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Are You Emigrating But Keeping Your House?

Are You Emigrating But Keeping Your House?

10 March 2021

You’re off on an adventure to distant shores but keeping a toe-hold in South Africa in the shape of your property. Paul Stevens, CEO of Just Property, advises on making your home pay without the pain of being a hands-on landlord.

First, how does one weigh up the potential earnings of holding the property against the cost of maintenance and tenant management from afar? “The rental market is under pressure right now, with high levels of unemployment, job insecurity and poor tenant credit ratings. This is a decision that needs to be made with insight into local market conditions,” warns Paul Stevens, CEO of Just Property.

Stevens says the best way to make the right decision is to ask yourself these questions:

  • Do I need the liquidity that could come from selling the property now, or can I afford to hold onto the property until I am sure that I won’t be returning to South Africa?
  • What will my expected running costs be? For example, rates and taxes, property maintenance, insurance, agent’s fees etc.
  • What are my prospects for finding a reliable tenant at a rent rate that will cover my expenses and build a slush fund for maintenance and unforeseen expenses?
  • What rental opportunities exist for me to tap into? (Stevens suggests you research long- versus short-term rentals, student housing, conversion from residential letting to commercial rights.)
  • Who would manage the property and the tenant in my absence?

“Absent landlords” and appropriation

“Properties with absent landlords and no managing agents present a higher risk than those that are more closely managed,” Stevens acknowledges. “That said, appropriation of land and property has been used by politicians as a tool to win votes and instil fear, but South Africa’s constitution is amongst the strongest in the world. It protects its citizens and ensures that due process is followed.” Understanding that process, along with local government objectives and town planning initiatives, is vital if one is to understand the risk of one’s property being appropriated, he adds.

DIY vs managing agent

The peace of mind you get having your property rental managed is something most foreign-resident landlords appreciate, says Stevens: “A strong managing agent maintains positive relations with the tenant (and neighbours), serves to help maintain the property and manages financial aspects like rent collection and payment of utilities.” These matters can be difficult and time-consuming to manage remotely.

“You might think you could save money by running your rental from afar, but it’s a false economy. An experienced management agent, who keeps close tabs on the property and the tenant, can handle small matters before they become big problems,” he warns. A recent Google My Business review from an overseas landlord sums up the value proposition, “It has been more than 10 years of outstanding service. 3 lease management agreements and never the slightest problem. I am an expat investor and most of the times not in South Africa. Just Property has always gone the extra mile, never excuses, always on the dot and very responsive. There has been little to no personnel fluctuation which speaks for the team itself and the management. Even in extreme situations. I had squatters in one of my flats that were not management by Just Property and they still helped. Rare to find business ethics these days... Thank you for a decade of peace of mind." We also received another excellence review for Sheriese Potgieter from the Just Property Queensburgh office: "Sheriese Potgieter has helped me get my apartment rented out while I was overseas. Sheriese did an awesome job and always provided me with feedback and went the extra mile. Excellent inspection reports and lease agreement arranged. Very recommendable service!". 

Stevens notes that he has seen DIY landlords getting into hot water through mistakes like these:

  • Using generic or outdated lease agreements
  • Including illegal clauses in their leases
  • Screening tenants in discriminatory ways
  • Not doing the in-going and out-going inspections because they’re abroad
  • Evicting defaulting tenants in ways that do not align with SA laws
  • Failing to invest deposits correctly and using them in illegal ways

Just Property has dominated the rental market nationally for over 20 years and Stevens speaks with authority, having witnessed – and helped clean up – many errors made by inexperienced DIY landlords.

It is not surprising that he advocates for a managing agent. He advises that you weigh a prospective managing agent on their delivery in the key areas that can offer landlords peace of mind:

  • Tenant vetting
    Do they conduct rigorous credit, employment and affordability checks? Their process should include identity matching with a credit bureau, an identity and deceased check with Home Affairs, a fraud and criminal conviction check against the SAPS database, bank account verification, character references, and consumer and loan account checks, including judgements or defaults.
  • Comprehensive contracts
    These should ensure that all parties are protected and contain clear and comprehensive terms and conditions. Ask your prospective agent if a legal firm has endorsed the quality of the lease contract.
  • Financial management
    You want an agency that processes payments speedily and accurately. Ask whether you’ll have complete transactional control on their system and whether it complies with regulations. Do they take care of all monthly payments (utility bills, rates etc.) on your behalf? How do they deal with non-payment of rentals?
  • Inspections and maintenance
    How will these be handled? Who do they have on call to see to maintenance operations?
  • Insurance against defaulting tenants
    Does the agency offer this? They should. Just Property’s RENTSECURE insurance product, priced at 3.5% of the monthly rental, offers three months’ cover in the event of non-payment, one months’ cover for absconding tenants and up to R50 000 cover for legal fees related to tenant evictions.
  • Communication
    When you’re far away, you want the assurance of excellent communication, but you also don’t want to be bombarded by spam. Ask what reports can be provided on request, says Stevens. “This will tell you a lot. They should generate activity reports, entry and exit inspection reports and interim inspection reports if required.

“It is important that you cover this ground before you appoint a managing agency,” Stevens warns. “You will be paying for this service and you need to be sure you are getting value for money and the peace of mind that your property is being looked after while you are away. With a strong rental agent in place, you can enjoy your new adventure overseas in the knowledge that your home is earning its keep and will be ready for you when you return – which we hope you will,” he concludes.

For more information on Just Property please visit www.just.property or call (087) 550 2258.

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