The South African rental market is under pressure as many good tenants step up to property ownership and a large proportion of those left behind are struggling with their finances.
This means landlords are having to step up their game when attracting, managing, and retaining tenants who are able to honour their leases and look after their properties.
Tenant payment performance is improbving in the residential tenant population but a full recovery to pre-lockdown levels is yet to be achieved, says Michelle Dickens, chief executive of TPN Credit Bureau.
As at Q4 2020, a total of 77.6% of tenants were up to date with their rents – although some had paid late. This is an improvement from73.5% in Q2 but still below pre-lockdown levels which were above 80%.
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Landlords with properties in the R7 000 to R12 000 monthly rental category are seeing 83.63% of their tenants paid up, she says. However, tenants at the low end of the market – with rents of R3 000 a month – are still in distress. Only 65.61% of them are in good standing with their landlords.
“This segment is populated by the most financially fragile part of the tenant population, with very few financial buffers with which to weather storms that may translate into income loss.”
The biggest challenge for rental agents this year will be finding good tenants, says PayProp’s Johette Smuts.
“By that we mean those with acceptable credit scores, sufficient funds for a once-off damage deposit and sufficient monthly disposable income to pay the rent.”
Luring them with good properties
Adrian Goslett, chief executive of Re/Max of Southern Africa suggests landlords invest money into updating and fixing their properties to make them more appealing.
“Right now, supply outweighs demand. We are no longer facing situations where landlords have multiple tenants fighting to have their applications accepted. Instead, landlords will need to make their homes as appealing as possible to ensure that their listing is the one that tenants select over the many other vacant listings.”
As part of this, landlords should take the time to ensure that professional photographs are taken of their homes so that the listing stands out online.
“More so than ever before, the house hunting process begins online. Landlords who do not take the time to ensure that their property is marketed correctly online are dramatically decreasing the true marketing potential of their homes,” says Goslett.
Just Property notes that the tenants are attracted to properties that are:
• Recently upgraded
• Include appliances
• Close to workplaces
• Close to good schools
• Close to amenities
• Have easy access to transport routes
• In good neighbourhoods
Managing good tenants
Once landlords have landed good tenants, they need to know how to manage them and to keep them. Smuts says landlords, or their letting agencies, must make sure their back-office processes are digital to survive distance and financial difficulty.
Bank-integrated automation of rent collection, accounting and outgoing payments is the best way to guarantee accuracy, efficiency and a steady stream of income from debtors when managing a distributed workforce and pressured clientele.
She advises landlords and agents to give tenants a variety of payment options.
“When collecting rents, it’s ideal to offer your tenants as many payment options as possible. These might include paying in-store at many leading retailers, via instant EFT, debit order or EFT payment.”
Dickens says the margin of error for complacent tenant administration was, even prior to the hard lockdown, under threat.
“Low escalations and higher-than-inflation property costs are slowly eroding profit for some landlords who have not been proactively managing their portfolios.”
Look after your investment
Landlords also need to take good care of their rental properties, says Brian van Wijk, Just Property Midrand franchisee, while Cherise Botha, a rental agent intern with Just Property Margate, says rates, taxes, levies and utility bills must be kept up to date. When accounts are behind there is a risk of disconnection and this makes life difficult for tenants who may decide to vacate your property as a result.
Echoing this, Grant Smee, property entrepreneur and owner of Only Realty says: “Assess your property as you would your business. Make sure that its well looked after, profitable and has the right people behind it. Do maintenance, hold inspections and work closely with the tenants throughout. Even if your place is empty, make sure that it’s kept neat and tidy, and ensure that all your bills are paid up.”
Holding on to good tenants
Without a doubt, landlords need to look after good tenants, states Graham Ross, manager of Just Property Blouberg.
“If you have good paying tenants, keep them, even if it means taking a knock on the rental amount. With Covid-19 affecting the job market, finding good tenants is becoming more difficult and some tenants are cancelling contracts in pursuit of cheaper accommodation.”
Van Wijk adds: “My advice to landlords facing vacancies is to reduce their monthly rent – rather generate a slightly lower but stable income than no income.”