So you finally own a an investment property! Well done! Now all you need is a tenant and the cash will roll in leaving you free to sip cocktails on a hammock gently swaying in the breeze!
Not so fast.
Before you put anyone into your new property, please make sure you have ticked the following check boxes:
- Have a watertight tenancy agreement. If you don’t have access to a property lawyer, you can get a lease/rental agreement from a stationery shop. Make sure you read through it carefully and understand every clause in the agreement. Delete the clauses that do no make sense or that you cannot understand. Ensure there are at a bare minimum:
- eviction clauses
- tenant’s obligations
- landlords obligations
- breach of agreement
- inspection frequency and rights
- Make sure your insurance covers renting it out to tenants and will pay out in the event of the tenants destroying or defacing the property in any way.
- In South Africa, the tenant is only legally responsible for the payment of the rent. The landlord is responsible for all utilities related to the property. Install pay as you for electricity and water as far as possible. Gas offers you another hassle free way of putting the onus on the tenant to cover their utility bills.
- Use a good letting (managing) agent to manage the property for you. If property is not your main business, it is well worth paying someone to keep on top of the rental payments, the property inspections and manage any repairs or maintenance that is required. Best intentions easily fall by the wayside when your paying job gets busy or family commitments take up your spare time.
- Run credit checks on potential tenants. Call their employers and previous landlords. Better still, pay someone to run the credit check for you if you are not using a managing agent. This step is crucial and will save you a lot of heartache and money further down the line!
Do your homework and make sure you understand how best to manage your investment. The effort you put it will be well worth it in the long run!