Four tips for first-time landlords
RE/MAX of Southern Africa shares some advice for property investors who are about to become landlords for the first time.Investing in property for the first time can be rewarding, but it's essential for prospective landlords to enter the market with realistic expectations and thorough preparation. RE/MAX of Southern Africa shares a few tips to help new landlords navigate this new venture...
Tip 1: Crunch the numbers
Affording a rental property involves more than just monthly mortgage repayments. First-time landlords must factor in additional costs such as property insurance, municipal rates, taxes, utilities, potential legal or collection fees, and the commission of a rental agent, who can assist with tenant vetting, rent collection, and property management. Regular property maintenance should also be included in budgeting calculations.
Tip 2: Plan for long-term returns
Unless you pay for the property in cash up front, purchasing a rental property is not necessarily a quick path to wealth. Instead, it should be viewed as a medium to long-term investment. Depending on how large a bond you have on the property, the initial expenses might exceed rental returns temporarily. Ultimately, with patience, properties will pay for themselves, especially once the bond is fully paid off.
Tip 3. Establish an emergency fund
Unexpected expenses are inevitable. Landlords should maintain a contingency fund to cover unforeseen circumstances, including repairs not covered by insurance or legal fees arising from tenant defaults.
Tip 4: Detailed contracts are essential
As tempting as it is to keep things casual and simple, it is far wiser to keep everything formal and officially documented between you and your tenant. Comprehensive lease agreements clearly defining responsibilities, payment methods, acceptable behaviour, and terms for breakages will minimise misunderstandings. Likewise, landlords working with property managers must sign detailed mandates specifying commission structures and the agent's obligations to avoid confusion.
“By working with a reliable real estate agent, first-time landlords can approach property investment confidently, prepared to handle challenges effectively and maximise long-term returns,” says Adrian Goslett, Regional Director and CEO of RE/MAX of Southern Africa.