Struggling to sell and thinking of renting out your property?
The persistently high interest rate has put a dampener on the housing market, resulting in fewer buyers and properties taking longer to sell in certain areas.
For sellers who want or need to move for whatever reason, this might pose a dilemma, especially if there is a mortgage loan on the property.
Property owners with a home loan who are struggling to keep up with their bond repayments may also consider renting out the property until their financial position improves. One of the benefits of property ownership is the ability to rent out your home in part or in full while still retaining the asset. Whatever the reason, Seeff’s rental agents say that it is important to follow the correct procedures.
Before you make the final decision, you should first investigate how much rent you could charge. Each area generally has price bands. The more expensive the rent, the harder it can be to find a tenant. It is, therefore, best to price your rental to fall within the price band of other rental properties in the area.
By correctly pricing your rental property, you will not only attract more tenants but will likely be able to keep it occupied with a lower risk of tenants wanting to move out to find cheaper accommodation.
Seeff says that it is also advisable to set aside some funds in case of an emergency. You must also keep the property insured. If you are renting it out as furnished, then you must insure the content as well. It is recommended that you remove any valuable or sentimental items or fittings.
Tenant verification is critical. In this regard, credit and affordability checks must be done. A background reference check is also advised so that you have some insight into the person who will be occupying your property.
A security deposit is vital. These days anything upwards of one to two months is the norm. It must be invested in an interest-bearing account to the benefit of the tenant. You may not use any of the funds during the lease. Only at the end of the period can you access the funds to cover any rental arrears or damage.
Seeff says further that you must be careful of tenants who offer to pay rent in advance for a number of months so that they can circumvent the recommended verifications. Many scammers use this to gain access to rental properties, and it might be the last time you see any rent, according to Steve van Wyk, licensee for Seeff Centurion.
You can rent the property out for any period. Short-term rentals tend to be financially more lucrative, but come with a risk that you might have periods without a tenant. The property will also need to be furnished and stocked with basic necessities. Long-term tenants usually look for unfurnished. If you are not taking your furniture with you, you may need to store it.
Generally, the tenant should have full use of the property unless they specifically agree that you can store stuff in the garages, for example.
A solid rental agreement that protects your interests and sets out the duties and obligations of the landlord and tenant, as well as breach of lease conditions and procedures, should be drawn up and signed by both parties. This should be done even if you are only renting out part of the property.
The contract must set out the duration of the lease, the rental amount, when and how it must be paid, and the conditions of use of the property. If it is a sectional title or estate property, then the tenant must be given a copy of the rules of conduct. Be sure to point out specific arrangements that may apply, such as parking, visitors, and noise.
An incoming property inspection must be done, detailing any damage or defects and must be signed by both parties. It is advisable to inspect the property during the lease period, but this must be done by prior arrangement with the tenant. You cannot use spare keys to enter the property at all, nor can you simply arrive at any time. At the end of the lease, another inspection must be done and compared with the incoming inspection.
Be sure to also speak to a tax consultant because the rental income will be subject to tax. The income must be added to your normal income. Certain expenses related to the property can, however, be deducted. Visit the SARS website for more information.
Bear in mind that in terms of the CPA (Consumer Protection Act), the tenant can vacate the property before the end of the lease, provided they give proper notice as set out in the Act. As a landlord, you will, however, be entitled to charge a reasonable amount to cover the costs of sourcing a new tenant, any loss suffered, as well as any repairs needed.
Managing a rental property requires time and administration. You will need to check that the rent is paid on time and provide certain paperwork to the tenant, such as a copy of the signed lease, rent invoices, and so on. It is important to act immediately if the rent is overdue and to follow due process. Evicting a delinquent tenant can be a nightmare in terms of time, stress, and costs.
If you are thinking of using a rental agent, which Seeff recommends, make sure you choose someone with a track record and knowledge of the area. You can choose for the agent to only handle the tenant sourcing and perhaps the incoming inspection or for them to manage the property as well. This is especially useful if you are not living in the area or are very busy.
Writer: Gina Meintjes
