Tips for first-time land­lords

Lesotho Times - - Property -

IR­RE­SPEC­TIVE of whether it is an in­vestor who has found an ex­cel­lent in­come-gen­er­at­ing rental prop­erty or a home­owner who is rent­ing out a cot­tage on their prop­erty, there is more to be­ing a land­lord than sim­ply col­lect­ing a rental cheque each month.

This is ac­cord­ing to Adrian Goslett, re­gional di­rec­tor and CEO of RE/MAX of South­ern Africa, who says own­ing and let­ting out a rental prop­erty can of­ten be an in­volved process that can de­mand a rea­son­able amount of time, de­pend­ing on the cir­cum­stances.

Goslett says al­though the idea of be­com­ing a land­lord and earn­ing some ex­tra money can be an al­lur­ing en­deav­our, it is vi­tal that the owner of the prop­erty be fully pre­pared for what be­ing a land­lord en­tails.

“Do­ing some re­search and un­der­stand­ing what is re­quired as a land­lord will put the owner of the rental prop­erty in the best po­si­tion to han­dle what­ever may come their way and make for a suc­cess­ful ven­ture,” he says.

Goslett shares five key el­e­ments to con­sider when en­ter­ing the prop­erty rental busi­ness:

1. Prop­erty is a long-term in­vest­ment The re­al­ity is that while a rental prop­erty may pay for it­self over the long term, ini­tially the land­lord will prob­a­bly have to put in money to cover all the costs of own­ing the prop­erty.

“While it does hap­pen, it is rare that the rent amount will cover all of the costs in­volved in own­ing the prop­erty from day one,” says Goslett.

“Whether it is a sec­tion of the home loan re­pay­ment that is not cov­ered by the rent amount or main­te­nance costs, a land­lord will more than likely have to put money into the prop­erty each month.”

He says own­ing a rental prop­erty is not a get-rich-quick busi­ness ven­ture, but over time as the rental amount in­creases and the as­set ap­pre­ci­ates in value, it can be used as a cor­ner­stone on which to build wealth.

“When it comes to see­ing a profit from a rental prop­erty, it is best to view it as a marathon - not a sprint.”

2. Know the num­bers When it comes to own­ing a prop­erty - the home loan re­pay­ment is not the only ex­pense. Po­ten­tial land­lords need to con­sider aspects such as gen­eral main­te­nance, in­sur­ance, rates and taxes and, pos­si­bly, the ser­vices of an at­tor­ney or a pro­fes­sional rental agent.

Goslett says an at­tor­ney is a valu­able as­set to a land­lord when it comes to draw­ing up lease agree­ments, giv­ing sound ad­vice re­gard­ing the land­lord’s le­gal rights and re­spon­si­bil­i­ties, and deal­ing with de­fault­ing ten­ants.

A rental agent will take care of screen­ing and vet­ting ten­ants, col­lect­ing the monthly rental and gen­eral man­age­ment of the prop­erty.

“It is ad­vis­able for land­lords to set aside a con­tin­gency fund in or­der to deal with the up­keep of the prop­erty, along with any other un­fore­seen cir­cum­stances or re­pairs that re- quire at­ten­tion,” he says.

“By know­ing the num­bers and bud­get­ing for ex­pen­di­ture, the land­lord will be able to al­lo­cate money in the cor­rect man­ner.”

3. Have a check­list The check­list will be used when a ten­ant moves in and when they move out. It will in­clude all items that the land­lord will need to go over care­fully with the ten­ant when hand­ing over the keys.

Goslett says a check­list will en­sure that noth­ing is over­looked and that all im­por­tant aspects that need to be ad­dressed are seen to. It is also far eas­ier to check the prop­erty for any po­ten­tial haz­ards or things that need to be fixed be­fore the ten­ant moves in, rather than when they are al­ready there and set­tled.

He says items to add to the list could in­clude the fol­low­ing: Check that the stove is in work­ing or­der. All lights and elec­tri­cal points. En­sure the geyser is work­ing cor­rectly. Check for any leaks or damp that needs wa­ter­proof­ing. Check that the gut­ters are un­clogged and clear of de­bris. Hav­ing a check­list will en­sure that the land­lord is well-or­gan­ised for years to come, says Goslett.

4. En­sure all con­tracts are de­tailed Goslett says to avoid any fu­ture com­pli­ca­tions or mis­un­der­stand­ings, all stip­u­la­tions should be clearly stated up­front in a de­tailed con­tract.

The more de­tailed the con­tract and the more is­sues that it deals with, the smoother the rental will be.

“If all the im­por­tant el­e­ments are in­cluded in the doc­u­ment there will be no ar­eas that are left open for in­ter­pre­ta­tion,” he says.

“Aspects such as ac­cept­able ten­ant be­hav­iour, break­age costs, pre­ferred method of pay­ment and date that the rental is payable by should be all in­cluded.”

5. Se­lect­ing the right ten­ants Goslett says ten­ant se­lec­tion will have a mas­sive im­pact on the fi­nan­cial suc­cess of the prop­erty rental. For this rea­son, each ten­ant should be care­fully vet­ted be­fore they rent out the prop­erty.

The land­lord should en­quire about de­tails of the ten­ant’s pre­vi­ous rental his­tory, rea­sons they are mov­ing, their place of em­ploy­ment and in­come.

Land­lords should con­tact the given ref­er­ences in or­der to ver­ify as much of the in­for­ma­tion as pos­si­ble.

“The ten­ant se­lec­tion process is where the ser­vices of a rental agent will come in handy, as they will be able to pro­fes­sion­ally vet all pos­si­ble ten­ants,” says Goslett.

“While it is not le­gal to dis­crim­i­nate against any ten­ant, it is also not wise to sim­ply ac­cept ten­ants on a first-come-first-serve ba­sis.”

He says while own­ing a rental prop­erty and be­com­ing a land­lord can be hard work, it is also an op­por­tu­nity for the land­lord to cre­ate wealth over the long term.

Goslett says the key el­e­ment to suc­cess is to al­ways view prop­erty in­vest­ment with the fu­ture in mind. — Prop­erty24

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