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How to maximise rental returns in a tough market

15 Aug 2019

Being a landlord can be just as challenging as managing any other business and, in a slow market where stock outnumbers prospective tenants, it is especially important to have a thorough understanding of the current rental market and to take a hard, objective look at your property.

Tenants are increasingly well informed about the rentals regulations and laws, and are not reticent to use them to their advantage to ensure that they are treated fairly, especially in terms of the upkeep of the property and of their deposit.

“In 2015 we saw a considerable increase in rental prices and, as the cycle goes, those prices have started coming down - along with a declining economy which has seen little growth in recent years,” says Lorraine-Marie Dellbridge, Rental Manager in the Southern Suburbs for Lew Geffen Sotheby’s International Realty.

“In these tough economic times, a landlord has to look at the bigger picture and appreciate that tenants are looking to be positioned right, with all the space that they need and the lowest possible impact on their bank accounts.”

Dellbridge says there are generally two types of tenants, and it’s important for landlords to establish which type they want to attract - and who their property is most likely to attract.

The first is your lifestyle tenant who wants to be seen living at the ‘right’ address or one who wants to be a stone’s throw away from their favourite activities. For instance, the priority for a surfer is to be close to the beach and a mountain bike enthusiast will look at property near his or her preferred trails, she says. Whereas the up-and-coming investment broker wants to be on the top floor of the newest, trendiest building in the CBD, and a student needs a flat close to the university - in other words, a property that meets their needs, but won’t break the bank.

Most popular with the latter group are two bedroom apartments with secure parking, whether it be on Rondebosch's main road, on the Jammie Shuttle route or in the CBD close to work.

This two bedroom, two bathroom apartment in Claremont, Cape Town, offers access to a communal pool, manicured gardens and 24-hour security. It is available to rent at R9 950 per month - click here to view.

Dellbridge says the common denominator these days, however, is that almost all tenants are looking to cut back on the financial impact.

“We have found that tenants will even move within the building where they currently live, simply because another two bedroom apartment in the block is going for less.”

Bearing in mind the fact that the largest cost for owners is vacancy loss when you’re not earning rental income, it becomes apparent that now more than ever it’s critical that landlords enter the market at a realistic and competitive price point.

Dellbridge says there are also a number of other key factors that contribute to determining success of an investment property in the rental market.

It should go without saying that landlords must ensure that the property is neat and spotlessly clean, and that any appliances are in working order, but this is not always the case, and first impressions are very important, especially when prospective tenants are spoiled for choice.

That said, while a fresh coat of paint will make a world of difference, landlords should be wary of overcapitalising in the hope of attracting a higher paying tenant in the current market.

The fact of the matter is that if a tenant can find a similar, but cheaper property in their preferred area, they will apply for the cheaper option. Lifestyle tenants are more likely to be impressed by, and pay for, added bells and whistles, but those are few and far between.

This newly-renovated apartment in Rondebosch, Cape Town, is available to rent at R8 000 - click here to view.

According to Dellbridge, security is another determining factor. Lack of security and secure parking will put many tenants off, especially single women, and it’s worth spending a little on securing your property, she says.

In the current market, it’s especially important for landlords to appoint an experienced agent who not only understands the market in their area, but also has a thorough grasp of the law, especially the impending upgrade on the Rental Housing Act.

Tenants are increasingly well informed about the rentals regulations and laws, and are not reticent to use them to their advantage to ensure that they are treated fairly, especially in terms of the upkeep of the property and of their deposit.

You’ll also have peace of mind knowing that your property is being maintained in a professional manner that includes timely payment of the rent each month.

Dellbridge says it’s also important to note that unless your property is in the ‘student central’ area or is a pristine property in an estate with furniture to match, that furnished properties tend to stay on the market for considerably longer.

In most cases tenants may like the property, but more often than not they ask about the possibility of the furniture being removed, so before you furnish a property, ask an agent about the feasibility thereof.

“The long and the short of it is that landlords need to arm themselves with knowledge about where the market is right now, preferably aligning themselves with professionals who can guide them,” she says.

“And remember that the end of the day, keeping the current tenant is always easier than finding a new tenant.”

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