Struggling to sell? Consider renting out your property

There are times when a seller may prefer to wait for a particular price, and would then choose to rather rent it out in the meantime. There are pros and cons to this, and it depends on the needs of the seller. The upside would be that the seller could move sooner, and can earn a rental income while waiting for the property to get sold.

This might be particularly suitable if the seller has already purchased another property and is financially secure enough to retain the property. If there is a mortgage bond on the property, the rental income can be offset against the repayments, and help pay off the property. If the property is already fully paid, the extra cash can supplement your income, but you will need to make provision for maintenance and other costs such as property taxes which are usually borne by the landlord.

Holding onto the property also gives you more time to consider whether you want to sell, or keep it as a rental investment. It might for example be that the market is not particularly favourable to secure the price that you want for the property. Holding onto it then allows you to wait for a better market while you continue earning an income.

The renting process may work out so well that you decide to retain the property as a rental investment, and start building a property investment portfolio. This could be particularly beneficial if the property is located in a high-demand rental area, and there is strong demand for the particular type of property.

In the meantime, provided it is well maintained, the property will continue to grow in value. Property is also among the best assets to use as security for business or other financing needs.

Rather than standing vacant, an occupied property also provides better security. It might also stand a better chance of selling as buyers often prefer to see the property fully furnished. The tenant should also be keeping the property clean, and the garden maintained, or you could retain a gardening service.

A downside risk might be that you could at times struggle to find a tenant, and the property could be vacant if it is not in a high-demand area, or an area which depends on seasonal demand, or if the price is at the upper end of the price scale. Limited stock, and sustained demand are always mitigating factors.

If you are not living near the property, it might also be a challenge to keep an eye on it. The best advice would be to appoint a good rental agent who can keep the property occupied with a good tenant who looks after the property, and manage it on your behalf, says Samuel Seeff, chairperson of the Seeff Property Group.

There may also be financial implications. Aside from costs such as the property taxes, there would be added maintenance costs for cleaning or painting before a new tenant takes occupation. There will likely also be tax implications as income earned must be declared, but maintenance and marketing expenses can be deducted.

If there is a mortgage loan on the property, and it stands vacant for a period with no rental income, then you would also need to be in a financial position to fund that. If you are still keen on selling the property, the agent can continue marketing it until a suitable offer is received. In the meantime, the seller will have benefited from earning a rental return on the property.

Issued by Gina Meintjes