It starts off as the ideal investment. You leverage your good credit record on your primary property to buy a second property that you’ll let out. Essentially you’re getting somebody else to pay your home loan, after which you’ll pocket the income. What could go wrong?
“Quite a number of things actually,” Harry van der Linde, Rentals Principal at Leapfrog Pretoria East, cautions. “Property is a robust investment, but playing the buy-to-let game is almost never without challenges, which is why it is crucially important to approach it strategically, transparently and proactively from the start,” he adds.
And because forewarned is forearmed, simply being aware of the issues you’re likely to run into means you’ll be able to handle it more swiftly, should they arise at some point.
The most common problems Van der Linde and his team encounter with rental properties and tenants include those around payment, damage to the property, and more people living on the premises than the contract makes provision for.
He elaborates on some of these issues:
1. First things first - paperwork
Renting out a property is a business transaction and should be treated as such at all times. This starts with a comprehensive application form that asks for all the relevant details, including bank statements, references, employment details and more. “A trusted property advisor will be familiar with the vetting and selection process, so it’s always a good idea to get a professional involved,” Van der Linde advises.
The next important document to have in place is a watertight lease agreement. “The contract between the lessor and the lessee should be drawn up by a trusted property advisor to ensure it holds in a court of law, should major issues arise. The contract will make provision for everything from the duration of the lease to the responsibility for maintenance and repairs, to insurance, breach of contract and everything in between,” Van der Linde explains.
“This is the one document you want to make sure is as comprehensive as possible, as it is designed to protect all parties involved.”
2. Payment problems
By far the most common problem landlords have to deal with, issues around non-payment or late payment is one that needs to be dealt with as swiftly as possible. “Rather than waiting until payment is a month overdue, get in touch with the tenant as soon as payment is late. Consider allowing payment on a later date, especially if they tenant is known to usually pay on time or has run into once-off financial difficulty,” Van der Linde suggests.
Leeway around payment requires a lot of discretion. “It’s a fine balance between having mercy on a good tenant who usually pays on time and looks after the property, and somebody who takes chances and is always putting excuses forward as to why payment is not forthcoming,” says Van der Linde.
Again, here it is a good idea to consult a trusted property advisor to guide you on the best course of action, with eviction as a very last resort as it is a complex and expensive process.
3. (Wilful) damage and neglect
In a standard rental agreement provision is made for general wear and tear on the property. It is, after all, a space in which people live, and the property owner certainly wants the tenants to be happy in their home.
What the owner of the property doesn’t want, and needs to act against, is the wilful damage or neglect of the property. “It happens that some tenants just don’t look after a property the way one would want them to. Whether it’s a broken toilet seat, cracked tiles, wardrobe shelves that have been removed or door handles that are missing, it’s important to ensure the tenant knows what’s covered under general wear and tear, and which damages will affect their deposit,” says Van der Linde.
4. Overcrowding
The size of the property you’re renting out typically determines how many people can reside at the premises, and it is important for the contract to stipulate that. “Time and time again we find that a one bedroom apartment that’s really only suitable for two people is being occupied by four, or that a suburban property earmarked for a family of four is hosting two large families, with the garage retrofitted to make room for granny,” says Van der Linde.
The recourse in this case is to refer back to the contractual agreement and the clause that stipulates the number of occupants allowed on the premises. “Allow a week or two for the ‘extra’ tenants to find alternative accommodation, after which you may need to enforce the terms of the contract with the help of a legal professional,” says Van der Linde.
5. Schedule regular inspections
Make sure to include a clause in the contract that allows for inspections of the property at regular intervals. “These inspections are to check on the structural integrity of the property and that things are in good, general working order,” Van der Linde explains. Note down, or better still, take photographs, of real or potential problem areas so that they can be brought to the tenant’s attention in writing, and so that a record exists of the problem.
Be completely upfront with the tenant about any issues you see, or foresee. “Sometimes it is something as simple as the tenant not ever opening the bathroom window, which causes extreme mould on the ceiling and walls. Ask them politely to see to this, as it is the kind of issues that quickly exacerbates into something bigger and messier,” says Van der Linde.
We also find that when tenants know that regular inspections are done and that damage to the property affects their security deposit at the end of the day, they are more likely to take more care in looking after the place.
6. Clear communication at all times
All things considered, you’re more than likely to have more good luck than bad luck with tenants.
Plan for all eventualities and ensure you have the right documentation in place, and you’re on the right track.
“Ultimately our best advice is to take action as soon as a problem arises, and to communicate with your tenants as openly and honestly as possible,” says Van der Linde.
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