7 Basic Compromises Smart Landlords Should Be Making
No landlord wants to end up with a vacant property, thus their number one priority should be to fill their unit as soon as possible. Period.
A vacancy of just one month can have a huge impact on a landlord's yield and it can turn out to be quite costly.
In order to avoid vacancy, it is important to make the property and the lease agreement as attractive as possible to the tenant.
If you already have a good tenant, then it is advisable for you to make the following compromises. This way, you will ensure that your tenant is happy, you get your monthly dues and you don't lose out on anything:
#1 - An increase in rates does not mean an increase in rent
Even though this is something that many landlords might seem to be fair, it is not always the best solution.
Many landlords lose great tenants when they increase the rent as an increase in (inflation) rates is reported.
Now, landlords are actually overpricing their properties compared to the market when proposing an increase in rent upon extending the lease agreement.
#2 - Secure a good-paying tenant
This is an important part of the renting process: the landlord should look for a tenant who can pay the rent on time and who can look after the property.
If you have such a tenant who abides by the lease agreement, it would be advisable for you to extend their lease agreement and offer a discounted rental rate as opposed to the 7-10% increase every year.
#3 - Repairs should be done as soon as possible
If anything breaks on the property, it is the landlord's responsibility to fix it.
Try repairing things as soon as possible. A tenant would much rather continue the lease somewhere else where problems are solved quickly and where they can enjoy full use of the premises.
#4 - No pets = no tenants
This might not always be true, but the no-pets policy does drive away a huge chunk of tenants looking for a place to rent.
If you do decide to change this policy, remember that the tenant can be held responsible for the condition of the unit and that it should be reflecting its initial move-in condition when they moved in - pets or not.
#5 - Make sure the rental price is market-related
The number one reason for a vacant property is because the rental price is not market-related.
Simple, no?
Landlords should make sure that they price their properties at market value in order to secure a good tenant.
Consider the following example: a real estate agent recommends that the rental market value of the house to be R12,000 per month, but the landlord insists on asking R13,000. If the landlord rejects an offer of R12,000 per month and the property might potentially be vacant for 1-2 months, the landlord could lose out on R12,000-R24,000 because he did not accept an offer of R1000 less.
Ironically, it might cost the landlord R1,000-R2,000 per month (spread over the year) due to the property being vacant for 1-2 months due to him rejecting that one offer.
At a non-market-related asking price, it might take a while before the unit is rented out, while market-related ones will be occupied.
#6 - Pay for garden services
Paying for garden services is a great way to improve the attractiveness of the rental property, as tenants will appreciate the landlord taking care of the garden!
Plus, at the same time, it's a great way for the landlord to know his property is being taken care of.
#7 - Ask for a one-month deposit
When you find a promising tenant, it is a good idea to ask for only one month's rent upfront as a deposit.
Asking for a deposit that exceeds the rental amount may turn out to be counterproductive.
It might put financial pressure on the tenant and it could lead to the tenant defaulting and searching for a place to rent somewhere more affordable.
It is important that landlords keep the above information in mind and hopefully make small compromises in order to get the most out of their rental unit.