Savvy landlords say that early investments and long-term strategies boost their buy-to-let bottom lines.
Being successful in this sphere of the property business requires a holistic approach. Landlords are expected to display all-round business acumen, while operating within the confines of various laws. They say that constant up-skilling helps with understanding additions and amendments to laws, such as the Credit Amnesty and Consumer Protection Acts, which serve in both their and their tenants’ interests.
Pre-emption is better than cure
Those familiar with losses incurred by defaulting consumers say that the best business practise by far is to pre-empt.
The expense of crossing paths with tenants in poor standing can be avoided by spending sufficient time and money from the outset. This will facilitate the necessary and thorough checks needed to cultivate a prime tenant base, which according to research, reflects a direct link of association between good landlords and tenants.
This is also when the benefits of professional credit rating statistics and research, such as those provided by TPN, become most quantifiable in the service industries that are exposed to ongoing consumer volatility. Individual owners and smaller operators in particular, enjoy greater protection against over-indebtedness exacerbated by high inflation and the impact of global economics.
The cause of committing the cardinal industry sin – overlooking poor credit behaviour – is perceived by many as being cost-related.
The inability of property owners to honour monthly fees of rental experts is far too often the downfall of first-time landlords and small start-up businesses. However, successful landlords say that pre-emption at any level is possible through cultivating cautious and scrutinising habits. TPN’s readily available quarterly reports prove that tenants in poor standing are often habitual culprits and over-indebted consumers.
Know your tenant
While it makes sense for landlords to attract new tenants through word of mouth referrals, expert advice however is to take extra caution in not assuming the best credit behaviour when potential tenants are well-known to them.
The pitfalls of insufficient checking and re-checking when friends, relatives or employees of small businesses enter the fray are well documented. This can be avoided in good time, by appointing credit experts to discreetly access the necessary yet personal information of tenants otherwise unbeknown to their future landlords. Crime records, poor credit card payment histories, and failure to pay monthly levies at private estates or sectional title developments, will soon reveal potentially risky behaviour.
Tenant payment research
TPN’s 2013 Q4 report shows that 85% of tenants nationally are in good standing, and that 72% of tenants remained in the Paid on Time category. Interesting to note is both the highest Paid on Time as well as in Good Standing group of tenants, fall within the R7 000 – R12 000 per month rental value, at an overall 76% of the national tenant base. However, the highest monthly rental group at R25 000 per month of whom 81% are in good standing, also reflects the highest Late Payment of 16% compared with 10% in much lower brackets. Other trends show the fastest deteriorating and worst performing segment of rental values to be the R3000 monthly rental group.
“Beware of confusion caused regarding the credit amnesty,” says TPN’s Michelle Dickens.
She says landlords and property managers need to understand that rental payment profiles do not form part of the amnesty, and tenant’s monthly payment flags will not be deleted. It is therefore vital that TPN members continue to load their full tenant debtors book, monthly, for all their tenants, to ensure proper tenant assessment – and even more so now that the credit amnesty is imminent.
All-round knowledge required to operate successfully as a landlord provides ongoing protection and rich future awards.
Knowledge and up-skilling
The Institute of Estate Agents of South Africa reminds landlords that renting out property may seem like an easy source of income, but it can be a legal minefield and more reason for up-skilling through various courses available to agents and newcomers to the industry.
Individuals can benefit from any number of accredited qualifications on offer by the Council of Higher Education that are recognised by the SA Qualifications Authority.
Commercial owners can access courses at various levels through The South African Property Owners’ Association such as the Property Financial Programme, in co-operation with the University of Johannesburg.