Growth in rental market ensures record year for industry
A CONSTANTLY g rowing demand for rentals in all areas of the Peninsula has led to a record year for the industry, according to Greeff rentals principal Glenda Taylor.
“The demand is particularly high in the R8 000 to R15 000 a month bracket, and that’s where there is a huge shortage in supply,” says Taylor, whose division is also managing a significant number of homes that are being let for between R45 000 and R65 000 a month.
“These are mostly large luxury homes in areas like Constantia, with four to five bedrooms, ample entertainment space, staff quarters, swimming pools and expansive grounds. There has a been a shift in clientele from corporate to private. Corporate budgets are not as generous as they have been in the past, and a number of these rentals are being funded by private individuals.”
She says properties in all price brackets are likely to yield rental returns. However, if want to build up your property portfolio, you should consider buying 10 properties priced at R1 million each r at her t han one property priced at R10 million.
The rationale is that if you lose one tenant you lose all your income, but if you lose one or two of your 10 tenants, you’re still relatively safe. However, the risk of losing rental income can be radically reduced if strict criteria for creditworthiness are adhered to when screening tenants in the first instance.
“Greeff Rentals invests in the services of reputable credit bureaus and we meticulously check credit records, rental histories and evidence of income such as bank statements.
“The tough measures pay off and rental management fees are a drop in the ocean when compared to the crippling legal fees associated with eviction of non- paying tenants,” says Taylor.
When calculating annual rental returns, Taylor advises looking at a total of 10 months’ rental.
“One month in the year covers rental management fees and the second covers maintenance, both of which are tax deductible. However, it’s a mistake for landlords to assume that tenants’ deposits are part of the rental returns, to allocate as they please. Tenants’ deposits must be kept in trust and only used in the event of damages for which the tenant can be shown to be liable. General maintenance and fair wear and tear repairs are the responsibility of the landlord. The deposit monies can only be dispersed on termination of the lease,” says Taylor.