Understanding the rental market

Keep it painted white, spend money on updating kitchens and bathrooms and don’t invest in a property at the outer limit of your budget in the mistaken belief that rental income will automatically cover your bond, rates and levies.

That’s the word from Lorraine-Marie Dellbridge, the new rentals manager at Lew Geffen Sotheby’s International Realty in Cape Town’s southern suburbs.

She says even property owners who work through agencies need to be knowledgeable about the rental income potential in their areas.

“Owners who understand the rental market and what they can reasonably expect to earn, are invariably our best landlords,” says Dellbridge.

“You can do this by checking newspaper ads and looking at the online classifieds – as well as working with agents who know the area.”

Dellbridge says it’s also not a bad idea to visit a couple of similar properties to let in the area to look at their prices compared to the offering and the finishes – especially if you’re a first-time investment property owner.

“We can’t emphasise to owners enough that they must ensure that everything is pristine, that walls are unmarked and that carpets are cleaned. Things like missing chunks of wall plaster from nails that have been removed will create a perception that will adversely affect the income potential of a property.”

Dellbridge says if a rental property has a garden, it should not be overly elaborate or contain temperamental plants that need special care unless you intend to pay for a specialist company to look after it.

“Gardens should be neat and low maintenance, because it can end up costing the property owner a lot of money when a tenant leaves, to restore a high maintenance garden to its original state.”

Lew Geffen, chairman of Lew Geffen Sotheby’s International Real Estate says although a rental property is an investment, owners need to understand that they cost money too.

“Some tenants might not be as careful with a property as they would be if they owned it, so a certain amount of wear and tear is to be expected. Owners also need to set aside funds for major breakages such as geyser failure or leaking roofs, because it’s unacceptable for tenants to be left for days or weeks without hot water.

Geffen says many investment property owners also erroneously believe that if they spend vast amounts of money redoing entire properties, they’ll get their money back quickly with much higher rentals.

“Rather spend a smaller amount judiciously, because in most instances rental isn’t even likely to cover a bond, rates and levies, especially if it’s a new buy with a large amount of capital to be paid off.

“After a few years of servicing a bond it’s far more likely that rental income will service all costs, but it’s not the thought you should be going in with if you’ve just bought the property – especially if you’ve spent tens or hundreds of thousands more renovating.”

Geffen agrees that the best and most cost effective walls colour for rental properties is white throughout, and if a property is older, advises spending a bit of money updating kitchens and bathrooms to increase rental earning potential.

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