How to Improve Rental Returns in the Current Rental Market

The Rental Market in Gauteng
Let’s start off by looking at and understanding the current rental market in Gauteng which, to say the least, is challenging! Currently, mostly as a result of lockdown and oversupply of rental properties, if your rental price is not competitive, you run the risk of sitting with an empty unit for weeks if not months. 


Payprop says: "We’ve seen a dramatic slowdown in rental growth rates since the beginning of the year, but of course this was to be expected. The COVID-19 pandemic has had a predictably significant impact on the rental market."


One of the most prominant factors affecting rental growth is affordability as many tenants either lost their jobs or took heavy pay cuts due to Covid 19. Therefore rental growth will be affected for sometime to come.


Payprop: "The year-on-year (YoY) rental growth rates for April, May and June were 2.3%, 1.1% and 1.6% respectively. This was below the rate of inflation – even as the latter figure dipped to its lowest level in years. At 2.1% year on year, the inflation number for May reached its lowest point since September 2004."


If you currently have a tenant occupying your rental property and they are paying regularly and in full, consider doing all you can to keep them. 


What can you do Improve your Rental Returns in the time of Covid?
Firstly, if you currently have a tenant occupying your rental property and they are paying regularly and in full, consider doing all you can to keep them. 


The first step is to identify what you can control with regard to the above. You probably cannot directly control our economy, the financial well-being of your tenant or the supply of new property into the rental market. You can however control how competitive your property is with regards to the rental amount that you charge, how appealing your property is to tenants in your market and how you treat your tenants.


How to prevent your Rental Property from standing vacant
Know your market, suburb and complex with regards to competitive current rentals being charged, rental increases and the rental demand. Be realistic about the rental you want to achieve. Do your sums, work out if your property stands vacant for 1, 2 or 3 months due to an unachievable rental price, what your losses will look like in the next year vs dropping the rental price by R500 - R1000. 


Make your property desirable – or specifically, more desirable than the guy next door! Make it look and feel modern, neat and tidy. Do you have 10 year old grubby carpets in every room or nice and appealing wooden floors or at least laminate flooring? What does your kitchen look like, would you like to cook in there? When last did you give the property a good coat of paint? Intrinsic to owning a rental property is the need to spend money upgrading your property from time to time, especially when the market is tough.  Spending money on maintenance and upgrades can also be tax deductible, so contact your tax adviser in this regard.


Look after good tenants – if your tenant is a good tenant, pays their rent on time and looks after your property, return that with interest by looking after them. Be responsive to their communication, be considerate to their requests for maintenance and be reasonable with renewals of the lease and rental increases. Communicate professionally, politely and show respect. It is almost always better to renew a lease with a good tenant, even without a rental increase, than to start over looking for a new tenant.


Maintain your property – know what your responsibility is with regards to maintenance and do it! At the same time understand what you tenant is liable for and be firm about this too. One of the biggest complaints from tenants that we deal with on a daily basis in landlords that refuse to take responsibility and do the maintenance and repairs that they are obliged to do.


How to guard against non-payment of rent
Screen tenants properly before signing a lease and allowing them to take occupation and control over your property. Make sure that they can afford the rent, verify their income & employment and get a reference from their previous landlord. Be aware of scam artists, there are many out there! Be fair and reasonable when dealing with requests (or fair demands) from your tenant.


Monitor your tenant’s payment behavior and be quick to respond and rectify it if you need to.  Follow the correct legal steps when your tenant stops paying rent or defaults. In this situation, unless you know exactly what to do, get legal advice quickly.


Etchells & Young are industry leaders and experts in placing tenants and managing rental properties. If you need help and assistance with your rental property, get in touch with us.