Landlords Needs To Make Rental Property Stand Out - Despite Hiked Demand In SA
The South African consumers' belt tightening in a weak economic environment has led to a cyclical reaction against unnecessary spending, due to i.a. rising interest rate hikes, which has pushed up the cost of paying off monthly bond payments. This has created a new surge of especially cash-strapped first-time homebuyers who are postponing their home-buying and are searching for suitable rental properties which are increasingly becoming scarcer and scarcer.
Although the property rental market may be swinging in favour of landlords, this does not mean that tenants will be desperate enough to take just any property. Landlords will need to still put in some work - and possibly some financial investment, if they wish to attract good quality tenants. Tenant quality is in an economic downturn much more important for landlords "than usual", as affordability also becomes a major hurdle for tenants. More lease applications are usually declined in tougher times than accepted, as tenant affordability and/or payment behaviours do not meet strict vetting requirements.
Here are three things you can do to make your property stand out and attract good tenants with a sound financial footing:
- Aim for the sweet spot when setting your rent
With supply still outstripping demand, and affordability an ongoing issue for cash-strapped South Africans, competitive rental rates are essential. 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, in the last three months of 2021, the best performing rental segment was the R7 000 to R12 000 per month category, with 87.29% of tenants in "good standing". This rental band also delivered the lowest "did not pay" number at 4.2%.
Tenants paying monthly rent of between R12 000 and R25 000 were the second-best performers (and) this sector of the rental market had the lowest vacancy rate of all rental bands at just 10.23%," the report says. The "below R4 500" rental band, however, continued to struggle to break through the 80% "good standing" mark, while the number of tenants renting in the "below R3 000" category "are struggling to make any sort of rental payment". TPN reports.
- Make some upgrades
To find a new tenant or to increase the amount charged in rent, it is sometimes necessary to upgrade the property. Increasing the appeal of a rental property follows the same principles of 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. Another idea is to install features that enhance the sustainability of the home, such as solar-powered geysers and water-saving faucets. Not only will this 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. 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, 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.
- Make your property pet-friendly
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. 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. This is not because the properties themselves cannot handle pets, but because four-legged fur kids get a bad rap with landlords. But 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.