Buy-to-let guide: Managing tenant relationships

Buy-to-let guide: Managing tenant relationships

Private Property South Africa
Private Property Reporter

It is easier to manage your own rentals, once you have acquired the requisite information and knowledge. If you do choose to handle the rental yourself, you will need to undertake all the duties relating to the property, which can become stressful and time consuming.


SO, FIRST ASK YOURSELF :

Do I feel confident running my own buy-to-let investment? If not, it is usually better to hand the management of a property over to a professional, such as a letting agent.

The more emotional of us also tend to get personally involved in the circumstances of our tenants. For this reason, it may be worthwhile distancing yourself from the tenant, by involving of a letting agent.

Letting agents will charge you a management fee but will deal with all the issues and have a good network of plumbers, electricians and other professionals to draw on as and when required.


SHOULD YOU CHOOSE TO MANAGE YOUR OWN RENTAL, THERE ARE A FEW THINGS YOU NEED TO BE COGNISANT OF :

  • Use a legally compliant written lease agreement. The lease serves to document the terms of engagement with your tenants, in terms of the rent amount, due dates, lease duration, rules and regulations, responsibilities, maintenance issues and a host of other aspects.

  • Rental should be set at a fixed sum and escalations should be reasonable.

  • Handle deposits professionally. When letting property privately there is a legal requirement for the deposit to be invested for the benefit of the tenant in an interest-bearing account.

  • Deposits are usually set at 1 months’ rental. It is however strongly advised to set deposits at a higher level (2 months), to allow room for recovery of damages at the conclusion of the lease.

  • Never allow the tenant to use the deposit as the last month’s rent. If you need to recover damages it is highly unlikely that you will be able to claim the money back from the tenant once he has left your property.

  • Invoices and receipts are legal requirements of the Rental Housing Act even if you are letting privately.

  • Inspect and document the condition of the property at the time the tenant moves in, as well as again when they move out in, order to avoid disputes and to meet the requirements of the Rental Housing Act. This must be done with the tenant present.

  • Do semi-regular inspections of the rental property. Remember that you need the permission of your tenant to access his/her private space.

  • Try to resolve disputes with your tenants amicably first before involving lawyers.


VET YOUR TENANTS

There is nothing more important than placing the right tenant. Buy-to-let as an investment strategy is generally very forgiving except for when placing the wrong tenant.

This is largely due to the delays and potential costs of evicting the tenant from hell. Do not take shortcuts on tenant checks and don’t put up with letting agents that do.

Make sure that the tenant ultimately occupying your space has a clean credit record. It is advisable to rather hold out for a good tenant than to accept a tenant that is only barely acceptable at best.

You have the right, by law, as a landlord to check a potential tenant’s credit record, as long as you have their permission in writing. This information is available on request and with permission, from the credit bureaus.

There are, however, companies who offer property rental solution that make this- and other processes much easier. A tenant credit report not only reports any adverse marks on the applicant’s credit record but also their payment behaviour on other accounts and confirms ownership and liability involvement for both real estate and commercial engagements.

The right tenant should have no judgments, blacklistings or adverse payment records against their name. He/she should also not be an unrehabilitated insolvent.

Making a truly informed decision with the relevant information available is just so much easier!

Check that your tenant:

  • Has a clean credit record.
  • Can meet their monthly rental obligations. A minimum gross salary of 3 times the rental amount is advisable;
  • Has regular gainful employment. Also confirm independently how much they earn, what position they hold and how long they have been there;
  • Confirm his current residential and business addresses.
  • Letting is now also subject to FICA requirements.


EVICTIONS AND SPOLIATION

Please recognise that it is illegal to remove doors, windows, the roof or anything else from the property occupied by a delinquent tenant. It is also illegal to have the utilities disconnected or have other people move into the unit with your non-payer.

If a rental relationship is heading for an eviction, don’t delay. Start the legal process immediately. Engage specialist attorneys known for evictions. Do not simply go to the friend of a friend that happens to be an attorney.


Now that you know where to start...
you understand some of the financial aspects of investing...
we have touched on the investment evaluation metrics...
you have taken into account all costs and run the numbers...
and you have a good idea of your rights and obligations as landlord...

The next step in your Buy-to-Let Investor Guide is "Education, team and exit strategy":

  1. Where to start?
  2. The financial aspects of investing in property
  3. The metrics used for evaluating property investments
  4. Costs to take into account when running the numbers
  5. Managing tenant relationships professionally
  6. Education, team and exit strategy


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