When the going gets tough, the tough get an agent
Economically we are in a time of fear and uncertainty and many of us will be looking for ways to offset financial risks. Landlords should be aware that renting a property out while lucrative, now comes with even more risk as the economy impacts affordability for tenants. While a managing agent’s assistance means paying extra costs for this service, having an agent in your corner could be the best way to protect yourself and your pocket.
“High risk tenants will become more exposed, but we are even finding that some outstanding tenants – those who always pay on time- are starting to default, as circumstances change economically,” says Natalie Muller, Regional Head of Rentals for Jawitz Properties Western Cape. “Salaries are not necessarily being increased, or by as much, while everything else goes up in price – it is a difficult time.”
There is an option just to vet
The vetting process of tenants, even at renewal stage, as well as throughout their tenancy is essential, and while some landlords may want to manage a rental themselves, they can come to estate agents for assistance in vetting a tenant only. The vetting costs are initially covered by the tenant but for a nominal fee, an agent can monitor the tenant on the landlord’s behalf. “This is definitely an option, but of course having an agent manage your rental property in its entirety comes with even more benefits.” Muller adds.
Managing agents handle all dealings with tenants from the rental payments, follow ups and deposit managing, to inspections and liaising with tenants on any matters. “We assist landlords in checking that their tenants are keeping utilities up to date and are able to see at any point how a tenant is managing – are all their bills paid on time, for example, because they might be paying rent but defaulting elsewhere,” she adds. “But beyond a regular credit check, we also vet a tenant’s employer to find out if the employer sees the tenant remaining at the company for some time. We get the full picture, so we can be sure the right tenant is put in place, and only remains in place if they should be.”
Landlords with mortgage bonds relying on rental income to cover bond re-payments would be wise to consider an agent who can make sure that appropriate tenants are in place. “If your tenant defaults in these types of situations, it is even more difficult. There are also insurance policies that we can offer landlords as part of managing the rental, which add another level of security,” Muller says.
High demand for safety and entry-level rental space
Those who are able, may convert large rooms or staff quarters on a property into living space that can be rented out. There is huge demand in the entry-level rental space, where in some areas landlords are seeing a return of 3.5 – 7.5%. “A converted room with a shower and loo in the Southern Suburbs, Cape Town may go for as much as R5500 or R6000 per month, depending on the exact circumstances. Of course, location is a factor here, but so is security. Landlords may even find that installing better security features is going to attract and sustain the right type of tenant as well,” she says.
As a strained economy can breed opportunistic crime, security features, Muller believes, are really going to become essential requirements. “These improvements will cost to install and maintain, making it all the more important to preserve and ensure your rental income, and the best way to do so, would be to have a managing agent involved,” she concludes.