Being a landlord is not for everyone. It is not an easy way to supplement your income or make a living and it is definitely not just about signing lease agreements and collecting rent.
“Many landlords underestimate the amount of time and energy it can require to ensure that a rental portfolio is maintained and tenants are kept happy. This does, however, largely depend on the tenants who are renting the property,” says Adrian Goslett, Regional Director and CEO of RE/MAX of Southern Africa. “There is also the matter of any legal issues and ensuring all legal requirements are adhered to and the right procedures are followed. This is especially important in the case where the tenant is not paying their rent. The correct steps need to be taken to deal with the delinquent tenant while protecting the landlord’s interests.”
And that’s just a taste of what it could take to be a (successful) landlord. No wonder then that you should consider these important issues before getting into the rental business.
Plan and set a timeframe
Purchasing a rental property is not a get-rich-quick scheme. Property investment of any kind should be viewed as a medium to long-term investment. There is a good chance that the rental property will pay for itself over time or when the market booms or when the bond is paid off, however in the initial stages there will probably be a cost involved.
Crunch the numbers
Affording a rental property is not just about being able to pay the bond. When it comes time to crunch the numbers, you need to factor in expenses such as property insurance, rates and taxes, utilities, possible legal costs or collection costs, rental agent’s commission and general property maintenance.
Ideally landlords will also need to have a contingency fund in place to assist with any unforeseen circumstances such as issues that are not covered by the home insurance or for legal costs if the tenant defaults on the rental agreement. There are also general legal fees for drawing up lease agreements or advice on the landlord’s legal rights and responsibilities.
Selecting the right tenant is crucial
Each prospective tenant should be put through a vetting process before they can let the property because the tenant will largely dictate the financial success of the rental. When vetting a tenant consider factors such as the tenant’s previous rental history, reasons why they are moving, their place of employment and income.
Keep in mind that you need to verify the information provided by contacting references. It quickly turns into a full time job definitely making a case for working with a good rental agent.
Contracts should be as detailed as possible
A highly detailed lease agreement that contains all the necessary stipulations upfront will help landlords to avoid any complications or misunderstandings regarding the responsibilities of each party. The more that is covered in the contract, the smoother the rental should run as each party knows exactly what is expected of them. No aspects of the rental agreement should be left open to interpretation, with the document covering aspects such as acceptable tenant behaviour, breakage costs, the preferred method of payment and date that the rental is payable.
Having a checklist can save both time and money
The landlord should make a checklist of all the items that they need to look at and check before a new tenant moves into the property. The list will ensure that all potential problem areas can be sorted out and that a snag list can be drawn up with the tenant in a comprehensive manner. Having this checklist in place has the added benefit of eliminating unnecessary conflict when it comes to exit inspections and deposit repayments.
Ask any established landlord or property expert and the consensus will be that being a landlord is hard work. Goslett agrees, adding that the key element to success is to always view a property investment with the future in mind.