RENTAL MARKET – LEVELLING THE PLAYING FIELDS

It’s a good time for landlords to take advantage of the advice of experienced rental consultants when it comes to market-related rentals and retaining good tenants.

Many South Africans today are under financial pressure…from increased transport costs to that of VAT, and in the property rental world, it’s a good time for give and take by both landlords and tenants. But how much has financial pressure actually affected tenants and landlords?

Surprisingly, less than you think.

TPN tenant rental monitor is South Africa’s largest aggregator of tenant rental payment behaviour: “Our numbers confirm that far from falling off any cliff, tenants in good standing declined a marginal 0.47% year on year for the first quarter of 2018.

“Nationally, 82.30% of tenants were deemed to be in good standing during the first quarter of 2018. The best paying tenants are in the R7,000 to R12,000 rent per month segment with a ‘good standing’ percentage of 87.21%. Investors will be impressed with the 71.91% of tenants who paid on time and the limited number of non-paying tenants at just 4.21%.”

INVESTMENT PROPERTY

When looking to buy your first investment property, do your homework well – check that the figures work for you. One of the advantages of working together with a company with both sales and rentals under one roof, is that your sales agent can connect you with a rental agent in their branch - that person can give you a good idea of what returns to expect, and which property would work best for your needs.  

 Property is always cyclical, and as a longer-term investment, will always follow the peaks and troughs. In tougher times as we’re currently experiencing, the savvy investor could well source investment properties which will provide excellent returns. They’re certainly out there, it just takes patience and persistence to find them.

LANDLORDS

Some investors will expect to achieve a rental which covers the bond and other expenses, and of course, from the outset – for the savvy investor - that’s achievable. However, when consumers are under financial pressure, it’s well worth taking advice on market-related rentals. Asking an experienced rental agent is the simplest, most fool-proof way to ascertain an achievable rental for your property – he or she will know and take into consideration the location, demand, condition of your property, and guide you as to the best rental to ensure the best possible return for you. As a landlord, you’ll want to keep that apartment fully tenanted for the entire year, and in tougher times, it’s worth balancing your rental against a potential vacancy.

ANNUAL RENT INCREASES

Once you, the landlord, have secured a good tenant and established a good relationship, it’s wise to retain that tenant. There are a number of ways to do that, but primarily, be sensitive to the current economy, and consider an increase possibly lower than you’d like while riding out this economic trough. The economic wheel will turn, as it always does. 

TPN tenant rental monitor noted, “There appears to be a correlation between escalations and vacancy rates. The good news for investors is that as vacancy rates start to rise, price- sensitive tenants are easily attracted by a lower escalation. And most landlords would agree to having a quality tenant at a lower rent than a vacant property. Or even worse, a delinquent squatter with a higher, but nonetheless, unpaid rent.”

WHAT TOP RENTAL AGENTS SAY

Wakefields’ Pinetown Rental agent Linda Mitchell, is the top rental agent in the Group - top Letting Broker on Earnings for three consecutive years, and top letting broker on Number of Units Let, for two years. In her years in rentals, she’s gained a great deal of insight into the process, and as a professional, considers it important to be very straightforward with both clients and landlords, as to best practice: “In Pinetown today, the bulk of clients want a two-bedroomed townhouse or apartment, with 1,5 bathrooms, 2 parkings, preferably tiles not carpeting, a little garden, prepaid electricity (a must!), and they want to pay between R6000 and R7000. They won’t pay R8000. ” Those who own investment flats, are often focussed on repaying their bonds/levies and so on, but she reminds them that the apartment can only bear X amount of rental, and that it’s far better to have a good tenant paying less, than no tenant at all.

Sanjay Singh of Wakefields’ Gateway branch, says that rentals for a two bedroom, two bathroom unit, fetch R10 000, and that of a one bedroom, one bathroom, R5 000. He says, “Having been in the industry for over 13 years, I feel confident in suggesting the appropriate rental figure to landlords. Landlords are a great deal more savvy nowadays because they go on line to check up on other rentals in the area and, indeed, the block. But so too are tenants. What a landlord asks as rent, isn’t necessarily what he’ll get, so the rental asking price isn’t always a good gauge of the market related figure.”

BOTTOM LINE

Wakefields’ rental agents operate in every suburb in Kwazulu-Natal. They know the areas within the areas, the blocks and their management, and what rentals are being achieved. They also have a very comprehensive method of tenant checks – financial history and otherwise - which gives every landlord the very best chance of having an honourable, good tenancy.