A property manager’s core function is ensuring quality tenants for landlords with timeous rental collection. A vacancy is a like a festering sore for a landlord and costs them for every day lost rental income. It is common practice for landlords to factor in a one-month vacancy in their annual rental income projections to allow for renewals and also defaults. The benefits securing a quality tenant with a good screening process are immeasurable.
Shaun du Bois, Just Property principal in Pietermaritzburg says, “An empty property is no different to an empty shop and has a devastating effect on an investor’s return on investment (ROI). So often we have landlords approaching us insisting on an inflated rental amount based on their bond or other personal circumstances. The reality is that every month a property sits empty the loss on ROI is approximately 8%.”
He says tenants have vast online resources to compare and investigate what a fair rental price is and by over pricing the property the owners are shooting themselves in the foot.
According to the latest TPN Rental Monitor the “sweet-spot” still remains in the affordable rentals space between the R3 000 and R7 000 per month rental levels. These tenants make up the bulk of the market at 57% market-share. Vacancies in this category are also the lowest at 4.31% and landlords enjoy above average payment behaviour with 86.44% in good standing.
There is also sometimes a ‘void’ in-between change of tenants as a result of the tenant moving or even a landlord selling the property. Tenants normally have a 30-day notice in their contracts before their lease expires and they normally have the option of renewing or departing.
Du Bois goes onto say if a landlord wants to sell a property with a tenant in it, then a quality lease will finely balance the owners right to sell and market a property without subjecting the tenant to a barrage of viewings and show days. He says, ‘any rental lease must supersede the potential sale agreement and the new owner must be bound by the conditions of the lease. So if the new owner inherits the lease then the ‘Huur gaat voor koop’ law is applicable.’
Du Bois goes onto say, ‘It is helpful to include in any sale agreement that the tenant’s deposit if held by the owner be deducted off the sale price. With the lease and obligations of the lease passing to the new owner so does the obligation to refund the deposit. By deducting the deposit amount from the sale price the new owner protects himself. It makes no sense to stubbornly hold out for a few hundred rands only to have the property sit empty. Owners should do the sums and carefully consider their options.’
Paradoxically at the same time, landlords should also not place a bad tenant simply to fill a unit. The cost of evictions for unpaid rent, damage to property and unpaid utilities will far outweigh waiting a month for the correct tenant.
Here are good quality ways to fill vacancies quicker and for longer:
- Ensuring you have a tenant in good standing who pays on time every month meaning better cash flow for landlords
- Screening tenants properly to ensure you have responsible tenants who look after your property better meaning lower maintenance and repairs for landlords and less hassles on property management which can free up more of your time
- Renting to tenants for longer periods which can increase the value of the investment for the landlord
It is critical to deal with an experienced agent who will have the necessary knowledge and skill to price the property correctly.
Paul Stevens CEO of Just Property says that, “Estate agents are a far cry from the industry it was years ago. Agents are now obligated to not only obtain qualifications but also to maintain these annually. The small fee a agents charges is minor compared to the cost of placing a tenant.”
About Just Property
Just Property is a property wealth creation company offering a full spectrum of professional services in residential and commercial sales, letting and property management, new developments and investor education across the country since 2000. With over 100 franchise offices in South Africa and Namibia, we draw on our extensive industry experience to assist you to purchase and manage property in South Africa.
Just Property was recently awarded The International Property Awards as the best Letting Agency and highly commended Real Estate Agency in South Africa for 2015/2016.
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Contact Jean Botha
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