Purchasing property as a source of rental income is a great way to secure one’s future wealth. However, if poorly managed, a rental property could end up costing a landlord much more than they bargained for.
Even though a lease agreement has been signed, Regional Director and CEO of RE/MAX of Southern Africa, Adrian Goslett, warns that the property remains the landlord’s responsibility. For example, if a utility bill is not paid, the landlord will ultimately be required to settle the outstanding balance.
“Certain measures can be taken to minimise the risk posed by a defaulting tenant, such as prepaid electricity and water meters, for example. If this is not an option, a deposit for these accounts can be agreed upon beforehand,” he suggests.
Another way to minimse risk is to conduct regular inspections of the rental property. “It is advisable that home inspections are conducted on a regular basis to ensure that any issues or breaches in the contract are dealt with as soon as possible. This will save the landlord on having to spend vast amounts on repairs when the lease expires. However, inspections must be conducted at the tenant’s convenience and landlords need to be respectful of the tenant’s rights and their privacy,” he explains.
To avoid any issues around conducting the inspections, Goslett advises that there be mention of these routine inspections within the rental agreement. “The agreement should include a pre-occupation inspection report, along with details regarding aspects such as the deposit, rental amount, maintenance and upkeep. Time frames should be allocated to the required clauses as well as penalties, should any condition be breached,” he recommends.
According to Goslett, the rental agreement is crucial in minimising the risk of costly capital outlays and unnecessary expenses incurred on the rental property as it outlines the responsibilities of both parties and explains the procedures for managing the rental property.
“Using a rental agent is often the safest and most efficient way to set up the agreement and manage the property. For a percentage of the rental income, an experienced, reputable rental management agent will have the expertise and resources to ensure that the property is managed correctly. They will assist the landlord with tenant selection, reference and credit checks along with the day-to-day management of the property. They will also be up-to-date with the latest legal and regulatory developments to protect landlords and tenants. If necessary, they will also have access to the legal resources and experience to deal with any situation efficiently,” he explains.
While owning a rental portfolio can be a lucrative undertaking, Goslett warns that it can also end up costing a landlord if the property is incorrectly managed.
“When handled correctly from the start, with ongoing professional management, many unnecessary, unpleasant, and costly situations can be avoided. Landlords should carefully consider this before deciding to forgo the monthly management fees in favour of managing their properties on their own,” Goslett concludes.