Q: Mark Fraser of Johannesburg asks,
Dear REImag Team,
‘As a property owner and manager of my own rental properties is there perhaps some type of scoring system that can predict future tenant behavior to ensure that my rentals are always paid?’
A: Johette Smuts of PayProp answers
“While a credit score can be a fool proof predictor of future account payment behaviour, the same can’t be said for predicting future rent payment behaviour. Credit scores are designed as a measure of creditworthiness and credit isn’t a feature of rental contracts. It’s increasingly clear that credit checks alone are not adequate in fully understanding the extent of non-payment risk that a new tenant presents.
PayProp has for some time offered a Tenant Assessment Report, designed in collaboration with Compuscan. This report, which has undergone a recent update, now provides a prospective tenant’s rental payment data along with their credit payment data, offering a superior tenant payment profiling metric that is much better at identifying potential bad tenants than a normal credit score. Importantly, the data used is extracted from the PayProp system and is not editable at time of export. Insights are taken on the same day of each month, which makes the results more consistent and accurate.”
PayProp’s own market research points to the need for extra care in selecting tenants. The PayProp Rental Index for Q1 2018 outlined that one in every four tenants in South Africa doesn’t fulfil their rental obligations. Nationally, we measure an increase in the percentage of tenants in arrears from 18.5% in April 2017 to 23.2% in March 2018. This means that only 76.8% of tenants pay their rent in full every month – and one in four don’t.”
With tenants increasingly defaulting on their rental payments, they too can benefit from access to their own tenant risk information. PayProp encourages agents to share the PayProp Rental Risk Rating, included in Tenant Assessment Reports, with their tenants. There’s a perception that the public needs to be excluded from their credit history information – but if consumers are aware of their credit rating, then they can actively work at maintaining or correcting it.