However, there are a number of things to consider for those who are emigrating but want to keep a toe-hold in South Africa in the form of Property Investment.
Paul Stevens, CEO of Just Property, advises on making your home pay without the pain of being a hands-on landlord.
Tenants within the lower-end of the rental market are still struggling to pay their rent, as recovery slowly inches to pre-lockdown levels, according to TPN credit bureau data.
“The rental market is under pressure right now, with high levels of unemployment, job insecurity and poor tenant credit ratings. This is a decision that needs to be made with insight into local market conditions,” warns Stevens.
The best way to make the right decision is to ask yourself these questions:
- Do I need the liquidity that could come from selling the property now, or can I afford to hold onto the property until I am sure that I won’t be returning to South Africa?
- What will my expected running costs be? For example, rates and taxes, property maintenance, insurance, agent’s fees etc.
- What are my prospects for finding a reliable tenant at a rent rate that will cover my expenses and build a slush fund for maintenance and unforeseen expenses?
- What rental opportunities exist for me to tap into? (Stevens suggests you research long- versus short-term rentals, student housing, conversion from residential letting to commercial rights.)
- Who would manage the property and the tenant in my absence?
plan to emigrate
“Absent landlords” and appropriation
“Properties with absent landlords and no managing agents present a higher risk than those that are more closely managed,” says Stevens.
“That said, appropriation of land and property has been used by politicians as a tool to win votes and instil fear, but South Africa’s constitution is amongst the strongest in the world. It protects its citizens and ensures that due process is followed.” Understanding that process, along with local government objectives and town planning initiatives, is vital if one is to understand the risk of one’s property being appropriated, he adds.
DIY vs managing agent
The peace of mind you get having your property rental managed is something most foreign-resident landlords appreciate, says Stevens, “A strong managing agent maintains positive relations with the tenant (and neighbours), serves to help maintain the property and manages financial aspects like rent collection and payment of utilities.” These matters can be difficult and time-consuming to manage remotely.
“You might think you could save money by running your rental from afar, but it’s a false economy. An experienced management agent, who keeps close tabs on the property and the tenant, can handle small matters before they become big problems,” he warns.
Stevens notes that he has seen DIY landlords getting into hot water through mistakes like these:
- Using generic or outdated lease agreements
- Including illegal clauses in their leases
- Screening tenants in discriminatory ways
- Not doing the in-going and out-going inspections because they’re abroad
- Evicting defaulting tenants in ways that do not align with SA laws
- Failing to invest deposits correctly and using them in illegal ways
Do they conduct rigorous credit, employment and affordability checks?
Their process should include identity matching with a credit bureau, an identity and
deceased check with Home Affairs, a fraud and criminal conviction check against the SAPS
database, bank account verification, character references, and consumer and loan account
checks, including judgments or defaults.
These should ensure that all parties are protected and contain clear and comprehensive
terms and conditions.
Ask your prospective agent if a legal firm has endorsed the quality of the lease contract.
You want an agency that processes payments speedily and accurately.
Ask whether you’ll have complete transactional control on their system and whether it
complies with regulations. Do they take care of all monthly payments (utility bills, rates
etc.) on your behalf? How do they deal with non-payment of rentals?
Inspections and maintenance
How will these be handled? Who do they have on call to see to maintenance operations?
Insurance against defaulting tenants
Does the agency offer this? They should. Just Property’s RENTSECURE insurance product,
priced at 3.5% of the monthly rental, offers three months’ cover in the event of non-
payment, one months’ cover for absconding tenants and up to R50 000 cover for legal fees related to tenant evictions.
When you’re far away, you want the assurance of excellent communication, but you also
don’t want to be bombarded by spam. Ask what reports can be provided on request, says
Stevens. “This will tell you a lot. They should generate activity reports, entry and exit
inspection reports and interim inspection reports if required.
“It is important that you cover this ground before you appoint a managing agency,” Stevens warns.
“You will be paying for this service and you need to be sure you are getting value for
money and the peace of mind that your property is being looked after while you are away.
With a strong rental agent in place, you can enjoy your new adventure overseas in the
knowledge that your home is earning its keep and will be ready for you when you return – which we hope you will.”