Property Owners Advised - Look After Good Tenants

Sunday, 15 April 2007

Landlords Advised to Look after Good Tenants!

By Andre de Villiers - Chas Everitt International

Over the last few years legislation has become far more tenant friendly, indeed many share the opinion that the property owner is being unfairly treated and that the risks associated with renting a property increasing.

Everyone in real estate is aware of cases where problem tenants are taking property owners for as ride. In many instances these ‘tenants’ are nothing but confidence tricksters and outright scam artists. Maybe the public sentiment is not that sympathetic for the property owners at a time that property prices have escalated dramatically but those that are investing in the so called ‘Buy to Let’ market are to a significant degree fuelling the current construction boom that is creating a lot of employment, which in turn is playing a significant part in the economic prosperity our country is enjoying.

But the supply of rental properties is increasing and many tenants have taken advantage of the lowest interest rates for decades to buy properties. In some areas the buy-to-let residential market appears to be saturated and there are substantial numbers of developments nearing completion that will add substantially to the supply. According to agents and real estate developers I have spoken to the number of Buy to Let owners in many developments is over 70% and in one case I was told as high as 90%. A recent report from Jacques du Toit an ABSA economist highlighted this issue.

Du Toit confirms the strong demand for residential property, driven by a rapidly growing middle class, that has caused the development of higher-density residential units to increase strongly over the past five to six years. Together with low interest rates and easily available finance, many new investors have invested in property against the background of the relatively poor performance of some other types of investment.

The property owner is taking a risk and is paying rates and taxes. It is only fair that the law protects their substantial investment and does not encourage those that try to benefit from loopholes and unfair legislation. Even worse there seems to be an increase in ‘professional’ bad tenants who know how the ‘work the system’ and end up staying for months in a property without paying rent before they are evicted.

Property owners with good tenants should appreciate them! The tenant is actually caretaking the owner’s substantial capital asset. It is far better to have a below market rental from a really good tenant than a good rental from a really below average tenant. The risk simply is not worth it. Vacancy factors and the loss of rental income due to a tenant moving due to a high increase in rentals should also be considered. The loss of a month’s rental may really not worth pushing the envelope with that annual rental increase if it’s a good tenant.

Property owners who decide to ‘DIY’ their own rentals are taking an increasing risk and would be well advised to consider using a professional rental service as this can protect a good relationship between the parties. Property evaluations of tenants is increasingly difficult as the law seeks to limit what info may be recorded and made available regarding bad debt and poor payment histories. Rental agencies are able to share information between them, scrutinise and evaluate data obtained (an experienced agent knows how to ‘read between the lines’ in an application that looks good but actually has little substance) and contact genuine references from objective third party sources.

End.

Contact André de Villiers
mailto:andre@cei.co.za

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