The advantages of landing up as a landlord during uncertain economic times

In major centres like Cape Town, Johannesburg, Pretoria and the KwaZulu-Natal's North Coast, there's a big move towards rentals with more and more people choosing to be more flexible with their location by renting. That opens the door for investors to build up property portfolios offering consistent income and long-term returns, according to Tyson Properties CEO, Chris Tyson.

Not only does this open the way for property investors but presents an opportunity for real estate agents to pivot and fill the gap. To keep pace with the emerging rental class, Tyson Properties is making a concerted effort to establish vibrant rental portfolios within their group. 

Although Statistics SA indicated that, after a strong resurgence in the growth of rental income during 2023 and 2024, increases are plateauing in 2025, the PayProp Annual Rental Index for 2024 suggests that increases in rentals will remain above inflation in 2025.

However, lucrative rentals tend to be location specific and Stephen Adamo, rental manager for Cape Town's Southern Suburbs, estimates that the city's market continues to grow year on year, with rental escalations hovering between 8 and 10% due to stock shortages and high demand.

"In this region, you know that you will be purchasing in a very robust housing market. With the sheer demand in Cape Town, you will always have access to the best tenants. In most cases, landlords have multiple offers for each property," he says.

Head of rentals nationally and Gauteng and KZN director, Murray Haywood, says the volatility of the South African economy means that both experienced and newcomer landlords should guard against risk by working closely with credible entities such as Tyson Properties that have substantial experience when it comes to up-to-date lease agreements, conducting thorough background credit checks on renters and agents consistently focusing on selecting both good potential rental properties for investors and matching them with reliable tenants.  

One of the biggest concerns for landlords is the risk of tenants defaulting and the need for eviction. However, Tyson Properties' works with Eviction Secure to help protect landlords, explains Dee Thomas, rentals training manager and property practitioner at Tyson Properties Johannesburg. Developed by Matt Smit of Van Deventer & Van Deventer Incorporated, Eviction Secure protects landlords from the costly legal fees that typically can exceed R30,000.*

10 Do and Don't s for Landlords:

1. Get the numbers right: Work closely with an experienced real estate agency to select a suitable property and then do your sums. The overall objective is to price your rental competitively after researching the market and area trends.  Take into account bond repayments and running costs and even add a contingency to cover any potential maintenance. Factor in potential savings, including the new transfer threshold which enables investors to purchase a property under R1.21-million without paying transfer duties.
2. Focus on cash flow: Prioritise properties that generate consistent rental income, providing a potential financial cushion during downturns. Avoid over borrowing. Aim for lower loan-to-value ratios that reduce the risk of interest rate hikes. 

3. Use an agency: Good vetting is vital and an agency is the perfect way to do this says Adamo: "Get them to do thorough credit and background checks and a move in inspection report, manage the property and even deal with maintenance and issue letters of demand if a tenant is a late or non-payer. That outsources the emotional connection to the tenant." An agency will also provide a lease agreement that clearly outlines payment terms, maintenance duties, and rules.

4. Aim low: "In the current market, the numbers must make sense. A buyer needs to do a full due diligence before purchasing a property. When it comes to price points, you get an immediate return on lower end properties in good locations," says Adamo.

5. Focus on location: Good quality tenants want to live in the right neighbourhoods, especially when it comes to amenities. Adamo says the rentals with proximity to top schools, shopping, restaurants, gyms and strong security are in high demand.

6. Be open to opportunities: Economic uncertainty can deliver foreclosures and motivated buyers who have the liquidity to snap up a bargain. Don't discount renovating homes in good locations - often homes on the market need no more than a cosmetic upgrade.  

7. Match tenants and lifestyle: According to Adamo, renting is the perfect way to adapt to changing lifestyle needs. Make sure your investment property meets general trends in a specific area - you don't want to try rent out a one or two bedroom property in a family neighbourhood.  Luxury properties are also rentable. Those looking to live in a R15 million plus property might wish to save on bond repayments of around R150 000 and instead pay a rental of around R50 000 to R100 000 to invest in other avenues.

8. Maintenance makes sense: A landlord who is invested in his property and has a good track record of looking after it and doing repairs within a reasonable timeframe always benefits. Adamo says tenants are happy to settle for a well maintained older property. Regular upkeep attracts and retains quality and long term tenants. So, conduct regular inspections and proactively ensure that all is well ahead of tenant alerts.
9. Consider Rental Insurance: Protect yourself from damages and loss of income.
10. Weigh up short term versus long term lets: Each have pros and cons says Adamo. Short term rentals might attract higher incomes over shorter periods but are extremely seasonal. In addition, larger numbers using a property during shorter times could mean more expensive wear and tear. Instead, investors can benefit from longer term rentals as they are stable and predictable.