5 investor must-knows for renting out property
Category Newsletter: Lifestyle
In the current market, letting out a property can be a good option as rental demand remains strong, especially in the northern suburbs of Johannesburg.
This is according to Chris Renecle. However, he says there are five key points landlords should make sure are covered before marketing the property for rent and signing any lease agreements. These are:
1. Make sure your property is letteable
Before letting out a property, homeowners need to ensure that it is in good working order and that it will be appealing to prospective tenants.
“Think about the kind of tenant that would find your property suitable and what kind of tenant you want to attract. Focus on the features that would be important to them, like the garden or security systems, and make sure these are in top shape. Take care of the general things too, like ensuring the plumbing and electricity points all work. Things like leaky roofs, built-in appliances and cupboard doors should also be in good working order,” says Renecle.
2. Establish a good working relationship with a rental agent
There are unfortunately many unethical people who take advantage of landlords and loopholes in lease agreements. Renecle says the best way to avoid this is to contract the services of a reputable rental agent to help you through the process.
“A reputable agent will thoroughly scrutinise any prospective tenants’ applications, ensure that their credit record is in good standing and that their documentation is legitimate,” he explains. “These are things that a landlord is often unable to do when going it alone as they don’t have access to the systems and information that property companies do. Added to this, an agent can assist in collecting the monthly rental amount as well as assisting and or guiding the landlord in taking the necessary legal steps should payment not be forthcoming.”
3. Ensure you have a solid lease agreement
Without a solid lease agreement that clearly stipulates the responsibilities of both the tenant and the landlord, as well as clearly outlining the terms and conditions of the rental, the landlord is leaving himself or herself open to exploitation. A reputable rental agent will be able to provide a solid lease agreement that adequately protects both the tenant and the landlord.
“This is one of the most important aspects that a landlord must ensure is done properly. Free templates off the internet often do not legally cover all the potential areas that unscrupulous tenants can take advantage of,” says Renecle.
4. Budget and plan well so that maintenance and financial shortfalls are covered
Often renting out a property isn’t as simple as the money coming in covering the money that needs to be paid out. The profitability of a rental property also often depends largely on if there is a bond over the property and the levies/fees that need to be paid by the landlord.
Renecle explains that while electricity and water usage are covered by the tenant, as should be stated in the lease agreement, costs such as bond repayments, levies and rates are for the landlord’s account. Special levies, if implemented by a sectional title complex, are also not passed on to the tenant. This means that a landlord has to carefully work out if there will be a shortfall that he or she needs to cover between the rental being charged and costs that need to be covered. There are also other costs that landlords need to budget for around maintenance and repairs that may be required from time to time.
5. Ensure that your tax and accounting is taken care of
As a rental property is an investment, it needs to be declared as income on your annual tax return. Certain expenses from running your rental property can also be deducted off the income. There are also other tax implications to owning a rental property such as Capital Gains Tax, which is due should you decide to sell your property.
Renecle advises landlords to employ the services of experts to help them property manage the tax and accounting side of owning and operating a rental property or properties.
Author: Property 24