The business of buying-to-let
JOHANNESBURG - Although rental demand rises during an economic decline, rental rates come under pressure. This means that landlords will need to relook their expectations.
Seeff provides a few recession tips:
However frustrating the economic climate may be, it is important to consider that it is better to fill your property at a lower rental than to let it stand empty. Your profit margin may be a bit lower and while not the ideal position that you would want to be in, at least you will still be earning rental returns
There is little to gain by a landlord who sticks to a high rental rate or escalations that are out of step with the economy as this may prove unsustainable.
The likely outcome of sticking to high rental rates or hiking your rate by an above-inflation escalation, is that you will end up with tenants who are unable to continue paying the high rental amount. Once a tenant goes into arrears, it often becomes difficult to recover from that.
Another characteristic of a recession is rising vacancy periods. You will find that tenants will opt for smaller and cheaper units to relieve some of the pressure on their budgets. Empty rental properties are a financial burden and while one month may not seem like much, it can quickly become two or three months - or more.
You should also consider incentivising good calibre tenants with a discount on the rent. Finding good tenants who will look after your property is a challenge, more so during a recession. You should always look after good tenants.
A skilled rental agent can add real value as they work with rentals in your area and are best placed to advise on the most appropriate rental rate to attract tenants. They are also skilled at sourcing and vetting tenants and can assist you to find a good calibre tenant.
Supplied / PERSONAL FINANCE