Charge more rent

“What can I rent it for?” “What are the rentals?” If I had one Rand for every time I’ve heard these two questions, I’d be a rich man.

The answer to both is: It doesn’t matter! One and two bedroom flat rentals in my area are about R2500 to R3500 per month. My flats rent for R4000 and R4500 per month and my vacancy rate is less than three percent. Yes, my flats are nice, but not that much nicer. So what is it that makes the higher rent worth it? Two things: The fellow tenants and the landlord.

There are good reasons for some investors to stay away from rental property. These are not some of them:

  • “I don’t want the headaches.”
  • “I don’t want to be fixing something all the time.”
  • “I don’t want my property damaged.”
  • “Short of eviction, I can’t get them out if they don’t pay.”
  • “They leave in the middle of the night and trash the place.”

If you handle your rental business like a business, it will make you money as any business should. Properly priced and managed, rental property makes you money. Poor management and pricing costs you money. The following are some ideas I use to keep tenant maintenance to a minimum and prevent some typical problems before they happen. Nothing’s perfect, but rental property can provide a worthwhile active or passive income to investors.

It begins with respect

Treat tenants with respect — this is the most important piece of information anyone can give to a landlord. If you respect your tenants and treat them well, they are much more likely to treat you and your property with the same respect; plus they’re more likely to make on-time rent payments to landlords they like and who like them.

So before talking about getting higher rent and keeping tenants longer, we have to address how you demonstrate respect for tenants (who are probably ‘financing’ this particular real estate investment of yours):

  1. Repairs. When something is broken, fix it fast. I just got home one evening when a tenant called to say their water wasn’t working. When I went to their flat and checked things out, it turned out the city turned their water off (for non-payment). Embarrassed and apologetic, they offered to ‘pay me for my petrol.’ (Had I been in my thirsty bakkie instead of on my motorcycle, I’d have been tempted to accept!)

    The lesson here is mutual respect. I took time to find out what was wrong. Tenants respect landlords who go the extra mile and they’re more likely to respect that landlord’s property. When was the last time a tenant offered to pay for your petrol?

  2. Communication. Keep tenants informed — upcoming maintenance, a termite inspection, an up-coming annual walk-through, anything relating to ‘their space’ and never increase their rent without asking them what they can afford. Here are some examples:

    • A note half way through a first year lease — “… Want to let you know I notice you’re taking good care of the house (flat)… I appreciate that … Hope everything’s okay …” My wife’s note to tenant on a diet or exercise program — “You’re looking great …What program are you on? … I might want to try it.”
    • Perform regular maintenance checks on your property, but instead of notifying a tenant you were there or are coming on a particular date, ask what suits them — “I need to do a walk-through and it’ll give us a chance to spend a few minute together … how’s this Friday after you get off work?” Every landlord should visit each property annually at the very least.
    • As lease renewal time approaches I have what I call my ‘Tenant Appreciation Gift’ (one year gift, two year, etc.). I always deliver it in person the month prior to lease renewal because if or when a rent increase is forthcoming, it sets the stage. The phrase ‘It’s the thought that counts’ applies here. In fact, the more the rent may increase, the less extravagant your renewal gift should be. You want to avoid appearing like you’re ‘rolling in their dough’. A small basket of fruit, a decent flashlight or a restaurant gift card are typical gifts I would consider.

      If a rent increase is going to be forthcoming then, after complimenting Joe on being a good tenant, I tell him we need to talk about a rent increase and add, “I don’t want to lose you so I need to know what you think you can afford”. If my goal is R100 per month, I’m going to ask if he could handle R200 per month. In the end, I hope to net more rent and still hold on to a good tenant.

  3. Esteem — Slumlords think of them as ‘tenants living in tenant housing’. Landlords view them as ‘tenants who rent property’. Do you consider your tenants a commodity you can trade at will or people who need and deserve your respect? Of course there are some undeserving undesirables, but landlords should have better sense than to rent to them in the first place.

    If you were in the retail rather than rental business, you’d probably have a customer or two you could do without, maybe even one you’d turn away. But most of them you would appreciate and treat with respect. Our tenants are our customers. They’re the reason we’re able to make a living. So who’s the real problem, them or us

Article by: Greg Gardner - www.iafrica.com