Electronic collection method gives Landlords the edge

The Purpose of property investment is to make profit and generate wealth. This is made possible throughthe escalation in property values over time and the leveraging effect created by using the banks money through a bond where the monthly payment is financed (partially or completely) by the tenants rent. 

Stabilis Incorporated conducted a survey of property rental companies to assess the extent of poor tenant payments in the local residential and commercial marketsand to assess the impact of the economic downturn on local rentals.

The general response on commercial rent payments was that there were very few problems especially with national groups who were considered the best and most reliable tenants. It was also noted that in established “older” commercial properties, especially shopping centers where successful businesses have established themselves, the poor-payment rates were lower than in “newer” properties.

We believe the economic conditions havehad a negative impact on property rentals in the commercial and residential property sector, which have been made worse with electricity price increases and by the high failure rates of start up businesses.  A number of key trends were identified in our residential survey:upmarket properties (3 or more bedroom) showed lower non-payment rates, while smaller properties (2 bedrooms and flats) showed higher non-payment rates.

Realty 1 confirmed that Landlords are faced with financial pressure when monthly rent is received late. Using the example of a bond of R500 000 at current interest rates results in a bond repayment of R4990 pm.  The amortised interest after 4 year comprises R4600 of the payment portion. The interest cost per day is R153. A tenant who habitually pays late by 3 days costs the landlord an additional R460. The additional interest cost per year is R5520.  A tenant, who believes that he has 7 days to pay his rent and habitually does this, costs the landlord R1071 in interest per month and R12 852 per annum.It usually takes 9 days to address a habitual payment defaulter and receive the rent into the landlords account.The impact of non-payment of rent is further evinced by the Banks consistent report of an increase in bonds,which are more than 3 months in arrears.  Properties repossessed by banks are also on the increase.  A tenant profile analysis prior to placing a tenant in a property is essential to risk management.  A stringent tenant payment monitoring process will identify late payments earlier so that landlords can be informed about any problematic situation. Realty 1 uses themost comprehensive tenant feasibility analysis and aground breaking electronic payment collection methods insuring that Landlords receive their rent before the 1^st of every month. This breakthrough is good news to property investors who need greater peace of mind to lure them back to the traditionally lucrative property market and with banks more careful in granting loans, many people are now unable to buy houses, and therefore the residential property rental market has generally been positively influenced by the current economic conditions. Lower prices and interest rates have also allowed those with the ability to access finance to purchase multiple properties at reduced prices.

In conclusion, Stabilis incorporated would propose that in the current climate, the best investment might be in smaller residential properties and flats. Their reasoning is, that in spite of non-payment being higher in this sector, this risk can be reduced through stringent tenant selection and with ground breaking electronic payment collection methods. The big potential gain for an investor would be that when the market turns, the first properties that will appreciate in value would be the smaller ones, as these will be the first to be affordable to new market entrants.

For more information on the Realty 1 Rental Revolution please visit www.realtylowveld.co.za. You can also call White River office: 013 751 3841, Nelspruit: 013 752 7135 or theBarberton office: 013 712 4534, to speak to any of the rental agents