5 improvements to consider to maximise the value of your investment property
22 Jun 2023
Homeowners in South Africa are under pressure after ten straight interest rate hikes as of the end of May, leading to many homeowners selling up or renting out their homes and moving into smaller rental properties.
Property professionals reported rising demand for rental properties in the latest PayProp Rental Index (Q1 2023), with budget-sensitive consumers opting for a fixed rental payment over a fluctuating bond repayment. Even would-be home buyers are opting to stay in rentals, driving up demand.
READ: Real estate professionals optimistic about the future of the rental industry
Michelle Dickens, CEO at PayProp, says the after-effects of the COVID years are still being felt by South African consumers. "Homeowners and tenants alike are still in a state of recovery from the substantial economic impacts of the period, compounded by present-day economic challenges like the cost of food and fuel and continued load-shedding. As such, many are delaying buying homes or even returning to the rental market, boosting demand for rented properties."
But while it’s easier to find a tenant, finding the right tenant is now more important than ever. Landlords are also facing higher bond repayments, giving them much less margin for error. If they are to stay profitable, they need to find tenants who will reliably pay the increased rents needed to cover their rising costs.
That means the challenge is on for landlords and investors to differentiate their properties in order to attract quality tenants.
Dickens suggests simple improvements to glean maximum value from an investment property:
With the current pressure on the South African grid, being able to keep the lights on is a substantial property differentiator. This doesn’t necessarily mean the installation of a full solar and inverter system (although at the top end of the market, solar panels are a key feature) but could be as simple as a stand-alone battery backup to keep the lights, wi-fi and television operational during load-shedding.
Load-shedding means that electric appliances like the microwave, oven and hob don’t work – often over meal times. Whilst we’re not able to solve it all, the simple installation of a gas hob means that tenants are able to prepare food whilst the power is off.
Small improvements in security measures add immediate value to a property. Simple additions, like a light-fitting CCTV camera that enables tenants to monitor movements within their property, make all the difference.
Remote geyser operation
By installing a smart wi-fi-connected geyser timer, tenants are able to remotely switch their geyser on and off. This enables power saving and also gives them a better insight into their energy consumption.
Making use of platforms like the PayProp Tenant portal means that tenants can easily pay their rent online and have 24/7 access to their invoices and statements, keeping them informed and in control of their payments.
“Once you’ve raised the value of your property with a few simple and affordable steps, it’s equally important to screen your applicants carefully,” says Dickens. “Systems like PayProp’s Tenant Assessment Report make that easy, allowing rental agents to check an applicant’s credit score and past rental payment behaviour, which makes it easier to place tenants who can and will pay on time and in full.”
READ: The importance of having a decent lease agreement
Andrea Tucker, Director of MortgageMe, stated in an article published last month, that the cost of buying and owning a house has become prohibitive for many South Africans, creating a challenging house buying and selling environment. This has had the effect of strengthening the rental market, which for existing homeowners and investors can be a reliable source of additional income."
Turn a liability into an asset
With as many as 54% of South Africans across all age groups saying they are renting simply because they cannot afford to buy, turning what may seem like an unsellable liability into an income-generating asset is an attractive option for existing homeowners. In addition, a strong ‘buyers’ market’ can provide new, prospective purchasers with good opportunities in the buy-to-rent property market.
"If a homeowner is struggling to sell and doesn’t want or need to let the property go when prices are low like they are in many areas at the moment, renting that property out can add an income stream to cover bond repayments and possibly more if one is lucky," says Tucker.