Landlords must factor all expenses into rent

WHETHER you’re an investor with an excellent income-generating property or a home-owner letting a cottage next to the main house, being a landlord means more than just signing a lease agreement and collecting the monthly rental.

“Owning and renting out a property can be a complex process, taking up much of a landlord’s time,” says Re/Max southern Africa chief executive Adrian Goslett, citing several key elements potential landlords should consider when entering the buy-to-let arena.

Tyson Properties chief executive Chris Tyson echoed these sentiments, saying property remained a sound investment, particularly for people planning to retire and looking for ways to bolster their income.

“Building a substantial property portfolio creates a future income stream and ensures a financially stable retirement. Despite fluctuating economic and market conditions, the investment will pay off in the long term,” he says.

Principally, property must be viewed as a long-term investment. While some investors may be able to find rental properties generate sufficient income to cover their costs, this was not typical and the property may only begin earning money once the bond repayments have been sufficiently reduced.

So landlords must factor in every expense, from bond repayments to general maintenance, insurance, rates and taxes and possibly professional services from attorneys or rental agencies.

Before letting tenants move in, landlords and tenants should run their checklist, ensuring everything functions correctly.

Goslett says it’s simpler to check a property for potential hazards or maintenance before tenants arrive than when they’re ensconced.

That list includes: checking the stove works; checking the lights and electrical points; ensuring the geyser works correctly; checking for leaks or damp that may need waterproofing and that gutters are unclogged and clear of debris.

Property management company IHFM general manager Michael Bauer says landlords must buy adequate liability and property insurance to protect against possible losses from fire, storms, burglaries and vandalism.

A detailed contract avoids misunderstandings or complications.

“The more detail and issues covered in the contract, the smoother the rental will run. It is vital all el- ements are included so there are no areas open for interpretation, including acceptable tenant behaviour, breakage costs, preferred payment methods and date the rental is due,” says Goslett.

Bauer says screening tenants is essential to a successful buy-to-let arrangement. This means checking affordability, credit history, employment references and previous landlord references. In this regard, Rentshield director Martin Goodman says the new Credit Amnesty Act, which took effect in June, has raised concern, especially among landlords. The act wiped away negative credit information from bureau records once the debt had been paid – which means landlords searching for potential tenants will be unaware of previous debts.

For the landlord’s part, it’s his or her responsibility to keep up with maintenance and repairs.

This includes ensuring the property is safe and secure by installing proper lighting and trimming trees hanging over fences.

“If your property is not kept in good repair, there is little chance good tenants will want to stay. Your tenant is your customer… make sure he is happy,” says Bauer.

Landlords also have to announce their arrival and, while regular inspections are recommended, tenants’ privacy must be respected.