Advice and Opinion

Low cost units generally give a better rental return than upper bracket homes

Although it has been said before, it is worth reporting that all his recent experience confirms that the rental returns on low priced residential homes, particularly sectional title units, are not only generally better than those of higher priced homes but they also escalate faster. This was said recently by Bill Rawson, Chairman of the Rawson Property Group.

Furthermore, said Rawson, finding a tenant for low priced units is usually easier than for upper bracket homes and on such units the landlord is often given a choice of two, three or more applicants, which makes it easier to find a reliable tenant.

“It is infinitely preferable, in my view, to own three R800,000 sectional title units than one R2,4 million home, especially as it always pays to spread one’s risk. Bad tenants are not only found in the low priced units but also, quite surprisingly, often in the higher priced homes.”

Rawson said, too, that in his experience, employing a rental agent will often prove to be a very wise move because, being in touch with the market, he will know exactly the maximum rent he can charge.

In addition, good agents know how to put the pressure on and if necessary get rid of poor paying tenants. Equally important, said Rawson, is that a good agent will greatly reduce the stress of being a landlord, particularly if you are a landlord with several properties.

“Many people are not psychologically equipped to handle a difficult tenant,” said Rawson. “We have found time and again that it pays to let the agent do this for the landlord, especially if they have other business interests that are probably more important.”

While it is obviously agreeable to see rents rising year-on-year, said Rawson, it has to be accepted that right now, many good tenants, whom the landlord should take pains to keep because they maintain the premises and the garden well, are feeling the effect of reduced salaries, lower annual increases and high inflation.

“When I talk about inflation in this context,” said Rawson, “I am not looking at the national figure but at the day-to-day costs of such basic essentials for the family man as food, clothing, energy and transport. Here the real annual inflation is, in my view, probably above 10%, not at the 6% level quoted by the economists. A socially sensitive landlord will, therefore, be wise to keep rent increases at reasonable levels, especially if he is dealing with such people as single mothers or young couples who are likely to be on limited incomes for some years to come.”

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