How to make the most of your Buy-To-Let Property in any market.

These days, investors are understandably more cautious with their hard-earned money, but as long as they do their homework and seek guidance from experienced professionals, entering the rental arena will always be an excellent investment, offering rental returns in the short term and capital gains in the long term.

This is according to Lorraine-Marie Dellbridge, Rentals Manager for Lew Geffen Sotheby's International Realty in the Southern Suburbs, Noordhoek and False Bay, adding that it's also a great way to get one's foot on the property ladder as the rental income will often cover a large portion of the mortgage repayments in the case of bonded purchases.

"Not only is the interest rate currently lower than it's ever been, property prices in Cape Town are also more accessible than they've been in many years and buyers have a lot more options than usual."

"However, with semigration to the Western Cape on the upswing again, this window of opportunity won't last long, especially in the more sought-after areas with excellent amenities and schools.

And, although the rental market is currently overstocked, Dellbridge says the full roll-out of the Covid vaccinations programme in South Africa as well as the recovery of tourism would mean "many of the rental properties will once again become short-term lets".

In other words, Dellbridge says "now is the perfect time to enter the market". 

'Don't make assumptions about the market'

She says rental agents specialising in the area you're interested in investing in "know exactly what prospective tenants are looking for and how much they are willing to pay".

"It can be a costly mistake to make assumptions. For instance, if an area is popular with young families, then a two- or three-bedroom flat would be a better investment than a one-bedroom apartment, even if it's absolutely stunning and has better finishes. And if you are buying property in an estate or complex its essential to add scheme management to your list of priorities when choosing property, especially if there will be budgetary restrictions going forward.

'Consider added costs such as levies'

"Sectional title levies are used to cover various expenses such as insurance, administrative fees and the maintenance costs of the common property and on-site facilities, and it must be remembered that the more amenities there are and the larger the grounds, the higher the levy.

"When deciding a property, try and look at it from a tenants view point and ask yourself what will attract a tenant to this property. If it's in a suburb near the university, why would a student rent your property rather than another. If it is a family suburb, consider what a family would need from a home, including proximity to schools, parks and convenient shopping."

Dellbridge cautions investors to carefully consider their options before making a final choice and to heed advice when it comes to pricing the property for rent. 

"One needs to reconcile that the rental that is achieved may not cover all the expenses such as the bond, levies and property rates for up to three years and that you may still need to dip into your own pockets to top up, especially in the current market.

'An empty investement is not an investment at all'

"However, it's important to remember that property is a long-term investment that will increase in value over time and it's very likely that it will begin to pay for itself within a relatively short period. Remember that an empty investment is not an investment at all.  Whilst your property stands empty, you still need to service your bond and payments for municipal costs and levies.  The trick is to be competitive with pricing whilst ensuring that you place quality tenants."

Dellbridge says although it may be tempting to save a buck and go it alone, these days it's advisable to use an experienced agent who not only has a thorough knowledge of the area, but also all the laws and regulations governing this sector.

"The Rental Housing Act has changed considerably in recent years and most tenants are also far more aware of their rights than before. Even if landlords prefer to handle their own rental properties, they should always seek the advice of an expert when drawing up the lease to ensure it is compliant with the rental legislation and that the lease covers all their responsibilities as well as those of the tenant.

According to Co-Principal, Arnold Maritz, it's important that both the tenant and landlord have a clear understanding about who is responsible for which repairs and this should be fully covered in the lease document.

"Landlords or their appointed agent must always conduct documented incoming and outgoing inspections to keep track of damage to the property and also to catch and repair any budding issues before they become real problems," says Maritz.

"And landlords must also bear in mind that the tenant is a key factor in the upkeep of their investment and that their impact is two-fold.

"The better the tenants take care of a home and the more a landlord keeps tabs on their property, the less maintenance there will be. Landlords should work with their tenants, as happy lessees are more likely to look after the home. And, generally, the better the condition of the property, the higher the quality of tenants it will attract. This benefits the landlord in both the short and long term and averts myriad potential problems.

Maritz adds that it's also critical for owners to take out the best insurance policy they can afford and, if possible, to start putting money aside for maintenance and repairs. Emergency repairs like burst geysers are not uncommon and can wreak havoc on one's cash flow as they require an immediate outlay that few people can spare.

"And landlords who have never lived in the properties they are letting are often unaware of potential issues that may require a watchful eye and this ignorance is easily exacerbated when they have long-term tenants who pay their rent on time and only ever communicate about major problems. No matter the economic climate, investors who are successful in the rental market are those who have done their homework and invested in an area and a property that will yield maximum return on investment," he says.

"Knowledge and professional advice will also go a long way to minimising the risk of unforeseen financial pitfalls which could not only cost them their investment but also cause untold stress down the line."