Ongoing publicity about the dangers of signing on unreliable tenants and/or appointing ineffectual managing agents has made the average South African buy-to-let investor far more aware of the need for extreme caution in these matters.
“Nevertheless,” says John Birkett, who has just bought a Rawson Rentals franchise to operate primarily in Cape Town’s Southern Suburbs, “there have been a number of unfortunate incidents which have resulted in investors being landed with bad tenants and losing money.”
Birkett, who in the last 11 years has always been among the top three commission earners in the Rawson Property Group and who will continue to operate as a sales consultant in partnership with the Rawson Properties Claremont franchise, says that he decided to add a rental management portfolio to his other operations because he had seen this type of investment go seriously wrong on occasions.
“The first big mistake made by buy-to-let investors,” he says, “is to try and handle the selection of the tenant, the drawing up of the lease and the managing of the property themselves. The second mistake, in my experience, is to appoint an inefficient managing agent.”
In these situations, says Birkett, it is only too easy to end up with a non-paying tenant who then also proves to be extremely hard to evict from the premises. The landlord can then quite easily lose half a year or a year’s rent.
“Owners going the d-i-y route with their tenants,” says Birkett, “are often motivated by a reluctance to pay commissions, but this in so many cases proves to be a false economy.”
In his franchise, he says, his commissions are competitive and differ for non-managed and managed, furnished and unfurnished units.
“Most commissions are relatively inexpensive in view of the work and effort involved and they will seem totally inconsequential if and when things go wrong through the landlord trying to handle matters himself.”
Good managing agents, says Birkett, will always have access to reputable credit bureaux and tenant records. He will be using the TPN (the Tenant Profiling Network) to check on all applicants’ financial and tenant track records.
Birkett’s new Rawson Rentals franchise is operating from ‘The Rondebosch’, which has 106 units and he has already received the go-ahead from clients to manage 98 of these – an indication of how respected he is in the industry. ‘The Rondebosch’ is one of five high density sectional title developments brought to or planned by Rawson Developersfor the Rondebosch and Claremont ‘academic belts’ – where students usually form the bulk of tenants.
Just how satisfactory the rentals can be in the Rondebosch/Claremont area, says Birkett, is shown by the average rental returns that will be charged at ‘The Rondebosch’. Monthly rentals from R5, 500 will be the going rate for a one bedroom unit (from R6, 500 if the unit is furnished), from R8, 000 will be charged for a two bedroom unit (from R9, 000 if the unit is furnished) and R10, 000 or more will be charged for three bedroom units.
‘The Rondebosch’, Birkett reminds us, is only 1, 5 km from the UCT campus and will have A1 security with access by means of biometric finger print recognition. It will also have secure covered and uncovered parking for 177 vehicles and its own Laundromat.
His Rawson Rentals franchise, he says, will be employing a cleaning service and he is already urging buy-to-let investors to make use of this at least once a month. Others should make use of this service as much as three to four times a week.
Paul Henry, Managing Director of Rawson Developers, said he welcomed the arrival of Birkett as a rental agent because operators of his calibre enhance the value of all units in Rawson developments.
