Emigrating but keeping your house
Properties with absent landlords and no managing agents present a higher risk than those that are more closely managed
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, advised 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,” warned Stevens.
Stevens said 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 and agent’s fees.
• 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 suggested 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?
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Absent landlords and appropriation
“Properties with absent landlords and no managing agents present a higher risk than those that are more closely managed,” Stevens acknowledged.
“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 among the strongest in the world. It protects its citizens and ensures 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 added.
DIY vs managing agent
The peace of mind you get having your property rental managed is something most foreign-resident landlords appreciate, said 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 warned.
Stevens noted 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.
He advised 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 judgments 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) 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.
• 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, said 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 warned.
“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 concluded.
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