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Writing on the wall for bad tenants

Residential rentals are rising due to a growing shortage of rental stock and things are looking up for landlords.
 
So says Jan Davel, MD of the RealNet estate agency group, who notes that only about one in 10 properties being purchased at the moment is intended as an investment property that will be let.
 
“What is more, many homeowners who were virtually forced into becoming landlords when they could not sell their properties during the recession are now able to find buyers, so that stock is leaving the market as well.”
 
At the same time, he says, the demand for rental homes continues to rise, not least because many consumers still have too much debt to qualify for a home loan and must rent – unless they are young and single and can perhaps continue to live with their parents.
 
And as a consequence, landlords have been able to raise rentals quite substantially over the past 12 months, as shown by the latest figures from PayProp, a company which provides an online transaction platform for rental property managers (see www.payprop.com) These show that:
 
*The national average residential rental grew 10,8% to R5787 at end-September 2013 from R5221 a year previously;
 
*The dominant rental range is still R2500 to R5000 a month, but the fastest growing price band is R5000 to R7500, followed by the R7500 to R10 000 range;
 
*The average “cost of ownership”, or percentage of rental income that a landlord has to sacrifice to keep and maintain a rental property, is 27,8%.
 
“This does not at all mean that landlords can get carried away,” cautions Davel. “They need to bear in mind that their tenants are also probably struggling to keep up with regular increases in electricity, food and transport prices, not to mention higher health and education costs, and that it is worth moderating their rental increases somewhat if they would like to hold on to a good tenant that pays on time and looks after their property.”
 
However, he says, tenants need to know that landlords are definitely not hard up for their business at the moment, or inclined to tolerate deliberate damage to their properties. “In many areas, it does not take more than a few days now for a landlord to fill an empty rental unit, so tenants really do need to be more meticulous about paying on time and keeping the property in good condition.
 
“They should also be aware that most landlords are now asking new tenants for the equivalent of two months’ rent upfront as a damages and utilities deposit, so it could prove very costly if they default and have to move.”
 
And finally, Davel says, most landlords are now well aware of the need to screen prospective tenants very carefully with regard not only to their credit record but also their payment history with other landlords, so they could find it very difficult to secure a new lease if they do have a spotty payment profile.


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