Renting out a garden cottage within your property can be an enticing prospect for many homeowners. It offers the opportunity to earn extra income and utilise unused space. However, like any decision, there are both advantages and disadvantages to consider before taking the plunge into becoming a landlord on your own property.
READ: Key strategies to retain long-term tenants
“Renting out a garden cottage or separate section of your home is not just about earning extra income; it's about unlocking the hidden potential within your property. Especially now that interest rates as high as they are, the extra income can make it much easier to afford your home loan repayments,” says Adrian Goslett, Regional Director and CEO of RE/MAX of Southern Africa.
Before going through with this decision, Goslett advises homeowners to carefully consider the downsides before allowing a tenant to share the property with you. “While renting out a portion of your home can have many financial benefits, homeowners need to make sure they are also okay with the lifestyle changes this decision might bring about,” he cautions.
For example, sharing a property with a tenant might mean that there will be compromises on privacy. “Sharing the same garden space with a tenant inevitably means sacrificing some degree of privacy. Homeowners may find it challenging to maintain boundaries and personal space, especially if the tenant is overly intrusive or disruptive. If possible, adding fences and shrubbery can help to create greater separation,” says Goslett.
Dealing with problematic tenants can be another major headache for homeowners and can become even more awkward when the tenant lives on the same property as the landlord. “Issues such as late rent payments, property damage, or conflicts around late night parties and other disruptive behaviours can strain the relationship between the homeowner and tenant. That’s why it’s always beneficial to work through a rental agent who can act as the mediator between the landlord and the tenant,” he recommends.
On the upside, Goslett mentions that having someone else living on the same property can enhance security, especially if the homeowner frequently travels or leaves the property unoccupied for extended periods. A tenant's presence can deter burglars and provide peace of mind.
“Renting out a garden cottage or portion of your property can be a lucrative venture that offers many financial benefits. However, it also entails risks and challenges that homeowners must carefully consider before proceeding. To better understand these challenges, I recommend setting up a meeting with a RE/MAX rental agent for some free advice and guidance,” says Goslett..
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So what should tenants do to stand out as the best choice for landlords?
According to Berry Everitt, CEO of the Chas Everitt International property group, who previously shared tips on what tenants should consider if they want to stand out as the best choice for landlords, tenants should take the time to ensure that their credit record is in really good shape, and will also stand up to scrutiny as far as their history of on-time payment is concerned. No landlord wants to have to repeatedly ask for payment or get it late every month.
"Prospective tenants should also be able to provide good references from any previous landlords and compile all the information and paperwork they may need to complete a rental application before they start house hunting. This includes a list of previous addresses, their bank account details, ID document, employer information, and recent payslips.
"They should also have the funds immediately available to pay a deposit, usually equivalent to a full month’s rent, and any water and electricity supply connection fees that are required. If they have to wait for a previous landlord to return a deposit, before they can afford to pay a new landlord, they may well lose out."
In addition, while they should be very clear about their absolute “must haves” in a rental home - and what they really don’t want – they should try to be flexible on the rest of their criteria so that they can make a quick decision when necessary, he says.
READ: A step-by-step guide for first-time renters
Rising council and municipal charges
“Across some municipalities, we are experiencing overinflated municipal service costs with very little service delivery or reliability,” commented Kritzinger. “In some cases, the tariffs that get charged by the different councils and cities can make rentals and ownership unaffordable,” he continued. “The City of Johannesburg, for example, charges a blanket sewer tariff of R600, whether you live in Soweto or Sandton. If you stay in a flat and your rent is just R3 500, this charge – as a percentage of your total rental cost – is huge and can be prohibitive. With this in mind, agents and landlords need to be strategic around how they carry these costs.”
Depending on who covers the cost, runaway charges could put further pressure on tenants’ ability to pay rent, or squeeze landlords’ profit margins and encourage them to raise rent further.
Surprise maintenance issues
Landlords face squeezed profit margins as bond repayments and other costs rise, and a big repair bill can easily put them into the red.
“Regular maintenance and ongoing inspections are a must,” said van den Berg. “If the agent does an inspection when the tenant moves into a property but doesn’t visit the property again until that same tenant moves out five years later, chances are high that the one-and-a-half-month deposit is not going to be enough to cover damage or even just general wear and tear. When it comes to maintenance, agents and landlords need to be proactive rather than reactive,” he added.
PayProp-powered agencies can help landlords prepare for maintenance costs using the PayProp Property Account. This secure account allows landlords to set aside money – either all at once, or by saving part of the rental payment each month. Landlords get full visibility of payments into and out of the Property Account and receive interest on their balance daily.
“In all of this,” noted van den Berg, “the best thing agents and landlords can do is keep abreast of what’s happening in the market and take the time to understand market trends.
“You really need to be an area expert and must know everything that’s going on in your area. This is the best way that we can serve the tenants and property owners we work with".
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