How to Avoid the Pitfalls of Choosing the Wrong Tenant
The Residential Property Market Boom
The residential property market is on an upward trajectory, attracting investors eager to capitalize on low prices by investing in 'buy-to-let' properties. However, this trend has resulted in an oversupply of rental properties in areas where demand is low, leading to a rise in residential rental vacancies. According to TPN’s 2021 Q4 data, Gauteng has an 11.9% vacancy rate, while the Western Cape sits at 11.4%.
The Risks of Desperation
While landlords might feel the pressure to fill vacancies quickly, experts advise against rushing to sign the first tenant who comes along. While finding a tenant quickly might seem beneficial in the short term, choosing the wrong tenant can have lasting negative effects.
Understanding Legal Protections
Contrary to popular belief, the law safeguards the rights of both landlords and tenants. It is crucial for both parties to conduct thorough due diligence before signing a lease agreement.
Tenant Obligations
- Pay rent promptly.
- Take care of the property.
- Return the property in the same condition in which it was received.
Landlord Obligations
- Provide a safe home in good working order.
- Maintain the exterior of the building.
- Protect the tenant’s deposit.
The Danger of Overlooking Red Flags
Some properties may attract numerous rental applications, while others struggle to find tenants. Regardless of the situation, landlords must be vigilant and not overlook potential warning signs.
Tenant Obligations
Ignoring red flags can lead to significant issues for landlords. Evicting tenants in South Africa is a lengthy and costly process, requiring a court-appointed sheriff to remove a tenant’s belongings after a court ruling. This process can take weeks or even months.
Obvious Red Flags to Watch Our For
While some red flags can be avoided by using a reputable letting agent, here are a few key ones that are often overlooked:
Poor Credit Score
A credit score reflects one's ability to repay debt on time. Given the high levels of debt exacerbated by the COVID-19 pandemic, landlords should run a thorough credit check on prospective tenants. A credit score of 610 or above is generally acceptable.
Affordability
A prospective tenant’s monthly rental should not exceed 30% of their monthly salary. Assessing a tenant’s affordability helps determine if they can cover rent, utilities, and other expenses.
References
Obtaining references from previous landlords provides insight into a tenant’s behavior and reliability. If a prospective tenant lacks rental history, they should either arrange a co-signer or provide a credible reference, such as from an employer.
Not-So-Obvious Red Flags
Some red flags are less obvious but equally important:
Employment History
Short employment histories can indicate potential issues. Job hoppers or individuals with frequent workplace problems may display similar behavior in their home lives.
Criminal History
Conducting a criminal background check is a standard part of tenant screening in many industries. This ensures that the tenant is safe, honest, and reliable.
General Behavior
Initial interactions with a tenant can reveal red flags. If they are hard to reach or unreasonably demanding, it’s a sign to proceed with caution. Using a trusted rental agent can help in making these judgments.
Building a Good Tenant-Landlord Relationship
Here are some tips for landlords to maintain a positive relationship with their tenants:
Communicate Effectively
Always communicate clearly and put everything in writing. Stay calm and rational if issues arise, and seek advice from estate agents or attorneys when necessary.
Avoid Quick Cash Temptations
Don’t be tempted by large upfront cash payments. Ensure that the tenant can consistently make regular rental payments.
Take Your Time
If a tenant is hesitant to sign the rental agreement, don’t rush. Communicate clearly, perform necessary checks, answer their questions, and take a few days to make an informed decision.
Trust Your Instincts
If something feels off during interactions with a prospective tenant, trust your instincts. Paperwork can be forged, but your intuition is rarely wrong.
By following these guidelines, landlords can avoid the pitfalls of choosing the wrong tenant and ensure a smoother rental experience.
Disclaimer from ClientSure Brokers
ClientSure Brokers makes every effort to ensure the accuracy and reliability of the information in our publications. However, we are not liable for any actions taken based on the content or recommendations provided. The information is intended solely for informational purposes.
