Do your homework before investing in property to rent

THE GROWING demand for rental properties has resulted in rental properties yielding good returns on investment.

However, potential landlords need to consider several aspects before buying rental property, says Adrian Goslett, chief executive of RE/MAX of Southern Africa.

The first step is to consider what you can afford, bearing in mind that the rental property may stand vacant for several months at a time.

“You need to make sure you can cover the bond repayments, as well as levies, rates and taxes and maintenance of the property even when it is standing empty. You will also need a savings account for unexpected repairs that may not be covered by insurance. The savings will also need to cover general upkeep of the property such as painting. There may also be the cost of marketing and advertising the property to potential tenants.”

Goslett says the demand for certain types of properties will vary from one area to the next. Research which types of properties are most in demand and achieve the best rental returns. Location plays a vital role as rental properties with easy access to public transport and closer to amenities such as shops, schools, universities and business districts will be more popular.

Consider whether you will manage the property yourself or hire a management agent. Hiring a management agent is an additional cost, but should allow you to reap the benefits of owning rental property without having to deal with the dayto-day administration.

If the rental property is in another region or province, a rental agent will save in travel costs. For a percentage of the rental income, a reputable rental agent will advertise the property to rent, screen potential tenants and undertake credit checks as well as draw up the necessary lease agreements among other services.

A rental agent can also help set a fair rental price, which will largely be determined by the average rental prices of similar properties in the area.

“Rental pricing is crucial because over- priced rentals will chase away possible tenants and increase the chance of the property sitting vacant. A competitive rental will ensure that the property is rented out within a reasonable time and that it continues to attract tenants,” says Goslett.

“If you choose to manage t he property yourself you should seek the advice of an attorney or property professional to ensure that the legalities of all documents or agreements with tenants are within the scope of the law.

“Lease agreements or legal documents that are incorrectly drawn up can result in costly d i s p u t e s t h a t wi l l e r o d e returns.

“It is important that all ele- ments are included in the document so that there are no areas left open for interpretation. Aspects such as acceptable tenant behaviour, breakage costs and date that the rental is payable should be included. An attorney or rental agent can assist with collection of rent and a letter of demand if the tenant defaults on the agreement,” says Goslett.

“Buying and letting property continues to be a sound investment option, provided the principles of buying a property are adhered to.

“A rental property portfolio can be a profitable way of realising returns on your property investments, but you need to do t h e r e s e a r c h t o make a n informed decision.”