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Why employ a rental agency?

One of the major attractions to investing in property is your capital growth, in addition to your ongoing rental income. For that to be true, you need to ensure that your property is well maintained and cared for says Harcourts Platinum principal Steve Caradoc-Davies.  A bad tenant can do significant damage that you may have to repair, eroding much of your capital growth.

While there is never any 100% guarantee that a tenant will care for your property and pay on time, there are a number of steps you can take to mitigate your risks.

First, there is much to be said for employing a professional rental agency to secure a suitable tenant and manage your rental, says Caradoc-Davies. Before you incur this cost though, ensure the agency undertakes to perform the precautions suggested.

A tenant needs to have their credit-worthiness established. To that end, and with their consent, a full credit check is performed.  In addition to this, there are property management platforms that also record the payment history and conduct of tenants when they rent through other rental companies that subscribe to the system.

The result is that a tenant is checked against their ITC and previous rental history. In many cases, they are graded to represent the risk they pose.  If you rent to a high-risk tenant you are almost always asking for trouble.  Tenant behaviour very seldom improves.  Even when a high-risk tenant offers to pay a higher rental you are often setting yourself up for significant problems later, he warns.

In addition to this, a professional rental company should be performing an affordability test. They will obtain the tenants recent bank statements to confirm they can afford the rental, much the same way as a bank will do this when qualifying someone for finance.

There is much to be said for a telephonic reference from their previous landlord or rental company, Caradoc-Davies advises. Systems provide much information – but a verbal reference check may reveal other problems.

Once you have selected a suitable tenant there are also other measures you can take to reduce your risk. Rental and deposit guarantee products are available which can cover you in the event of non-payment, property damage, and legal costs.  But beware, not all of these products are created equal, and their costs vary greatly.  So be sure you know what you are purchasing.

Lastly, ensure your rental company does regular maintenance inspections. If there are problems with your tenant these can be detected early and you can act on them – rather than trying to deal with a crisis as their lease comes to an end.

Landlords also send a strong message when they maintain their property well. When a tenant is valued and fairly treated they usually treat your property with the respect it deserves.  Make the most of your investment growth by selecting a low-risk tenant and ensuring your asset is professionally managed, thus maximizing your rental return and capital growth.


Review overview
  • Denis 13th March 2016

    I have read this article with interest.

    It is true that property investment offers attractive capital growth and a steady income stream. However it is debatable, for many, that the rewards outway the risks and thankless effort.

    Certain changes to the Rental Housing Act and the introduction of the Consumer Protection Act have burdened the residential property owner / landlord with additional regulations and procedures which have frustrated their enjoyment of this capital growth and steady income stream.

    I note however the absence of the “Estate Agents” in negotiating on behalf of the property investors in this regard which resulted in the evolution of the local legislation, to the property investors peril. I am amazed at the arrogance that Estate Agents have. I have found many Estate Agent to be ignorant of the law and place very little effort in educating themselves in the law and the implications thereof.

    I am reminded of an individual, who purportedly was the co-principle of a local franchised estate agency, who invited us to give them a mandate to market and or negotiate the rent / lease of one of our residential properties on our behalf. In an effort to test the individual I asked three questions.

    1. What is the name of the SA legislation that governs the residential rental market in South Africa.
    2. What is the name of the regulations in terms of section 15 of the RHA that is applied in the Gauteng province,
    3. How many times is an agent in terms of the RHA obligated to execute an inspection.

    Needless to say the individual could not, even after over 15 years of the legislation being in place, answer one questions. The only conclusion I could come to was that the individual was elevated in the sky by hot air and did not possess the requisite skills to rise above the clouds.

    I have many such stories. I have assisted multiple individuals, mostly tenants, in a lease dispute who have been taken advantage of by so call “Estate Agents”. The industry does not regulate its self and the EAAB is so burdened with complaints that they have been rendered impotent. The last lease agreement that I was invited to consult on was so badly written the landlord abandoned their legal action to their disadvantage.

    It is intriguing that no agent offers anything more than a undertaking to procure a tenant. The absence of a commitment to do:

    1. Credit checks.
    2. Criminal checks
    3. Regular inspections
    4. Financial reporting
    5. Maintenance management
    6. Presenting a defined marketing plan, and
    7. A commitment to protect the property owners interests.

    In short Sir, I do not share your view that Estate Agents add value to our industry.