Trouble with the tenants? Acting swiftly is key
Category Advice
Anybody who has ever taken on the role of landlord on an investment property knows it is not without its challenges.
Yes, in theory it is the ideal investment because you're essentially leveraging the good credit record on your primary residence to invest in a second property and getting somebody else to pay for it. "I always chuck to myself when I hear it simplified like this, because there are actually a number of things that can go wrong, which is why it is crucial to approach it as the property business transaction that it is," shares Harry van der Linde, Principal Rental Agent at Leapfrog Pretoria East.
He says that the most common challenges are around payments, overcrowding and damage to property but it's a case of "forewarned is forearmed" and managing it properly from the start can make a difference if or when issues arise.
The paperwork
Start with a comprehensive application form that asks for all the relevant details, including bank statements, references and employment details of the potential tenant and verify its validity. "A trusted property advisor will be familiar with the vetting and selection process, so it's always a good idea to get a professional involved," Van der Linde advises.
Secondly, and even more importantly, a watertight lease agreement needs to be drawn up and signed. "The contract between the lessor and the lessee should be drawn up by a trusted property advisor or lawyer to ensure it holds in a court of law, should major issues arise. The contract will make provision for everything from the duration of the lease to the responsibility for maintenance and repairs to insurance, breach of contract and everything in between," Van der Linde explains.
The lease agreement is designed with the best interest of all parties involved in mind, so it pays to ensure it is as comprehensive - and transparent - as possible.
Money matters
Unsurprisingly, non-payment or late payments are the most common problem landlords have to deal with. "The best approach here is to act immediately by contacting the tenant so assess the reason for late or non-payment," Van der Linde suggests. He says the landlord would consider allowing payment on a later date but cautions that this kind of allowance needs to be strictly managed to ensure it doesn't become a habit.
Leeway around payment requires a lot of discretion. "It's a fine balance between having mercy on a good tenant who usually pays on time and looks after the property, and somebody who takes chances and is always putting excuses forward as to why payment is not forthcoming," Van der Linde believes.
Bear in mind too that eviction is not necessarily the first - or the best - course of action as it is both complex and expensive.
Damage and neglect
In a standard rental agreement provision is made for general wear and tear on the property. It is, after all, a space in which people and the property owner certainly want the tenants to be happy in their home.
But it does happen that tenants wilfully damage or neglect the property. "Whether it's a broken toilet seat, cracked tiles, wardrobe shelves that have been removed or door handles that are missing, it's important to ensure the tenant knows what's covered under general wear and tear, and which damages will affect their deposit," Van der Linde says.
Overcrowding can also become a problem, which is why the lease agreement must stipulate the number of people permitted to reside at the property. The agreement is the only real recourse in this case, which underlines its importance.
Scheduling regular inspections is also a good way to mitigate potential damage, Van der Linde advises. These inspections are to check on the structural integrity of the property and that things are in good, general working order. Note down, or better still, take photographs of real or potential problem areas so that they can be brought to the tenant's attention in writing and so that a record exists of the problem.
Communication is key
"Overall though, you're more than likely to have more good luck than bad luck with tenants," Van der Linde says. Plan for all eventualities and ensure you have the right documentation in place, and you're on the right track. And manage the process strategically, transparently and proactively from the start.
Author: Leapfrog Property Group
