South Africa

Why landlords need agents in today's uncertain economic climate

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The past year has forced South Africans to relook their budgets and question every expense. The economic strain of the pandemic means everyone is looking to save where they can. For many property owners, this may mean questioning the necessity of using a residential rental agent to not only source tenants to occupy their properties, but to manage the relationship, stay on top of arrears and ultimately protect their investment.

The South African real estate industry has managed the pandemic-forced transition to remote working with relative ease. In the recent PayProp State of the Rental Industry 2020 survey, 92.5% of respondents indicated that they increased the use of technology in their business due to the pandemic. This is a clear indication of agencies’ belief that those who embrace technology in their everyday activities are best placed to ride out the storm.

There are four motivators for landlords to employ the services of a professional real estate agent focused on rentals:

1. Good tenants are in short supply

It’s no surprise that COVID-19 continues to wreak havoc on tenant placements and payments, and landlords are hanging on to good tenants whenever possible. An experienced rental agent will not only initially help you identify a good tenant, but they will also manage the relationship, and advise what a reasonable increase on rent should be in this climate. Landlords can’t expect ten or even five percent increases – it is for the most part just not realistic. A good rental agent will know what is acceptable in their local area and can provide the reality check needed to help manage expectations.

However, when it comes to the two income streams of property ownership – capital appreciation and rental income – growth is cyclical. Just because landlords aren’t experiencing the increases they might be used to, it doesn’t necessarily mean that it won’t be the case in the years to come. Rental owners need to stay the course for the mid to long term, because the tide will turn eventually.

2. Arrears are on the rise 

South African private landlords are facing increasing financial pressure due to increasing tenant arrears from a shrinking pool of tenants in arrears, and keeping the lines of communication open with tenants is critical to the ongoing stability of this important revenue stream. A good rental agent will be experienced in identifying reliable tenants and diligent in following up and handling arrears. The process requires an agent who understands payment reminders, letters of demand and other factors involved.

3. Regulatory factors play a role

Due to the onerous regulations that need to be adhered to, renting a property in South Africa can be a complicated process without the assistance of a qualified rental estate agent. The Rental Housing Act regulates the behaviour of landlords, their agents and tenants, and will be succeeded by the Rental Housing Amendment Act in future. Rental agents know these laws and can take care of all aspects of rentals in a lawful manner.

4. Financial scrutiny more important than ever

In the current climate, agents that employ leading payment platforms like PayProp are best suited to financially manage rental properties. These platforms enable agents to reconcile payments to the right properties as they come in, and landlords, contractors and the agent are paid without delay from fully balanced trust accounts – in the correct order, with funds ringfenced for the exclusive use they were intended for.

Property is an asset class, and with all asset classes there are certain inherent risks. Bad tenants, frequently late payments, a vacant property or damage to your property – these are all risks that can unduly affect property owners’ livelihood and return on investment. For most landlords, having someone in the property is better than it standing vacant, but that is still not ideal for their risk profile. A professional rental agent can help to smooth the process and protect the landlord’s investment.

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