South Africa

Managed rentals the key to profitability in 2024, say agents

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Agents’ top profitability strategy for 2024 is growing their managed rental book, according to PayProp’s latest State of the Rental Industry report.

More than half (51.7%) of residential rental professionals across South Africa said this was their preferred strategy, making it the most popular option in the survey. The runner-up option – using property technology to boost productivity and profits – was picked by just 14.6% of respondents.

Quantity and quality

The report also showed that agents strongly preferred managed rentals over procurement-only contracts. The latter option was the top profitability strategy for a much smaller group of respondents (14.3%).

It’s easy to see why. Managing rental properties lets agencies charge ongoing fees and create consistent monthly income streams. Moreover, in a rental market where supply is tight, upselling existing procurement-only clients to a fully managed scenario is a low-friction way to boost revenues without having to sign new landlords.

Even better, why not do both? More than half of respondents (51.5%) said their top priority for 2024 was to sign new landlords, making it the top business priority in the residential rental industry. The goal for most agents seems to be to sign new clients and then sell them the full package.

Elsewhere in the report, it looks like agents are making good on both – getting more fully-managed mandates as well as signing new landlords. Average portfolios keep getting bigger: 29% of surveyed rental professionals said their business manages at least 250 properties, up from 22.5% the previous year. And more than two thirds said 25% or less of their rental book is procurement-only.

Efficiency is key

In keeping with their wish to sign new clients, respondents were clearly concerned about how they would manage that growth. That may be why they strongly prefer using PropTech to increase productivity (see above).

While PropTech adoption slowed down in 2023 according to the report, it also showed that this was because most rental agencies are already using technology to digitise key functions, including accounting, tenant vetting, document storage and inspections – and saving valuable hours on unproductive admin in the process.

Business leaders were particularly enthusiastic about PropTech, with 16.2% choosing this option (versus 14.6% for all respondents). Encouragingly for rental sector workers, business principals also see tech as an enabler for agents and administrators, not a replacement for them: just 0.7% plan to increase profitability by cutting staff.

For more on rental professionals’ profitability strategies, technology use, landlord and tenant relationships and more, download the latest PayProp State of the Rental Industry report.
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