Renting out of rooms in your home one way to beat the recession, but beware the pitfalls

The recessionary conditions in SA have resulted in more and more homeowners renting out parts of their homes (i.e. one or more rooms) to supplement their incomes, says Tony Clarke, MD of Rawson Properties, and, he adds, there is a growing demand for this type of accommodation.

“In our group,” he said, “we see this demand coming from students (property in the “Academic Mile” from Mowbray to Wynberg has proved to be one of the best possible investments), from visitors (who increasingly opt for the peace, privacy and cheaper price of a home rather than a hotel) and from those who, regrettably, have lost their homes this year as a result of redundancies, bond payment defaults and the like.”

Clarke added that although the renting out of rooms is now most evident in the disadvantaged areas such as Mitchells Plain and Khayelitsha, (Ivan Neethling, Chairman of the Western Cape branch of the Institute of Estate Agents has said that in some homes designed for a maximum of six people, up to 15 are now living) the trend is also evident in the affluent areas such as Constantia where singles in particular welcome this type of extra income.

Clarke warned that those going this route should take note that

  • accommodating paying guests (or a second family) in a home could invalidate the property’s insurance policy.
  • in some cases, especially in gated communities, this could be against the Homeowners’ Association regulations – or, where it is permitted, the regulations could limit the number of people allowed to live in a home.
  • similarly, municipal byelaws often put limits to the number of people permitted in a home (this is often calculated on the number of bathrooms).
  • the Receiver of Revenue might see this as a business (which it is) and not only demand income tax but also work the revenue into the Capital Gains Tax if the house is sold.

Those going this route, said Clarke, should take care to avoid “a tenant from hell”.

“This sort of lease is often drawn up by the homeowner without the help of an agent, who would be familiar with the criteria for assessing a tenant – and who knows how to check his track record as regards behaviour and payment. Let homeowners take care: on any long-term lease, even one for just a few weeks, your peace of mind and that of your neighbours could be at risk. Check the tenant out thoroughly and do not accept any statements unless they are backed up by reputable referees.”

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