Residential rentals currently provide an exciting opportunity for real estate agencies in previously underserviced areas, according to rental payment platform PayProp. This follows nearly two years of the Covid-19 pandemic and South Africa’s ongoing economic woes.
PayProp chief executive Jan Davel says residential rental business opportunities are plentiful in the fast-growing formal private rented sector. Areas like Soweto in Gauteng and parts of the Cape Flats in Cape Town are just some of the up-and-coming neighbourhoods where tenants are looking to rent.
The PayProp Rental Index for the second quarter of 2021 reports growth in residential rental demand and supply. Davel believes this means that landlords and tenants will need competent agencies in these areas with the necessary knowledge, credentials and tools to manage their investments and tenancies.
Administration
For many new rental agents, the ongoing administration required to deal with rental payments and strict industry regulations are significant hurdles that are difficult to overcome.
Precious Thoka, Principal at Thoka Properties in Gauteng says he initially refused to take on rental business due to the level of administration required.
“The input and output didn’t seem to make business sense. So, when we started Thoka Properties, rentals were not part of the plan. However, after a few months, we realised that we were losing out on a lot of potential business. So, I decided to reconsider and find ways of easing the administrative load.”
Thoka Properties approached PayProp to help build a thriving rental business without the heavy administrative workload that previously put him off.
Davel says it’s important to identify the tools for automating all the critical payment administration required each month.
“Dealing with all the invoices, statements, reminders, receipts, reconciliations, and payments at month-end is time-consuming. Even if you’re managing 10 properties, it can add up to a day or two each month,” says Davel.
The administrative burden of collecting rental payments from the various payment sources and then matching them to the right tenants and properties is substantial. However, an integrated technology platform can reduce it to a quick and easy task at the end of each month.
“Finding the right technology to automate most of the administration makes rentals a far more viable option for many property professionals.
“Agency principals can focus on marketing and other income-generating activities while still enjoying a stable income stream. Their residential rental portfolios often turn into the star performers in their real estate businesses.”
Legislation
When the new Property Practitioners Act (22 of 2019) (PPA) comes into effect, the job will be easier for new market entrants in historically disadvantaged areas.
The old Estate Agency Affairs Act (112 of 1976) required property practitioners to manage a trust account environment to separate their client and business funds. However, this requirement will change once the PPA comes into effect – once the Property Practitioners Regulations are finalised.
“Under the new Act, agencies can apply for exemption from operating their own trust accounts and from having them audited – provided they follow the prescribed procedure and use an approved payment processing agent,” says Davel.
“Agencies using PayProp get a bank account that complies with all trust account regulations. Tenants pay their rent via PayProp, which meets all the agency’s trust account compliance requirements.”
Rental agents
PayProp reports a steady increase in the number of smaller agencies servicing historically disadvantaged areas and run by local entrepreneurs.
“The PPA states that the property market is a national asset. It restores the dignity of all South Africans through the basic constitutional right to ownership of immovable property,” says Brenda Matyolo, member of the board of PayProp in South Africa.
“The current low interest rates and lower property prices present great opportunities for landlords to expand their rental portfolios very affordably,” says Jacqui Savage, National Rentals Manager for the Rawson Property Group.
“These will take some time to become profitable but would provide an excellent investment base to capitalise on growth when the market inevitably swings up.
“There are opportunities at all price points,” she says. “Like any other investment, the key to making the most of these lies in intelligent asset management. Having a rental expert on board can make that process a lot easier, helping you minimise risks and maximise returns, now and in the long term.”