Buy To Let .co.za

Whether you decide to use the service of a letting agent or to do it yourself, the importance of a good tenant cannot be over emphasised. It is far better to settle for a good tenant at a lower rental than to accept a bad tenant who Is prepared to pay more to stay in your property. Choosing a good tenant will determine whether or not the rent is paid each month and whether the property is well cared for.

 

To find a tenant you can piece an advertisement in the classified section of your local newspaper.

It is prudent to make enquiries with regard to a new tenant in order to ensure that the tenant has regular employment and an Income sufficient to meet his or her obligations in terms of the lease. Furthermore, you should ensure that the prospective tenant has no judgments against him or her and is nor insolvent.This information is generally available from a credit bureau. Arrange to meet the prospective tenant for an interview and to show him or her the property. Some questions you need to ask in making an assessment are:

• Where does he or she work?
• How long has he or she been there?
• What position does he or she hold?
• Where Is he or she staying at the moment?

The answers to these questions and the manner in which they present themselves should assist you in determining what type of person he or she is and whether or not you would be happy with him or her as your tenant.

 

You will need to agree on a rental price — a rule of thumb is between 0,6-1% of the property value, and how many months' rental you require in advance as a deposit. The deposit is normally equal to one month's rental The deposit does not belong to you, the owner, but can be used at the end of the lease for covering any damages to your property or for non-payment of rental.

 

The next step is to draw up and sign a lease agreement. Although it is not a legal requirement that the lease agreement is In writing, we strongly recommend that, as this will reduce the scope for disagreement regarding the terms and conditions of the lease.

 

Standard lease agreements are provided by letting agents and are also obtainable from legal stationers. We recommend that an attorney specialising in property matters be consulted. This will ensure the lease agreement meets the individual requirements of both parties and takes into account any special circumstances.

 

The Rental Housing Act and the respective provincial regulations govern the relationship between you and your tenant. The lease agreement may not contain provisions that are contrary to this act.

The lease should record the terms and conditions upon which your property will be let and must comply with certain legal requirements.

• The lease must clearly identify the parties, all of whom must have the capacity to contract.
• If the property is to be leased to more than one individual, it Is best to contract with both tenants jointly and to specify that both tenants are jointly and severally liable in respect of the terms of the lease.This will enable you to proceed against each Individual in the event of a dispute.
• If your tenant is a company or close corporation, it is best to bind all the representatives as surety and co-principal debtor in terms of the lease. This will enable you to proceed against the entity and each representative in the event of a dispute.
• The term of the lease may be for a fixed period or for an indefinite period — this is known as an open lease. For an open lease the notice period must be specified. For a fixed-period lease specify the commencement date, and the date on which the lease will terminate. In this case a reasonable notice period of, say, two months should be provided for to enable you to advertise the premises and secure a new tenant.
• Specify the frequency with which the rental is payable. Most lease agreements provide for rental to be paid monthly in advance.
• Clearly specify the rental amount. In most cases the absolute rand amount is reflected. It is possible to use a formula such as an amount per square metre. In this case the value and rate per square metre must be specified.
• A lease should be for a period that meets the needs of both parties. where the period is greater than 12 months, consider including an escalation in the rental amount. The increase can either be reflected as a percentage or the actual amount may be stipulated.
• A lease needs to set out clearly the respective obligations of both parties regarding the
  maintenance and repair of the property and the payment of all related costs and charges.
• On commencement of the lease, your property should be jointly inspected and a list of any defects or damages should be attached to the lease agreement. It must also be agreed whether the faults are to be repaired or not. If they are to be repaired, it should also be clear whose responsibility, and for whose account, it is. This will reduce the likelihood of dispute when the lease terminates.
• On termination of a lease, the premises should again be jointly inspected to identify any damage and/or breakage caused by the tenant, for which he is legally responsible. Any damage or breakage should be repaired prior to refunding the deposit to him. Fair wear and tear is for the account of the owner and is not considered as damages.
• The lease agreement should specify the procedure to be adopted in the event of default of any party.
• Generally speaking, any condition of the lease may be changed with the consent of all the parties. In addition to the abovementioned factors, both you and your tenant have rights and obligations that are worthy of inclusion in the lease agreement.
• As the owner:
• You must ensure that the property is delivered in a condition reasonably fit for your tenant to live in.
• You are required to give your tenant undisturbed use of the property. You are entitled to inspect the property from time to time, and provided adequate notice is given to the tenant. No surprise inspections are allowed.
• You may restrict the number of people who may occupy the property.
• you have a duty to maintain the premises in good condition. The tenant is entitled to a reduction in the rent If any defect or damage makes it impossible for the tenant to derive the full use of the property,
• You cannot terminate the lease agreement if you sell the property.The fact that there is a lease must be disclosed to the purchaser.
• You must consult an attorney immediately when your tenant defaults, as legal action may be required to protect your interests. A legal process needs to be followed in such circumstances and the law does not permit you simply to evict a defaulting tenant. The Prevention of Illegal Eviction from and Unlawful Occupation of Land Act further regulates the legal requirements relating to the eviction of what is termed an 'unlawful occupier'. Before a defaulting tenant may be evicted the requirements of this act must also be complied with
  
  Your tenant:
• is obliged to pay the rent amount and at the frequency agreed to.
• is obliged to use the property solely for the purpose for which it is let to him and it cannot be used for any unlawful purpose.
• is obliged to take good care of the property and is responsible for any damage incurred by himself/herself or any person he/she is responsible for.
• is obliged to maintain the garden, look after the swimming-pool and change the light bulbs.
• has the right to continue in terms of the lease agreement even if you sell the property.
• is obliged to redeliver the property to you on termination of the lease.

Lawfind lease agreement is available on www.lawfind.co.za for your use.

Many amateur landlords will fail if market conditions become tougher as is presently the case.  

'Some inexperienced investors who might have hit problems, such as a lack of tenants, will read about price falls, get cold feet. Smart investors will still do well if they follow a few basic rules.

Investors looking to buy property this year should ensure it is in an area with a rich source of potential tenants and that they don't overstretch with the mortgage. If you're stretched as a landlord, you'll soon get into financial difficulty if there are any void periods when tenants cannot be found.

Iinvestors should be more careful about the type of property they buy and must be prepared to hold the asset for the long term. 'In a slower property market, scope for capital gain is reduced. It is important to invest for income as well as growth so you aren't simply relying on the property rapidly increasing in value to make the investment viable.'

 

investors should keep an eye on mortgage rates both for new and existing properties, remortgaging for the best deals. 'There are some aggressively priced loans as lenders scramble

Landlords can avoid problems by budgeting for void periods, being careful about location and type of property and ensuring that the rent more than covers mortgage and running costs.