Mind the complexities when investing in holiday rental property
Many property owners soon realise that short-term rentals, especially holiday rentals, are complex and perhaps best managed by a skilled rental agent. It requires a lot of administration and a hands-on approach.
The rise in popularity of Airbnb has seen somewhat of an explosion of people investing in short-term rentals as property owners look to capitalise on what is often seen as lucrative rental income. While the income can be attractive, there are many complexities and pitfalls, says Natalie Muller, sales and rentals manager for Seeff Atlantic Seaboard and City Bowl. According to an Airbnb report released in October last year, 43 000 homes in South Africa are listed on the site (about 17 000 in Cape Town) and the typical host earns R28 000 per annum based on 19 nights a year.
Muller says property owners need to first see to it that they are legally compliant and then, to really ensure they can meet their income targets, attract good calibre guests with a top quality product. She puts this into perspective by using Cape Town as a case study.
Cape Town is the busiest tourist city on the African continent and regularly features as a top destination, the latest example being its nomination as one of the world's most beautiful cities by CNN Travel. The tourist season runs from around October to April annually and the city attracts people from across the country, along with a lot of foreigners who often spend long periods in the city to escape the cold European winter.
Town and city councils have by-laws which regulate the use of the property. In the case of Cape Town, there is a comprehensive
"Guest Accommodation Policy" drawn up pre-2010 for the Soccer World Cup, which regulates the zoning and requirements. Guest accommodation is also regulated in terms of the Municipal Planning by-law of 2015. You can generally operate a B&B from a full title house without prior consent, but subject to certain conditions (like not renting out more than three rooms), but it is more complex when it comes to sectional schemes.
Sectional title schemes
Sectional schemes are more challenging, and would only be permitted if zoned GR2GR6, which most of Cape Town properties are. If not, permission is required from the city's Development Management department. The Sectional Titles Act and the Sectional
Titles Schemes Management Act (STSMA) also empower a body corporate to make or amend appropriate rules and holiday rentals could, therefore, be blocked if problematic.
The body corporate must also be informed of names and ID numbers of all occupants, and tenants must be informed of rules including security arrangements and noise (which can be problematic with short-lets).
Agreement and governance
Janine van Heerden, rentals manager at Seeff Hout Bay and Llandudno, says that it is important to have a detailed short-term lease