Property Management, Property Rentals and Property Financial Services in South Africa

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Cyclicality in the residential letting market

Cyclicality in the residential letting market and letting priorities

Residential letting is cyclical with significant letting demand peaks in January / February and June / July. These peaks coincide with typical timing when tenants prefer to move and for students with the academic calendar. The cyclicality seen in the residential letting sector has significant implications for owners: for example with student rental accommodation, pricing 12 months of required rental income into a 10 or 11 month lease and importantly trying to attend to necessary maintenance in November and December or May before the letting peaks. New developments and refurbishment projects should as far as practically possible, aim to target and benefit from the letting peaks by being ready for occupation at the times of peak demand. With competition for quality tenants who pay their rent on time and take care of their units, it is worth trying to accommodate good tenants over December when they may want to return to family, by reducing rental in December and allowing tenants to retain their possessions in the flat whilst being away. Typically the benefits of reduced maintenance costs and bad debt warrant a more flexible and accommodating approach to good tenants and the rental difference can be priced into the remainder of the year when the unit is occupied.

Numerous surveys have shown that security, cleaning and prompt attention to maintenance are the top priority service focus areas expected by tenants and positive delivery in these areas goes a long way to retaining good tenants, reducing vacancies and optimising rental income. It is advisable to keep on top of maintenance items with at least annual property inspections and fully attending to all maintenance items when a tenancy rotates. It is always advisable to show a vacant unit in good condition with all maintenance items attended to, to attract good quality tenants as quickly as possible. Thorough tenant application screening is important to pre-empt payment and default issues: affordability testing, reference checking of both prior landlords and employment as well as a credit check are very important application screening focuses. A rental deposit together with well documented inspection report to correctly hold tenant’s accountable for any damages during the lease term are also very important for reducing long term maintenance costs and ultimately the performance of a residential property investment asset.

Written by Andrew Schaefer (Managing Director)

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