SA's residential landlords: What they own, how they're coping

Ever wondered who owns South Africa's residential property stock? Whether these investors are getting their rent on time, and what types of annual increases they are successfully implementing?

According to TPN, a bureau which assists landlords and agents in vetting tenants and ensuring they remain good payers, you are either a 10 properties' person, or you're in the league of individuals with 200 - 300 properties. Institutions, meanwhile, are dominating inner city ownership of residential blocks.

Owners of properties generating monthly rentals of R3 000 to R7 000 are most likely to pay the rent on time and tenants paying R12 000 and more most likely to default first. Western Cape landlords, meanwhile, are finding it easier to increase the rent.

This fascinating glimpse into the world of residential real estate investing was provided this week by TPN in its third quarter 2009 report.

The organisation said the majority of residential properties available for rent in South Africa "appear to be supplied by a mass of private individuals who have purchased 1 -10 properties with the aim of creating an additional source of income".

The second type of residential property investor, it said, appears to be "a more serious private individual with up to 200 or 300 properties.

"These individuals either self-manage or hand their portfolios over to a number of letting agents."

A third category of investor is "institutions", which have portfolios ranging up to 10 000 properties. Normally these institutions purchase entire building, enabling them to run more cost-effectively. The larger portfolios, said TPN, are "predominantly held in the inner-city environment".

Nevertheless, there are fewer institutions that "play" in the residential property market because of issues like expensive and time-consuming evictions and the "limited number of property managers with the skills and infrastructure to manage large portfolios".

Tenant payment trends

Also in its report, TPN noted that tenants seem to be getting a little bit better about paying their rent every month (6% year-on-year). However almost half of tenants paying R12 000/month and more are not paying their rent on time. "Nonetheless, it is important to point out the biggest recovery has been noted in this bracket, which is up from just 38% of payments made on time and in full during the previous quarter."

The average national rent, meanwhile, has increased by 11.5% over the last 12 months.

Western Cape landlords seem to be experiencing fewer difficulties than in other provinces, with only the Eastern Cape "showing a decline of 2% of tenants in good standing".

The organisation said property investors who "follow strict and appropriate tenant acquisition and affordability assessments" are most likely to succeed.

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