So, you’ve finally managed to buy that investment property that will help build up a future retirement income plan. Or perhaps you’re already retiring to your secondary seaside home, and you want to rent out your home in the city to help supplement your pension income.
Wherever you find yourself, if this is your first time renting out an investment property, it’s important to note that there is so much more involved than just finding a tenant. Below are five factors to consider when renting out a home…
1. Make your property as attractive as possible
Let’s not forget that the main reason you are renting out your investment property is to provide supplementary income – either to help pay towards the bond repayments or as part of your immediate pension income. So, make sure the property is in a condition that will not only attract the right kind of tenant, but also get you the best rental income.
Here are a few things you can do: freshly paint the inside and outside of the property in a neutral shade; and make sure the handles on the kitchen cabinets and bedroom cupboard doors’ are tightly secured, all the lights are in working order, and should the property come with a garden, that it’s well manicured. In addition, think about what you could add that would make the property a home for potential tenants, such as blinds throughout the home and even furniture pieces or key appliance like a washing machine – a fully or semi-furnished home is set to get a substantially higher income.
Another factor to consider is how safe and secure your property is – does it have burglar bars, an alarm system, electric fence and/or remote controlled gates? If not, consider adding them to your property. It might feel like a great expense but these are big factors for tenants in how attractive a property can be for them and how much they’re willing to pay in a month.
2. Check if there are any repairs that need to be done?
Your home might look pretty good to rent out from a far, but is there anything that needs to be fixed? Perhaps there is a faulty plug in the kitchen or a sliding door that is a bit glitchy when you open or close it. And while you’re inspecting, take note of things that might be in working order now but may potentially become problematic – this could be anything from a stove that is nearing the end of its days, bathroom cabinets that might need some love or an old geyser that will need replacement in a year or so.
As a landlord, it will be your responsibility for general upkeep and maintenance of the property, particularly for issues that aren’t covered by home insurance. As a standard rule, landlords are advised to save 5%-7% of their rental income for any upkeep issues that might arise.
3. Screen Potential Tenants
You might think a potential tenant has an honest face or, perhaps, they’re an acquaintance of a friend who has vouched for them. But we cannot stress enough how important it is to vet a tenant so that you can securely know that they will be able to afford and pay the rent on time.
If you’re managing the rental yourself, make sure prospective tenants provide a detailed application form and that they include a certified copy of their ID, three months bank statements, proof of income and references from previous landlords. If you make use of a rental agency, they will – in addition to checking above – conduct a full credit check to ensure that your tenant will timeously pay their rent every month.
4. Understand your responsibility as a Landlord
To ensure any rental agreement is successful, all parties involved need to know what their responsibilities are, and then commit to them. While the tenant also has certain obligations (such as paying rent timeously every month), it’s important to note that below are just some of your key responsibilities as a landlord:
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Ensure your property and its contents are in a reasonable working condition when the tenant moves in.
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Keep and maintain all external walls, roof, plumbing (including any applicable flushing mechanism of all toilets on the property), electrical fixtures and other structural parts of the property in good order and repair.
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You must invest the deposit in an interest bearing trust account. Once the lease is terminated, the deposit plus interest is payable to the tenant after all damages relating to the leased property have been paid (that is, if any damages exist).
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You may not enter the property without the tenant’s permission, and can enter only after reasonable notice has been given.
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You, together with the tenant, must conduct an inspection prior to the tenant moving in and list any damage – this will help determine what you are required to fix and to record any damage that happened before the tenant moved in. This is especially important when it comes to claiming back a deposit.
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You may not cut water or electricity to a tenant’s unit without a court order.
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You have to keep the leased property insured to its full value against risk of damage by fire.
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During the period of three days before the lease expires, you and the tenant are required by law to inspect the property (at a time convenient to both parties) to assess if there is any damage caused during the tenant’s occupation of the property.
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After inspecting the property, you are required to pay back the tenant’s deposit plus interest. This needs to be done within seven days, provided that there are no damages. If damages are present, the damages must be repaired and the remainder of the deposit needs to be repaid to the tenant within 14 days after restoration of the property.
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You also have to maintain the structure of the property and ensure that plumbing, electrical systems and any lifts are in working order. In addition, you also have to repair any damage caused by fair wear and tear.
If you want to find out more about all the finder details relating to your responsibilities as a landlord, kindly download our free Landlord Handbook Here.
5. Have a detailed written and signed contract
One of the main responsibilities of the landlord is to have a detailed contract where both landlord and tenant have signed. It’s not only helpful to have clear stipulations for both parties marked up front, but it can also avoid any misunderstandings and complications in the future. The more details that are covered in the contract, the smoother the rental will run.
While a basic contract will suffice, it is important that all elements are included and clearly explained in the document so that there are no areas left open for interpretation. Aspects such as acceptable tenant behaviour, breakage costs, preferred method of payment and date that the rental is payable should be included.
As a landlord, it will also be your responsibility to ensure that you provide your tenant with a copy of the signed agreement, and to also issue the tenant with a receipt for every payment received with regards to rent received, services, accounts and so forth.
We understand that this process can be overwhelming – even for the most seasoned landlords out there. If you would like to find out how a Rawson Rental agent can assist you in any step of the rental process, please contact 021 658 7100. We’d love to take care of this process for you, so that you can get on with enjoying life instead of worrying about finding the right tenant and all the paperwork that goes with it.
