Agent Advice

6 ways for agents to manage the health of their rental book in a tough economy

Private Property South Africa
Press |
6 ways for agents to manage the health of their rental book in a tough economy

In a tough economy, property professionals in the rental space are under immense pressure to ensure that their rental book remains healthy. Tenants countrywide face a trifecta of challenges between rising inflation, increasing interest rates and ongoing slow economic growth.

“Tenant expenses can be simplified into three ‘baskets’, namely debt repayments, rental payments and remaining disposable income covering everything from groceries to entertainment and school fees. With inflation at 7% and even more on items like private schooling, groceries and healthcare, Smuts says to an extent, rental payments are the only expense category under the tenant’s control. “Tenants just do not have the ability to afford rental increases, so many are moving to smaller properties to avoid paying more rent or lower that expense.

Smuts offers six pointers for rental agents looking to assist their landlords and tenants, and in so doing to maintain the health of their rental books:

1. Proper vetting of rental tenants

Data has shown that many tenants shifted into property ownership over the period of the pandemic, leaving the rental market permanently. Smuts says that this removed many of the ‘good tenants’ from the market, making it even more important to vet prospective tenants. This trend is counteracted somewhat by rising mortgage rates, but Smuts says it’s important not only to review credit check data, but also to combine that credit check information with tenant data. She adds that diligently phoning references listed by a prospective tenant can offer further invaluable insights, as will conducting a proper review of bank statements and salary slips.

2. Manage your arrears

The key to managing tenant arrears is to anticipate and deal with it immediately. “With the increasing pressures on tenants, there is a high likelihood that they might miss a payment, or only pay partially because they just don’t have the available funds,“ says Smuts. “Our data shows that the larger the outstanding amount, and the longer that the situation persists, the more unlikely it is that the account will be settled in full.”

3. Use best-in-class PropTech

PropTech should free up property professionals’ time, allowing them to spend their time on things that add value to their tenant and landlord relationships. Smuts says instead of balancing accounts, professionals want the freedom to focus on ‘people’-centric activities like building relationships, keeping properties ship-shape and finding new opportunities to grow their business. PropTech like PayProp automates and optimises inefficient rental payment admin processes, freeing up your time, your money and your agency for more.

4. Protect yourself from cybercrime

Protect your landlords and your rental book with secure PropTech that puts you on the front foot. Cybercrime and fraud typically increase during tough economic times. To protect your rental portfolio, PayProp allows you to set permissions and to control who does what in a rental business. An audit log also tracks all transactions that anyone with access to your portfolio performs on the system, allowing you to protect yourself further.

5. Find your ‘value add’

In economic downturns, a large portion of agents cut their commission just to keep a landlord on their books. Sadly, it’s very difficult to ever gain that percentage back and is therefore something that should and can be avoided in a number of ways. Smuts says a far better way to approach the situation is to proactively increase the value you add to your landlord's life. “Using tools like the PayProp Owner app, which gives landlords access to damage deposits, detailed portfolio payments and other useful information, will add immediate value and bolster the relationship.”

6. Be informed

It’s important to follow the trends in the rental market and to track their effects on your own business. Smuts says a good place to start is quarterly or annual data produced by various market players. “Knowing your market can help manage expectations, especially at crucial times like the listing phase, when listing a property above market value will lead to endless vacancies,” says Smuts.

Smuts says that whilst market conditions are tough, many property professionals are adding value to their landlords and tenants and managing to navigate the pitfalls to the benefit of their agencies and clients. “Going back to the fundamentals will help professionals to maintain healthy and strong rental portfolios,” says Smuts.

Writer : Daniela Els

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