Landlord rental income protection

With the constant flow of tenants entering the rental market, it is not very hard for a landlord to find someone who is willing to rent their property. However, just because the tenant is willing to rent the property, doesn’t mean they should, says Jerry van der Merwe, Broker/Owner of RE/MAX Proprentors, whose offices specialises in rental properties and tenant selection in the west and north rand area.

He notes that with recent changes to the South African law pertaining to landlords and tenants, along with the generic risk that is inherent when letting out property, it is important for a landlord to make sure that they select the right tenant. “Eviction of a defaulting tenant can often prove to be a complicated and costly exercise, so selecting a suitable and reliable tenant from the outset is paramount to the success of a buy-to-let investment,” says van der Merwe. “The landlord should never base their decision merely on gut-feeling, but rather on the results of a full background check. This is where services of a specialised rental agent become invaluable.”
Van der Merwe explains that a rental agent such as those at RE/MAX Proprentors will vet possible tenants by performing a full credit record check with credit bureaus such as ITC, as well as check references from previous landlords and get confirmation of employment. Once this process is complete, a comprehensive file of each tenant will be given to the landlord for selection and approval before any lease is concluded. “This gives the landlord the best possible chance of selecting a tenant who is not going to default. However if they do, a rental agent can assist the landlord with a strategy to deal with the situation in the most effective manner,” says van der Merwe.
He says that for landlords who choose to do their own property management and rental collection, RE/MAX Proprentors offers the unique service of a once-off lease. A rental agent will list and market the property and vet possible tenants through the normal process, however once a tenant has been found, the responsibility of managing the property will be handed back to the landlord.
According to van der Merwe, for further protection against defaulting tenants, landlords have the option of taking out a Landlord Protection Policy (Rental guarantee). The policy guarantees the monthly rental income, covers legal costs and provides the necessary qualified legal resources to achieve tenant eviction if required. “It is advisable for any owner of a fixed property who enters into written lease agreements for residential purposes to have some kind of income guarantee. The premiums are 3.5% of the monthly rental income, which can be deducted from the rental income when determining a landlord’s tax position. The policy provides cover for loss of income for up to six months and covers legal fees of up to R120 000. This will alleviate much of the emotional strain when dealing with a tenant who is no longer paying their rent,” says van der Merwe. 
Adrian Goslett, CEO of RE/MAX of Southern Africa, says that if a landlord decides to use the services of a rental agent, it is important that they select a real estate agent that deals specifically with rentals, due to the often intricate laws surrounding the relationship between landlords and tenants. “It is advisable that landlords use an agent who deals with rentals as part of their normal daily business practise,” says Goslett.
Leasing a property without the assistance of a rental agent can be a very time consuming and labour intensive exercise. “However, a specialised rental agent can ensure that the process of owning and renting out a property is far easier and will therefore provide the landlord with peace of mind,” van der Merwe concludes.

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