With some difficult financial time ahead, many of us are faced with finding new and creative ways to make a bit more extra cash. One of these methods is to rent out your home or a section of your home. Our 6 Tips to renting out your home will help make the transition a bit smoother.
There are several aspect to your property that needs addressing before your house will be rent ready. We will focus on the physical and the financial for now.
In general I’m not a fan of Insurance, but in regards to your properties you will have to take out some sort of insurance. The honest truth is that property is to much of a big investment not to take some insurance, unfortunate events do happen. Also you are allowed to add any annual insurance increase to your lease agreement (once the fixed period has passed) in South Africa. You are however not allowed to charge them for the initial insurance, only the increase, especially if caused by the tenants themselves.
Your insurance needs to cover these, at least:
- Building Insurance
This is to cover you from all natural disasters. Consider floods, land slippage (especially if you are on any sort of incline), thunderstorms (hail damage), Earthquakes, Malicious damages.
- Indemnity Insurance
This kind of insurance will protect you from any damages or deaths that might accrue to a tenant or a visitor of your tenants. Imagine a tree falls on the house – your building insurance should cover that, but what if the tree fell on the tenant. What is going to save you from that angry tenant – your indemnity insurance:)
- Other Insurance add-ons:
- Non-payment of rent
- Loss of earnings
- Damages to the property by the tenants.
Always inform your insurance company of any changes. The more they know, the better they can adjust your policy and leaving you with less surprises.
Indemnity Insurance is a must for any landlord!
In South Africa you will have to pay income tax on your investment properties. The amount various from the size, price, location and type of property. The tax percentage will also be influenced whether this is your first, second or third property. The more you own – the more you pay.
Remember to pay your tax, for the tax man always collects:)
You may need a permit depending on your type of property and your type of renting business. Commercial and Industrial properties are slightly different to Residential. It is best to have a quick chat with your property lawyer in regards to permits. Your insurance firm should also be able to help you out with the understanding of permits.
4. Maintenance & Upgrades
This will be the same as if you were selling or renting, making sure your property is in a good order. The quality of the property is in-directly relation to the quality of tenant. Thus, the better you maintain your property, the more options you will have available as a landlord.
Also if you know your property is in a good condition, but finding similar tenants seem difficult you may need to change your marketing methods a bit.
5. Rental Rate
Determining your rental rate is always a balance between what your neighbourhood is worth and the property itself. A good neighbourhood will still not make up for a dilapidated property. The same as what a mansion will not make up in a crime ridden hood.
You will be able to have a quick guess of your rental rate compared to what other rental units of the same size are going for in the neighbourhood, considering your property is similarly maintained.
You should however run a proper calculation of what your monthly expenses will be and how much your rental income will cover. In some cases you might have to aid in the property’s financials, especially if it still has a mortgage.
6. Finding your tenant
Finding tenants can be tricky, that is to say the least.
Firstly start by advertising your property. Give as much detail as you can. You never know what small detail convince a quality tenant to come by for a viewing.
Secondly you will have to screen your tenants. In South Africa that can be tricky as well,this is why a property manager like Mafadi is ideal for this job, this is part of their daily duties. As an individual DIY landlord you can try TPS. TPS has a single search function for under R100/search.
Your tenants screening should include:
- Credit check – TPS
- Salary Statement
- 3 Month Bank Statements
- A Reference or two
Consider a Property Management Company
Our 6 Tips to renting out your home is but only a quick preview to the types of duties a landlord will have. This is of course even before you got the tenants and having to start managing all their concerns. If you feel you still want to make a bit of extra cash, but have little patience and time then you should consider hiring a property manager, such as Mafadi.
Property Management companies are responsible for all the paperwork, the repairs, the tenants concerns, collecting rent and even paying the bills if you allow them. They tend to do this for around 10% depending on the extend of the service.
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