RENOVATING IN SOUTH AFRICA

When TPN released their Residential Rental Vacancy Survey for the Fourth Quarter 2020, the results were worse than expected with vacancies nationally standing at 13%, up from 9% at the same time the previous year. We decided to reach out to David Beattie, author of “The Expert Landlord” for tips from his book as well as his views on the buy-to-let sector in 2021. Apart from being an author, David is the founder of a residential property rental agency responsible for the management of over 2 000 properties on behalf of landlords.

[RISA] So the review of your book was prompted by the results of the TPN vacancy survey for the Fourth Quarter of 2020. Some of the survey numbers were alarming with Sandton sitting at 22% vacancy. According to some commentators, this is probably because people are downscaling. Are you seeing that in your property management business?

[DAVID] Yes, prices in Sandton have come down. We've managed properties for landlords in Morningside and Paulshof and prices have come down - we've got a unit to close off now which is going for R6 700 for a two-bedroom unit. It was going for R7 000 to R8 000 not long ago. So we're seeing it in areas like Sandton and in Cape Town’s southern suburbs.

But the tenants are kicking tires - they're just looking, but they're not committing. And those that do commit, the applications aren't that great. It's an economic thing and people are just getting up and moving. They just can't afford it. So we are working harder for less return.

So those TPN figures are interesting and we're living it.  It's a downward spiral when it comes to pricing. But that's the way it is.

[RISA] If you as a residential property management business are feeling the effects of the pandemic, individual landlords are definitely under pressure as well. We know the book has been out for over two years but now is as good a time as any to look at the book again, especially given the challenges facing landlords.

[DAVID] On that topic of property management is the one sentence. It is the best answer to property management at this time is to keep focused, to get the basics right. There is no real major innovative solution to the problem, it is what it is.

[RISA] Where do you think most landlords drop the ball? Is it on getting the tenant or on the property management later?

[DAVID] It's difficult to pinpoint any challenge. I mean, I think the ball gets dropped right along the whole process. So, right now the big challenge is on getting a property let. But it is easy to let your property. It’s a bit more challenging to let your property with a well-vetted, well-screened tenant, a quality tenant.

So the challenge, I think the biggest challenge and what we are facing as a business is getting a quality tenant and keeping a quality tenant.

[RISA] There is an alarming statistic in your book that up to 40 percent of tenant applications contain fraudulent information. That is quite scary.

[DAVID] It is. And look, I get it because tenants are desperate and don't have jobs and they are struggling, especially in areas like the Joburg CBD. And we as landlords must keep our eyes open and just not expect the best from everyone. There are a lot of people that are desperate for accommodation, and we need to just be cognisant of it. And we probably need to weed out some of our emotion when it comes to screening tests.

[RISA] So once you have a good tenant, how do you keep them? Especially when some of the good tenants are thinking of downscaling or moving elsewhere. Is there anything a landlord can do to make a tenant happier?

[DAVID] I think a couple of I things. So the biggest thing is when you are re-negotiating your rent and extending a lease with a tenant. More often than not at the moment, you're going to have no rent increase. And then look at what the market value is. Let's say I'm getting R7 500 at the moment, but if I were to market for a new tenant, I'd probably have to market for R7 000. Then I would sign on the existing tenant at a lower rent. In other words, the first big thing is your pricing, to make sure are you pricing competitively because the tenant is going to be looking elsewhere and other guys dropping their prices.

The other things are just based on customer service and whether you are reacting to the tenant or are you actually looking after the tenant? I'm not saying agreeing to doing every little whim or fancy, but your basic customer service. And thirdly, just make sure your property is maintained.

 Because little things like wear and tear could irritate tenants, especially if they've been asking for something to be done and it is of high value to them. For me, it might not be a high value thing, for example, a dripping tap - I mean, that's not a big job but for a tenant, it's high value because he is paying for utilities and it's expensive.

[RISA] Ok, and would you recommend landlords carry out maintenance themselves if they consider themselves to be DIY experts? Are there risks with doing the work yourself?

[DAVID] No, I would. I'm a big fan of people doing it themselves. But one massive caveat, if they are going to take three months to do the job, then get an outsider to do it. So we had a landlord who was a very busy doctor, kind of thought himself as a good DIY person who maybe was. But if you take two or three months to get something done, to fix a garage or whatever it was, that frustrated the tenants to no end. And there was a much bigger churn on that portfolio than necessary. So the landlord saved some money for an event, but he lost it on higher vacancies. So I would suggest in this market it's a very good idea to do DIY maintenance because it's going to save you that extra money, which is important in this market, but not if you're going to take much longer than a normal contractor to get out and get the job done, because that's going to really irritate your tenant and your quality of tenant is going to go down.

[RISA] Ok, and is there somewhere that one can find good contractors? I know you speak about it in the book. That would be a question for a landlord. Where do I get a reliable contractor?

[DAVID] You've got to Google it. The first thing is to ask for referrals. Everyone has a mate or someone in the marketplace, whether it's an agent you know or whether it's a friend. So first and foremost it’s your referrals.

And then once found through Google, look at reviews and so forth, that's going to be best and then obviously your local networks, for example, the Facebook groups. That's a very reliable source and obviously on the community WhatsApp groups as well.

And then when once you've got your group of contractors to look after them well, make sure you pay them on time, give them good service. But bear in mind, contractors come and go when it comes to the service levels so obviously you have to try and build up a database of two or three in a particular discipline but then be loyal to those people and look after them so they can look after you.

End of Part 1