What you must know about your managing agent
One of the biggest growth areas in the real estate industry at the moment is the management of rental property on behalf of landlords despite the fact that buy-to-let investments now only account for about 7% of property purchases, compared with about 25% in 2004.
The main reason is that owners as well as tenants have come under increasing financial pressure in the past two years, and simply cannot afford to risk rental defaults, says Berry Everitt, CEO of the Chas Everitt International property group.
Many people still own several rental properties that they bought during the boom years and are in a situation where one bad payer could jeopardise their whole portfolio.
But the most vulnerable in this respect are homeowners who, having found themselves in financial distress but unable to sell their properties in a soft market, are renting them out to cover their bond repayments while living somewhere cheaper themselves.
Writing in the Property Signposts newsletter, Everitt notes that while falling interest rates have steadily reduced the incidence of non-payment or part-payment among tenants since last year, this is still around 20% (one in five) in most areas and income brackets, according to the latest Rental Payment Monitor compiled by TPN.
In addition, low inflation and rising municipal service charges are going to make it very difficult for landlords to raise rents by much next year, which means that they will have little or no cushion if a tenant does default.
In short, he says, the need and demand for expert help in managing rental properties is set to grow even more. However, there are some important things for owners to check before entrusting the management of their properties to an agent. These include:
* Ensuring that the agent is registered with the Estate Agency Affairs Board and has a trust account for holding tenant deposits;
* Ensuring that the agent is at least working towards obtaining an NQF4 or NQF5 qualification by the end of 2011, when these will become essential for an agent to practice legally;
* Ensuring that the agent has proper systems in place to check on the creditworthiness and payment history of prospective tenants, and will also establish that they are not currently under debt review;
* Ensuring that the agent will not under any circumstances hand over keys to the property until the deposit and first months rent have been paid; and
* Ensuring that there is a clear, written contract detailing exactly what services the agent will provide in return for his or her management fee - and whether this is a set amount or a percentage of the rent.
Article by: www.chaseveritt.co.za