10 Pointers For Agents To Convert Homestay Rentals Into Long-Term Rentals.
In light of the uncertainty around when borders will reopen and continued restraint even once travel for tourism is permitted, many owners of homestay accommodation (for example Airbnb listings) are considering securing longer leases for their properties. Chelsea Viljoen of Just Property gives some advice.
"Due to the impact COVID-19 has had on the short-term rental market, many landlords who focused on very short-term rentals in the past have entered the long-term market," says Chelsea.
"The supply is higher than the demand at this stage and many landlords have had to reduce their rental asking price. Landlords are hesitant to sign for longer than six months in hopes that the short-term rental market will improve".
But there is an opportunity cost to offering 6-month leases. Moving is often expensive and always disruptive, so tenants may be disinterested in these shorter rental periods, leading to extended vacancies. There are other considerations too, making the shift from homestay to long-term rentals something to think long and hard about.
Do your research.
Do not take the potential nightly rate into consideration when working out a realistic monthly rental. If you achieve an average rental of R1000 per night in high season, it doesn't necessarily mean you will achieve a rental of R30 000 p/m. Research what is currently being advertised and check when the property was listed i.e how long has it been on the market for and what level of interest it has attracted.
Start marketing at the RIGHT rental amount.
In the current rental market, there is no time to "test the market". Price council your landlords from the "get go" and list their property at the right rental. Tenants are savvier and more informed than ever before so don't start promoting the property above what is market related unless you are comfortable risking an extended vacancy. In some instances, private landlords are marketing properties below what is market related just to secure a tenant.
Be flexible with the rental term.
Rental terms can vary e.g. 6/9/12 months. There is a lot of uncertainty that comes with the pandemic and tenants might not be prepared to commit for a full year. Instead, offer a 6-month rental with an option to renew. It's an inconvenience moving so chances are, if the rental is reasonable and the tenant is happy, the tenant will renew.
Be (reasonably) flexible with the rental amount.
If a tenant is willing to commit for a long-term rental but wants to offer slightly less than what is advertised, consider it. Do the math and figure out what is worse - a month's rental loss due to vacancy or R100 p/m less rental a month?
Take honest pictures and include useful information on the advertisements.
Many short-term advertisements include more artistic pictures to promote the ambiance of a particular unit rather than what is practical and useful. If a tenant is to commit to a rental of longer than a month, that tenant wants to see the dimensions of the property. Instead of a picture of neatly folded towels on the bed, the tenant wants to see whether there is enough cupboard space in the bedroom, whether there is a plumbing point in the kitchen, whether their couch will fit into the living room etc. Ensure that the photographs are high quality and include all angles of the property. Include beneficial information like the size of the property, the amount of parking bays, the property specifications, etc. For example, if a property is close to the Table Mountain Cable Way, this would be something you would most definitely want to include in a short-term advertisement, however, for a long-term advertisement, this will not necessarily be relevant.
Cancel subscriptions and avoid including "extras" in the rental amount.
Unless a tenant specifically asks for it, avoid including utilities in the rental amount. Netflix, DSTV, WiFi, alarm system etc. need to be deactivated and should be for the tenant's account over and above the rental amount. If a tenant has an issue with any service, the tenant can then take it up directly with the service provider and not involve the landlord or agent.
Be flexible in terms of furniture and remove valuable and personal belongings.
If possible, give tenants the option to rent either furnished, unfurnished or semi-furnished. Advise your landlord to remove any expensive and sentimental items. Photographs, books, portraits, DVD's etc. are all items that can clutter up a property and make it difficult for viewers and potential tenants to imagine themselves in the property. If a tenant is renting a property fully furnished and the items are quite valuable, "check-in" on the tenants every so often by means of interim inspections.
Do a thorough inventory and in-going inspection.
Before the tenant moves into the property, a conditions report needs to be done. Where possible, get the landlord to join you for the inspection with the tenant and jointly sign the report. Predetermine who will be responsible for what and get it in writing. For example, if an appliance like a toaster is faulty, is it the landlord or tenant's responsibility to get this repaired/replaced?
Determine whether you are proceeding with a management or procurement agreement.
There is a lot of work that goes into the rental of a long-term property especially when it is a furnished property. Is your landlord hands on and someone who prefers to manage the property him/herself? Or is your landlord perhaps out of town and needs an agency to tend to the management of the property? Determine what your landlord's needs are and advise him/her accordingly as to the various options your agency has to offer. Sign a mandate and get all terms and conditions in writing.
Vet the tenant extensively and sign the relevant paperwork.
Unlike short term rentals, an extensive application process needs to be adhered to in order to place the right tenant. Go through financials, references, credit checks etc. and always present your landlord with a profile of the applicant. Ensure that the full deposit and rental has been paid before checking in a tenant. A complete, comprehensive, and case-specific lease agreement needs to be prepared and signed by all parties. Have the tenants sign a copy of the building's conduct rules.
Character traits that in Chelsea's experience can give you an idea of the applicant include how responsive they are and whether they're good with communication; whether they pay rent on the same day every month; whether the rental amount paid varies; their spending habits and whether money being saved. Most of this can be deduced from bank statements.
"Another good idea is to check out their profiles on social media," says Chelsea. "You can tell a lot about a person by their online presence."
Listening to an experienced letting agent so freely sharing her tips of the trade highlights the fact that for any homestay host hoping to become a landlord should really consider teaming up with a passionate and astute property professional who intimately knows the market and your area.