While many buy-to-let investors are cashing in big bucks from the rental market, landlords are warned to carefully assess tenant affordability.
The Tenant Profile Network (TPN) Rental Payment Monitor Q1 2012 reveals that the riskier rental brackets are at the higher and lower end of the market with tenants renting homes priced over R12 000 per month struggling to pay rent.
The Tenant Profile Network (TPN) Rental Payment Monitor Q1 2012 reveals that the riskier rental brackets are at the higher and lower end of the market with tenants renting homes priced over R12 000 per month struggling to pay rent.
Of these tenants, only 77 percent are in good standing with 61 percent paying rent on time, 17 percent paid late, 11 percent made partial payments and 12 percent did not pay rent.
Writing in the report, Michelle Dickens, TPN managing director says estate agents and landlords should be carefully analysing tenant affordability in this category.
“Looming interest rates will most certainly affect these tenants’ ability to meet their rental and other credit obligations.”
Tenants renting properties priced below R3 000 per month recorded 72 percent of tenants in good standing.
Of these, 58 percent paid rent on time, 14 percent paid late, 9 percent made partial rental payments and 19 percent in this price category did not pay rent at all according to TPN.
Overall, 81 percent of tenants were in good standing in the first quarter of 2012 with 68 percent paying rent on time, 8 percent made partial rental payments, 13 percent paid late and 11 percent did not pay rent during this period.
Dickens notes that tenants renting properties priced between R3 000 and R7 000 per month had 83 percent in good standing.
In this category, 72 percent paid rent on time, 12 percent paid late, 8 percent made partial payment and 9 percent did not pay.
Those renting properties priced between R7 000 and R12 000 per month recorded 83 percent of tenants in good standing.
Of these, 71 percent paid rent on time, 13 percent paid late, 7 percent made partial payments and 9 percent did not pay rent at all.
According to TPN, the Eastern Cape and Western Cape continues to fare better with tenants in good standing at 86 percent and 85 percent respectively.
TPN advises landlords and managing agents to be aware of tenants who submit fraudulent proof of payment – especially while negotiating the hand-over of keys.
This figure remains unchanged from the previous quarter, read the article here.
Gauteng went up to 77 percent from 76 percent in the previous quarter while KwaZulu-Natal saw a decrease to 76 percent from 80 percent in the fourth quarter of 2011.
TPN advises landlords and managing agents to note the following risk factors on the rise:
1. Tenants who use the rental deposit as the last months’ rent.
2. Applications to rent in the name of a spouse or other family member with intent to hide previous delinquent tenant behaviour (particularly parents who make applications in the names of their children).
3. Tenants with delinquent credit profiles who target private landlords.
4. Tenants who submit fraudulent proof of payment – especially while negotiating the hand-over of keys.
5. Tenants who submit fraudulent supporting documentation such as false proof of identity and altered accounts, masking non-payment of utilities. – Denise Mhlanga
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