You’ve just bought an investment property and believe it will be exciting and cost effective to rent out. But, whether you’re about to rent out one property, or will have several to offer to potential tenants, it is important to research the legal requirements of the rental property market.
“Do your homework before renting out your property,” says Vera Nagtegaal, Executive Head of Hippo.co.za. “This is especially the case if you are considering doing it on your own without the help of a rental agent, which could save you between eight to 12% in rental agency fees.”
“You are advised to apply yourself to how the rentals industry operates, to help you avoid any pitfalls or headaches down the line,” Nagtegaal adds.
Protecting your future rental income
First off, you will need to advertise for a tenant, using social media and any number of popular websites where rental property can be browsed, from Private Property to Gumtree and other property listings pages.
Once you have identified a suitable tenant after an open day at the property, you would have to investigate whether they will be able to afford the rent.
“At this point,” cautions Nagtegaal, “contact a reputable credit bureau such as TransUnion for a credit check on your potential tenant once the tenant has provided the necessary consent.”
Importantly, usually a tenant with a low credit score is a higher risk as there is a lower possibility of collecting your rental from them. “Therefore, don’t ever skip this step in your haste to place a tenant,” she adds.
With the possibility of the tenant defaulting on their rent or utility payments, it is advisable to have indemnity insurance in place to protect you against these potential risks.
Protecting your property
Next up, have a lease agreement drawn up by an attorney – it should detail important aspects of the rental agreement, including where the deposit will be held and how any disputes will be cleared up.
“A rental deposit tends to be a sizeable sum – often equalling at least two months rental – which you should keep in a high-earning interest account for your tenant during the time they are renting from you,” says Nagtegaal.
It is important to conduct an ingoing inspection before the tenant moves in to have the initial state of the property on record. As landlord you should consider home insurance to cover any damage to the structure of a rental property, including walls, roofs and floors.
“In the case where damages, aside from normal wear-and-tear are found, the landlord has a set time period, usually two weeks, to make changes to these and, thereafter, to return the balance of the deposit to their outgoing tenant,” she adds.
At the end of the lease agreement, your responsibility as landlord is to refund this deposit, in full, within seven days, if no damages are pinpointed during the tenant’s outgoing inspection.
“Most landlord-tenant conflict arises from a lack of knowledge as to who is responsible for what type of maintenance, when it comes to a rental property – so be sure to do your homework,” Nagtegaal advises.
Protecting your furniture
Should you decide to rent out a furnished property, it is important to ensure that you have household insurance in place to cover movable possessions like furniture and electrical appliances against a range of contingencies. As landlord, you are not residing in your rental property, therefore you would have to take out a separate policy over and above your existing household contents insurance of your primary residence.
“You’ll be grateful you took this step when an expensive appliance needs to be replaced – such as a fridge or washing machine,” she stresses.
Once all the above is set in stone and your credit-worthy tenant has taken occupation of the property you should be set to reap the benefits of a property that pays itself off – at least until it’s time to look for the next occupant.