SECURING YOUR RENTAL INVESTMENT: HOW TO CHOOSE THE RIGHT TENANT

Integral to ensuring a return on your investment (ROI) in a rental property is finding and retaining the right tenants. Whether it’s a commercial or residential property, South African landlords should rely on the expertise of a rental agent to help them find the perfect tenant.

Start with market research to price your rental unit

Understanding the local rental market is crucial for both determining an appropriate rental rate for your property and attracting good tenants. Those who set rental rates that are competitive and are in line with market trends are more likely to attract quality tenants.

As Adrian Goslett, Regional Director and CEO of RE/MAX of Southern Africa, advises, "Landlords should be aware that setting the right rent is crucial in attracting the right tenants. Overpricing your property may result in longer vacancy periods, while underpricing could attract tenants who are not financially stable."

Tips for pitching property your property rental price right

To attract good tenants in South Africa's rental market, landlords need to set competitive rental rates. When deciding what rent to charge, a landlord can either conduct some research themselves or allow a rental agent to tap into their resources for a more accurate view of the following:

• Analyse comparable properties in your area: Look at the rental rates for properties that compare with yours in terms of size, location, and amenities. This will help you to establish a baseline for establishing a competitive rate at which to rent out your property.
• Take vacancy rates into consideration: If there is a large number of properties to let in the area, you may need to carefully consider adjusting your rental price to attract consistent and reliable tenants.
• Consider local economic factors: Take into consideration what is happening in the local economy before setting the rental price. When things like interest rates, inflation, and unemployment levels are high, then rental prices will need to reflect that reality.
• External drawcards: Employment opportunities, infrastructure, and access to amenities like schools and hospitals as well as crime levels can all influence the property’s appeal to prospective tenants.

Four questions tenants ask when looking for property to rent

1. Is the property (and area) safe and secure?
2. What is the rent price and is it a fair rate when compared with similar properties in the area?
3. Is the suburb - and the property - pet friendly?
4. What is the size of the property? Residential tenants want to know the number of bedrooms, bathrooms, and room size, while commercial tenants may need to know more about how the property is configured in relation to their business requirements.

Top tenant characteristics to protect your property investment

To ensure that your rental property is well-maintained and financially secure, there are certain qualities landlords should look for in prospective tenants. Here are some of the key tenant characteristics to look for:

• A stable income, such as a steady job or other reliable sources of income, means that the prospective tenant is more likely to be able to consistently pay the rent on time.
• A good credit score is a strong indicator of financial responsibility and the tenant’s ability to manage debts and payments. A rental agent will do this on a landlord's behalf. Alternatively, landlords can request credit checks from tenant screening services to help you assess a prospective tenant's creditworthiness.
• A positive rental history, including good references from previous landlords, tells you that an applicant is more likely to be a reliable and responsible tenant.
• A history of prompt payments will show you that the tenant consistently pays rent in full and on time. Late or missed rent payments can have a significant knock-on effect on your cash flow and the property’s profitability, so it's essential to choose tenants who have an established history of paying rent on time.
• Pride of place in their living and/or workspace. This means that they will properly maintain the property, following any rules outlined in the lease agreement regarding maintenance and repairs, as well as when, and what issues to report to the landlord.
• Good communication from a tenant will help to prevent misunderstandings and ensures that any problems can be quickly and efficiently resolved.

How agents effectively screen tenants

A professional rental agent will screen prospective tenants on a landlord’s behalf by using the steps outlined below:

• Verify income: As a general rule of thumb, a prospective tenant’s income should be at least three times the monthly rent. This ensures that they will be able to comfortably pay their rent and meet all their other living expenses. Part of this process will also be to run a credit check on the prospective tenant to make sure they do not have a history of missing payments or making late or partial payments.
• Ask for and check references: A good rental agent will also talk to the tenant’s previous landlords and employers to get a better understanding of the tenant's overall character and reliability.

Improving tenant retention

Finding the right tenants to lease your property is just the first step of the journey. While it’s a very important step, it's equally important to focus on building and maintaining a healthy landlord-tenant relationship. Fostering a long-term, stable rental income reduces the headache of having to find new tenants too often. Two key tenant retention strategies include:

Regular property maintenance: Conduct regular property inspections and respond promptly to maintenance requests to ensure the property remains in good condition. Open communication: Build a professional relationship with your tenants, keeping communication lines open and addressing any concerns as they crop up.

Keeping tenants happy is the key to retaining them. Proactively addressing their needs and maintaining the property, ensures a long-lasting and profitable relationship.

Get support from local real estate professionals

Finding and retaining the right tenants for your rental property is central to a profitable real estate investment. Your local RE/MAX office will help you find and retain good tenants so that you can achieve long-term stability and profitability from your rental properties.

Have more unanswered questions? Here are some related questions – and answers – that might help…

How do you attract high-end tenants?

Attracting high-end tenants in South Africa involves a combination of factors, including location, property features, pricing, and marketing strategies. To do this effectively, landlords should utilise the services of a reputable managing rental agent like RE/MAX to list the property and reach your target market and ideal tenant.

What makes a landlord choose you?

Although each landlord may have certain specific criteria for selecting a tenant, most look for candidates that are responsible, reliable, and financially stable and who have a good rental history. Making sure that you can demonstrate these things will significantly increase your chances of securing your dream rental.

Who makes the best tenants?

The best tenants pay rent on time, take care of the property, and stick to the terms of their lease agreement. In addition, good tenants communicate effectively with the landlord and respect both the property and their neighbours.

For more in-depth answers to these questions, please reach out to your nearest RE/MAX Office for some free advice. Whether you're looking to buy, sell, or rent property, we can help you achieve your real estate goals! Please get in touch to find out more about how we can help you optimize your rental investments.