As interest rates rise, so does the demand for rental homes, as many people who were planning to buy find that they are no longer able to qualify for a home loan, or that they don’t have enough saved for a deposit.
However, while this does indicate some good opportunities for property investors, being a landlord is not as easy as it may look, says Greg Harris, CEO of Chas Everitt Property Rentals, and investors will save themselves a lot of time and money if they follow some basic guidelines.
“To start with, you should try to buy property close to where you live. This will allow you to check on it periodically, see to any repairs yourself, and easily show the property to prospective tenants if you don’t have a managing agent. And if you decide to invest further away, you really should appoint a reputable rental management agency like Chas Everitt Property Rentals to assist you and protect your interests,” he says.
“Secondly, you should make sure that you understand the principles of rental law. You don’t have to learn the details off by heart, but you do need an overall grasp of legislation such as the Rental Housing Act and the Sectional Titles Act that deal with issues such as security deposits, written leases, the provision of municipal services, how much notice you need to give your tenants if you want them to leave and your obligations as a landlord in a sectional title scheme.
“You should know that even if you do appoint an agent to manage the property, the lease is still a contract between you and your tenants, and you are still responsible to make sure everything is legal and above board.”
The next most important thing is to always screen prospective tenants, says Harris, or to insist that your managing agent does so. “It’s really worth your while to run a credit and tenant history check every time, and online screening services are quick and convenient. You might not base your decision to accept an application on credit score alone, but with demand building for rental properties you may have several applications and this can help you choose the most reliable payers.
“You or your agent must also then take the time to meet your preferred applicants in person and to check all their references, especially from employers or past landlords. People are not always what they seem to be.”
This does not mean, he says, that you shouldn’t treat tenants with fairness and respect. “Indeed, cultivating a good relationship with your tenants often goes a long way to ensure rent will be paid on time and that repair requests will be easier to deal with.
“On the other hand, it is never a good idea to get too friendly. If you do, you might just be tempted to let your tenants pay their rent a couple of weeks late some months, or allow a partial payment when you know they’re between jobs. And before you know it, they will be six months in arrears and you will be struggling to make the mortgage payments. It’s a fine line to walk, and another good reason to appoint an agent who can act as a go-between and keep things on a business footing.”
Finally, says Harris, you must make sure that your lease gives you the right to regular property inspections during the lease period. “You can conduct these inspections yourself or instruct your agent to do them every three or six months, and they are the best way to keep on top of whether the tenants are treating your property well – or being so destructive that you need to give them notice as soon as possible.”