I love this strategy because it puts money in my pocket every month freeing me up to spend more time in my hammock in my bikini!
Here are some of my top tips to edge you closer to your hammock:
1. Buy to a qualified demand: do your research, make sure the property you want to invest in is in an area where there is demand. TPN offers incredibly insightful statistics to help you identify the following:
what average age group rents in the area?
what is the average household size?
how much is the average rent?
and importantly, how likely are tenants in that area and that rental bracket likely to pay you?
TPN also offers credit checks, lease agreements, management systems. They are your new best friend.
2. Run the numbers to make sure the property can look after itself. Will the rent cover ALL the expenses? You don’t want to fund your tenant’s lifestyle so make sure the property is putting money into your pocket, not taking money out.
3. Include all expenses. Lately security in Jozi is a hot topic and is affecting our portfolio. Our tenants are demanding better security and are not always prepared to pay for it. Of course, you can refuse to do it because of the costs involved. But then you might find yourself sitting with an empty property for months on end. Weigh the risks, run the numbers - including security - and let the calculator decide.
4. Make sure you vet your letting agent properly. They are a crucial part of your power team. Check their references, follow up with their existing clients and view some of the properties they manage. Ask them how many staff members they have and what services they offer. This is about creating you another stream of income, not another job so choose someone who can take the admin out of your property portfolio.
5. Choose the correct tenant upfront. We get our prospective tenants to pay a R350 admin fee when they apply to rent one of our properties. This ensures we only process applications from tenants who know their credit profile is good and their references solid. If they pass the vetting process, we put the R350 towards their deposit. If they fail the check due to credit reasons, we keep the R350. As always, explain the rules of the game upfront so everyone understands what they are letting themselves into. Taking the time to do thorough vetting upfront will save you from the nightmare of evictions later.
If you follow these tips, chances are good you’ll find yourself swinging gently in the hot summer breeze on your own hammock sooner than you imagine!