that potential landlords consider a few aspects before venturing into the property rental game because as with most investments, purchasing a buy-to-let property is not without its risks.

Consider affordability and the financial risk
According to Goslett, the first step for an aspiring landlord is to consider what they can afford financially, bearing in mind that there may be some months that the rental property stands vacant. “It is important that the financial implications are measured and that the landlord is not reliant on a tenant occupying the property at all times,” says Goslett.  “It is not just the bond repayments that the landlord will have to pay, but also levies, rates and taxes and maintenance of the property. While in the case of a sectional title unit, the body corporate will have some responsibility of maintaining the property, certain aspects will be for the landlord’s account. The landlord will also need to have a savings account for unexpected repairs that may not be covered by insurance. The savings will also need to cover general upkeep of the property such as painting. There may also be the cost of marketing and advertising the property to potential tenants.”

Different types of properties cater to different markets

Goslett says that the demand for certain types of properties will vary from area to area. He notes if a landlord wants to purchase a rental property in a particular area, they will need to research which types of properties are in the most demand and achieving the best rental returns. “Location will also play a vital role in that rental properties that are situated within easy access to public transport and closer to amenities such as shops, schools, universities and business districts will be in far higher demand. This is because generally tenants will want a shorter commute to their place of business and many students may have to walk or use public transport to get to their campus if they don’t have their own car,” says Goslett.

Who will manage the property?

A landlord will need to consider whether they have the time to manage the property themselves or if they need to hire a management agent. Goslett says that although hiring a management agent may be an additional cost, the service they provide will allow the landlord to reap the benefits owning a renting property, without having to deal with the day-to-day administration issues. In cases where the rental property is located in another region or province, a rental agent can provide a valuable service that saves the landlord in travel costs. For a percentage of the rental income, a reputable rental agent will assist the landlord with advertising the property to rent, screening potential tenants and undertaking full credit checks as well as drawing up the necessary lease agreements among other services.

Rental pricing is crucial

Another aspect that a rental agent can assist with is ascertaining a fair rental price. The achievable rental potential of any property will largely be determined by the average rental prices of properties with the same or similar offering in that area. Determining this figure will give the landlord an indication of the rental they can expect to earn, which in turn will help to establish whether the investment is worthwhile. A rental agent that has a solid working knowledge of a specific area will be able to accurately determine a rental figure that is market related. “Rental pricing is crucial because if the rental is over-priced it will chase away possible tenants and increase the chance of the property sitting vacant.  A competitive rental will ensure that the property is rented out within a reasonable time period and that it continues to attract tenants,” says Goslett.

Seek the advice of a professional

If a landlord chooses to manage the property themselves it is advisable that they seek the advice of an attorney or property professional to ensure that the legalities of all documents or agreements with tenants are within the scope of the law. Lease agreements or legal documents that are incorrectly drawn up can result in costly disputes that will erode the possible return on a rental property.  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 and date that the rental is payable should be included. An attorney or rental agent can also assist with collection of rent and a letter of demand should the tenant default on the agreement.

“Purchasing and letting property continues to be a sound investment option provided the principles of buying a property are adhered to. A rental property portfolio can be a very profitable way of realising returns on your property investments, however, it is imperative that potential landlords carry out as much research as possible to allow them to make the most informed decision,” Goslett concludes.


  Comment on this Article

  Please login to post comments

Post to my facebook wall
  
2000
Characters remaining


    Latest Property News
    • 22 Nov 2017
      The end of the year is fast approaching, and so are all the travellers, tourists and holidaymakers. For those who live near or own a property in a holiday-hotspot, the festive season also brings with it an abundance of short-term rental opportunities. Its a great way for property owners to make a few extra rand for their own holidays or to put towards their savings.
    • 21 Nov 2017
      The buying process is over, and the moving truck has delivered your household goods to your new property. Now it’s time to unpack and turn your new house into a home.
    • 21 Nov 2017
      When an offer to purchase a property is signed by both buyer and seller, this constitutes a binding agreement or “Deed of Sale” between the two parties. However, in most cases the “standard contract” might not be enough to cover all the specifics pertaining to the sale. The agreement may require some additions or alterations to clauses, which needs an expert hand in the drafting of such
    • 21 Nov 2017
      As more and more South Africans look to invest in property abroad, Spain is offering them one of the best deals in global real estate.
    • 20 Nov 2017
      Since 2012, sectional title complexes have been leading the South African property market, not only in terms of price growth, but sales volumes as well. Remaining relatively strong, even in the face of 2017’s political and economic turmoil, experts say this market segment could offer valuable insight into South Africans’ property purchase priorities.
    • 20 Nov 2017
      Regardless of whether you are purchasing your first start-up home, downsizing or moving in with roommates, finding ways to maximise small spaces can be a big advantage, says Adrian Goslett, Regional Director and CEO of RE/MAX of Southern Africa.
    • 20 Nov 2017
      Property valued at approximately R1 billion is on High Street Auctions’ sales floor during the month of November, including the much-anticipated sale of the Tshwane Mayoral Residence and the land occupied by one of South Africa’s oldest operating gold mines.
    • 17 Nov 2017
      FWJK has announced the launch of its latest residential brand, the Lil’ Apple, which will be launched simultaneously in two developments in Cape Town and Umhlanga totaling 600 apartments. The Lil’ Apple is set to be a brand of FWJK’s New York style apartments which will be rolled out nationally.
        
    X
    Subscribe to the MyProperty Newsletter

    Name  
    Last Name  
    Email Address  
    Email Frequency
    select
    X
    Share this Page

       
    For Sale Property
    Rental Property
    More Options
    About
    Connect with us
    FEEDBACK