At a time when rental defaults are rising, landlords must do all they can to hang on to the good ones. Picture: RDNE Stock Project/Pexels
Rising interest rates have significantly boosted the demand for rental accommodation over the past 18 months, but landlords should not see this as an opportunity to increase the rent they are charging.
Rather, they should put some effort into attracting and retaining good tenants, especially as many are under considerable financial pressure due to high inflation and rising interest rates.
The rental market is increasingly competitive, and the risk of rental defaults is growing, says Andrew Schaefer, managing director of property management company Trafalgar.
Read our latest Property360 digital magazine
Landlords, therefore, need to be wary of unilaterally implementing rental increases now that might easily prompt existing tenants to leave or put new tenants off.
“They should rather focus on attracting and retaining quality tenants by doing whatever they can to increase the desirability of their rental properties and ensure that they provide good value for money.”
Landlords could, for example, decide to provide or improve some of the features that tenants value the most. Currently, this might include installing a gas stove so that load shedding does not necessarily interrupt meal preparation, or installing an inverter and battery system to power fridges, computers, and other essential items during blackouts.
“In freehold properties, a solar power system or at least a solar geyser is a draw card, and even in sectional title homes it is possible to increase the appeal by providing eco-friendly items that are increasingly sought-after, such as LED light bulbs, water-efficient taps and showers and sustainable flooring.
“Good security is also a priority for most tenants, so it is worth taking steps to improve the security and safety of the property, especially if it is not located in an access-controlled complex or estate. Secure locks, burglar guards, and good outdoor lighting are essential, and landlords should consider adding electric fencing, security cameras, and an alarm system if at all possible.”
Schaefer says other ways to make tenants feel that they are getting great value for their rent include:
It is vital to ensure that the grounds and exterior of the property always look well-maintained and inviting, and that the interior is clean, well-lit, and visually appealing. Tenants also really appreciate quick and positive responses to requests for essential repairs.
This includes things like high-speed internet, laundry facilities, secure parking, and additional storage space, or even a certain amount of pre-paid electricity.
This creates a positive landlord-tenant relationship and a sense of satisfaction and loyalty that encourages tenants to stay put and renew their leases. Plus, it is always preferable to retain a quality client who looks after the property and pays the rent on time, even if you have to settle for a lower increase when renewing.
In some areas, landlords may find that shorter lease terms are attractive to certain tenants who work on contract and are prepared to pay a premium rental rate for this convenience. On the other hand, landlords may want to consider incentives for great long-term tenants who renew, such as a smaller rental increase, or an increase only once every two years.
Here are another three things landlords can do to make their properties stand out to good quality tenants:
With affordability an ongoing issue for cash-strapped South Africans, competitive rental rates are essential, says Jacqui Savage, national rentals manager for the Rawson Property Group. However, cheaper is not always better.
“In fact, there’s a very definite sweet spot in terms of rental brackets that has both high demand and an excellent tenant payment behaviour record.”
TPN’s Credit Bureau’s Residential Rental Monitor reveals that tenants paying between R7,000 and R12,000 have been the best performing category of tenants since 2014, with the highest proportion of tenants in good standing of all rental bands. They are followed by tenants paying between R12,000 and R25, 000 per month.
“Tenants paying R3,000 or less a month – the lowest rental band – continue to struggle to pay their rental with a continued deterioration of tenants in good standing.”
To find a new tenant or to increase the amount charged in rent, Adrian Goslett, regional director and chief executive of RE/MAX of Southern Africa, says it is sometimes necessary to upgrade the property. After all, increasing the appeal of a rental property follows the same principles as increasing the appeal of a home that is up for sale.
“In both scenarios, the purpose of the renovation is to make the property appeal to the largest possible number of potential buyers or tenants. The greater the number of interested buyers or tenants, the more they will be willing to pay, and the possibility of a bidding war increases which could push up the asking or rental price further.”
To maximise returns, landlords should look for affordable and easy home improvements such as giving the property a fresh coat of paint or even replacing old doorknobs and cupboard handles in kitchens, bathrooms, and bedrooms.
“These simple switches can make the whole room look more modern, which could create greater appeal to tenants.”
He also recommends that landlords install features that enhance the sustainability of the home, such as solar-powered geysers and water-saving faucets.
“Not only will it cut down on water and electricity costs for either the landlord or the tenant (depending on how the lease agreement is structured), but it could also increase the appeal of the home as green features are becoming increasingly sought-after.”
Savage agrees, saying that affordability is not just about competitive rents.
“Installing water and power-saving devices like geyser blankets and timers, LED lights and low-flow shower heads is a quick and easy update that really can make a difference to tenants.
“If you have a garden, a rainwater and/or greywater harvesting system is also a big drawcard. Tenants love green spaces, but don’t love big bills for their basic maintenance.”
In addition, she says most rental properties have not been designed with modern concepts like work-from-home in mind, but accommodating these new necessities does not have to be a major overhaul. Installing a fast internet connection and a simple workspace in an unused corner, under a flight of stairs, or even in a converted cupboard, can take a rental from “no-go” to “must-have” for a lot of tenants.
The number of tenants looking for homes that welcome their furry friends continues to increase. This is not only evident in tenant rental request adverts but also the number of new developments that are making their units pet-friendly. Catherine de Villiers, rental consultant at Jawitz Properties, says more landlords need to start welcoming pets.
“With so many competing properties, landlords who allow pets widen the scope of potential clientele. Tenants looking for pet-friendly accommodation are generally willing to agree to clauses stating that any damage caused by pets will need repairing.”
Many rental properties are not pet friendly, Savage says, noting that this is not because the properties themselves can’t handle pets, but because four-legged “fur kids” get a bad rap with landlords.
“The thing is, pets are family for a lot of people. By not allowing them in your rental property, you’re potentially excluding a significant portion of your target market.
“Adjusting these limitations – within reason and in line with body corporate restrictions of course – is a great way to broaden your tenant pool and differentiate your property from the competition.”
IOL Business