Owning and renting out a property is a complex process that requires time, effort and money. This applies whether you have invested in an income-generating rental property or as a home owner letting your property, a granny flat on your property or an extra room in your home.
Long term
Property is a long-term investment - whether you have bought the property to live in or to let. Property is an appreciating asset that can be used as a cornerstone for wealth creation, but this only takes place after several years.
A rental property may pay for itself once you have repaid the bond or if the market booms. However, initially, your bond repayments and ongoing costs such as insurance, repairs and maintenance will limit the income earned from the property.
Expenses
Keep in mind that repaying your bond is just one of the many expenses involved in owning a property. As a landlord, you should factor in expenses like general maintenance, insurance, rates and taxes. Budgeting for expenditure will enable you to allocate funds correctly and keep track of your expenses for tax purposes.
Be sure to set aside funds in a contingency account for urgent and unexpected repairs and consider allocating funds for the services of an attorney or professional rental agency.
- Attorneys can help with lease agreements, defaulting tenants and advice on your legal rights and responsibilities.
- A rental agent will screen potential tenants, collect rent and manage the property.
Checklist
Before the new tenants move into your rental property, have a list of items to check before the ingoing inspection. This will save time and will ensure that you deal with all necessary items during the inspection. It will also make it easier to inspect the property for repairs that need to be attended to before the tenants move in.
Checklist:
- Make sure the oven and hob are working.
- Check all lights and electrical plug points.
- Ensure the geyser works.
- Check for water leaks and damp that need attention.
- Check that gutters are clear of debris.
- Make sure the swimming pool pump is working, that the chlorinator is producing chlorine and the chemical balance is correct, and that the filter is clean.
Contract
A detailed contract will help you avoid future misunderstandings between yourself and your tenants. All important elements must be included in the lease agreement document so that there are no grey areas. Be sure to specify details such as:
- The date and preferred method for monthly rental payments, for example, EFT.
- Acceptable and unacceptable tenant behaviour.
- Who is responsible for damage and breakages to the property. For example, the landlord is usually responsible for replacing burst geysers, whereas tenants would be responsible for cigarette burns on carpets.
Selecting tenants
Before handing tenants the keys to your investment property, you need to verify that applicants are reliable and responsible and that they will look after your property and pay the rent on time every month during the lease period.
In addition to their names, identity numbers and current addresses, you need to ask applicants the following questions:
- Details of their previous rental history.
- Reasons for moving.
- Their place of employment.
- Proof of income.
Always contact the references given and verify as much of the information as possible. You may not unfairly discriminate against applicants, but you shouldn’t simply accept the first tenant who applies without checking their credentials.
A reputable rental agent should have access to various tools designed to help you select the right tenant.
Don’t be tempted to let your investment property to a friend or a family member. If things go wrong, it could have a huge negative impact on the relationship and your income from your investment property.
Writer : Sarah-Jane Meyer