Landlords have had a bit of a dry white season these last couple of years and those who chose to rent out properties must now be over the moon to hear that the demand for rental properties is fast outstripping supply.
In most cases, tenants have had a pretty easy time of things. Many landlords opted to keep the rental and subsequent increases to an absolute minimum knowing that, given the amount of choice available, that tenants would find it relatively easy to find a similar property that cost less. This situation has now changed and the growing demand for rental properties will undoubtedly affect what landlords can charge.
It also means that landlords do not have to take what they can get as far as tenants are concerned and can now start to get choosy as to who they select to rent the home. Likewise, tenants who have not played ball in the past, who have a bad credit rating or have been evicted from a property, may just find it harder to find a suitable home.
Consider the mandate
While all of the above should make landlords’ lives far easier, it doesn't mean that they should sit on their laurels waiting for the money to start rolling in. Michelle Dickens, MD of Tenant Profile Network (TPN) recently noted that there are some serious shortcomings to consider when landlords issue an open mandate as opposed to a sole mandate to rental agents.
Many property owners and landlords choose to approach a variety of different agencies with their request to place a suitable tenant in their property – known as an open mandate. “The assumption by landlords is normally that this method will be beneficial because it creates healthy competition between agents, and the landlord would then be able to take their pick from a set of highly considered options,” says Dickens.
“However, the high demand for rental stock right now means that it doesn’t take long to rent a property – there are a plethora of prospective tenants on the market. The result is that most agents only earn a commission on placements they secure.”
She says that because agents know that their competition will be moving quickly, in many cases they recommend the first deal, as opposed the best deal, in order to keep up with the limited window of opportunity and avoid losing the deal completely. This ultimately means that the upside of finding a tenant quickly through an open mandate is far outweighed by the risk of placing a potentially bad tenant, which could end up being costly and frustrating for the landlord in the long run.
Generally speaking the amount of commission charged by rental agencies is not carved in stone. However, Dickens notes that while many landlords assume that this is the case, landlords can in fact negotiate on the commission upfront, after which they give the agent the opportunity to go and source the best potential tenant for the property.
While it may be easy to find a tenant these days, Dickens warns that one in two South Africans have an impaired credit record. In other words, it isn't simply a case of placing a tenant. Landlords need to ensure that they are placing the right tenant.
The deposit isn’t everything
“Don’t be misled by the fact that there are so many tenants seeming eager to submit their applications, deposits at the ready – this doesn’t necessarily mean they are the tenant you should choose. It is better in the long run to show your property to 10 different potential placements and take time to choose the right one, than to place the first person who has the right deposit amount, and end up dealing with the headaches of a delinquent tenant,” Dickens says. “It is definitely worth the wait for a good tenant, even if your property stands empty for a while during your search.”
Landlords should be wary of renting a property to someone who needs to move in urgently. Questions should be asked, particularly if it happens to be in the middle of the month, as the tenant could well be planning to abscond from their current rental property.
It is vital to conduct a full credit check on any tenant, regardless of whether the landlord chooses to rent privately or uses the services of an agency. It is also highly advisable to contact previous landlords in order to ascertain how well they maintained the former rented home and if they paid their rent on time every time.