select
|

Selling or offering your property to rent?

If you’re a homeowner whose job suddenly demands that you transfer to another town – or country – for a while, you could have a tough time deciding what to do with your property in South Africa.




“Many work-related moves these days are only for the duration of a specific project or contract, so it is not surprising that those who have already acquired a property often decide not to sell their ‘home base’, but to rent the property out while they’re away and rent a temporary place themselves in the new location,” says Berry Everitt, MD of the Chas Everitt International property group.


“Their decisions are usually influenced by the degree of difficulty they have had in acquiring the property – saving for a deposit, qualifying for a loan and so on – and their willingness or unwillingness to through that process again. The length of time they have owned the property can also play a role, because high property transaction costs could see them lose money if they sell too soon after buying.”


However, he says, the decision to go about renting property out and becoming a “landlord” is definitely not one to be taken lightly. Offering your property or house to let can carry considerable risks, and it entails additional responsibilities and obligations, so a critical factor in the success of such a plan is the choice of a managing agent you really trust to act in your interests.


Writing in the Property Signposts newsletter, Everitt says the costs of maintaining a rental property – many of them “hidden” – can seriously erode the rental received. “And if there is a sudden downturn in the property market, or a tenant absconds, the financial consequences can be serious for the owner who is also paying rent or another home loan instalment elsewhere.”

The costs that must be considered by the prospective landlord when offering a house to rent include municipal rates, regular maintenance costs (which may be higher than if the owner was living in the rented property), comprehensive insurance, property management (usually 10 to 15% of the monthly rent) and the “turn” costs (cleaning, repairs, painting and advertising when there is a change of tenant).


“Most experienced landlords also build in a vacancy rate contingency of about 5% for safety, depending on the current market, and all of this can absorb up to 40% of the total property rental, so if you then account for a monthly home loan instalment on the property, there is unlikely to be much, if any, profit.”


On the other hand, he notes, the property itself will usually keep growing and appreciating in value, especially if it’s in a sought-after area, and if you already have a lot of equity and a reasonably low home loan balance, it could really be worth your while to keep it and let it out.


“But before you decide either way, you really should consult a qualified property professional who knows the area well and can advise knowledgeably and realistically about rental property levels and property price prospects. If you do then opt for renting your property out and becoming a landlord, an experienced managing agent will also have a much better record of selecting properly-qualified tenants, will see to it that the rental property is properly maintained and will be able to handle evictions promptly and tidily if these should become necessary.”




  Comment on this Article

  Please login to post comments

Post to my facebook wall
  
2000
Characters remaining


    Latest Property News
    • 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.
    • 17 Nov 2017
      It’s been a tumultuous year on many fronts, with socio-political uncertainty setting the tone for much of South Africa’s economic activity yet despite this and seemingly counter-intuitively, the residential property market has held up well.
    • 17 Nov 2017
      The EAAB (the Estate Agency Affairs Board) recently claimed that around 50,000 illegal estate agents could currently be operating illegally.
    • 16 Nov 2017
      Penthouses are synonymous with New York – characterised by high-rise living that is decidedly luxurious and spacious. While exclusivity comes at a price, you can still create a “penthouse” look and feel in your existing apartment or even the upstairs bedroom of a double storey house with some clever design changes and styling touches.
    • 16 Nov 2017
      The area has long been popular with kite surfers and, with escalating property prices in Cape Town itself, is increasingly in demand with home owners who work in town, but are looking to invest in more affordable properties.
    • 16 Nov 2017
      Cape Town’s popularity as a world-class tourist destination has resulted in a spike in the number of homes available for holiday lets and fuelled investor demand for sectional title units with short term rental potential.
    • 15 Nov 2017
      Sappi, one of South Africa’s oldest global companies and a leading global supplier of sustainable woodfibre products, has moved its global and regional headquarters to a new site on the corner of Oxford and 14th Avenue in Rosebank.
    • 15 Nov 2017
      There’s an old saying in real estate that you should seek to make a profit when you buy, not only when you sell – and a large part of succeeding at that endeavour is buying a home in an area with desirable features that will enhance the resale value of your property.
        
    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