Before taking on the decision to become a landlord, there are several factors buyers need to consider. Adrian Goslett, Regional Director and CEO Buying a house with the intent to generate rental income from it can be a great passive investment move, but it is also more complex than many may think, and can lead to some financial troubles if tenants are not properly vetted and expenses are not properly budgeted.

To help investors decide whether they are ready to become a landlord, Adrian Goslett, Regional Director and CEO of RE/MAX of Southern Africa, provides a few key considerations that should be made before signing any offers to purchase.

Time is money
In addition to selecting the right property, preparing the home for tenants, and finding reliable tenants, there will also be ongoing maintenance hassles and tenant challenges. This means that being a landlord can be a big drain on time and sweat equity, especially if one has multiple properties and troublesome tenants. 

Those with less time available should factor in the cost of involving a real estate professional to help manage the rental on your behalfDebt exposure Experienced investors might carry debt as part of their portfolio investment strategy, but the average person should avoid it whenever possible. You do not want to be in a position where you will be unable to make the necessary repayments on your debts if one of your tenants ever happens to default on rental payments.

Purchasing a rental property may not be the right move if it will overstretch any other financial commitments such as outstanding student loans, unpaid medical bills, or even children on their way to university.

Bank finance

Acquiring the lowest possible interest rate on your home loan is a crucial part of maximising the return on a buy-to-let investment. When applying for finance, keep in mind that most banks do not take the potential rental income on the property into account when assessing your bond application.

Have you factored in all the costs? Once you learn how much you can charge in rental income for the property, you still need to take into account what your expenses will be and subtract them from theincome to find out what your bottom line will be. Remember to include any applicable fees, including:

●Property Insurance

Levies and/or Homeowners Association fees
Rates, Utilities & Taxes
Advertising costs for acquiring new tenants
Costs for vetting potential tenants
Travel expenses to and from the property
Cleaning, maintenance and repairs
Professional contracts (legal and management)
Home loan repayments
Location, location, location

Ambitious millennials are often looking for a cosmopolitan lifestyle, usually near urban vibes. There’s also a drive for family homes in suburban rental markets across Johannesburg, Pretoria, Durban, and Cape Town too. Semigration trends have also created a demand for rentals in coastal and smaller towns. Investors should also consider “work, play, live” opportunities near transport nodes that reduce travel time and are situated in fully-equipped lifestyle estates. In general, South African renters are seeking a better quality of life, greater safety, and a sense of community.

Ultimately, the best way to find out if you are ready to become a landlord is to consult a local real estate professional as well as a financial advisor. “Owning a rental property can be hard work, but it can also be the foundation to creating wealth over the long term – especially when you have the right support at your side. With a reliable rental agent managing the property for you, you can sit back, relax, and reap the long-term financial rewards of being a landlord,” Goslett concludes

Source Re/max