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2 months ago

In light of the uncertainty around when borders will reopen and continued restrictions even once travel for tourism is permitted, many owners of homestay accommodation, like Airbnb listings, are considering securing longer leases for their properties

WORDS & IMAGES: SUPPLIES

Due to the impact Covid-19 has had on the short-term rental market, many landlords who focussed on very short-term rentals in the past, have now entered the long-term market.

“The supply is higher than the demand at this stage and many landlords have had to reduce their rental asking price. Landlords are hesitant to sign for longer than six months in hopes that the short-term rental market will improve,” says Chelsea Viljoen, Just Property.

But there’s an opportunity cost to offering six-month leases. Moving is often expensive and always disruptive, so tenants may not be interested in these shorter rental periods, leading to extended vacancies. There are other considerations too, making the shift from homestay to long-term rentals something to think long and hard about.

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Take out the furniture

Most tenants will want the premises unfurnished. Remove pieces such as vases and paintings but leave more practical items like fridges and beds until you know for sure, says Viljoen. “If the tenant insists on having all furniture items removed, you will then have to store or sell these. If they want it fully furnished, do a thorough inventory and be clear about who will be responsible for repairing or replacing items in the inventory.” Any subscriptions that were provided for homestay guests, for example Netflix, DSTV, security etc might work to attract a tenant, but if they don’t want to take over the subscriptions, cancel them.

Evaluating the right rental

When you post your listing, you’ll find out within a week if the rent is reasonable. If there’s no response for days, it’s almost certainly due to the rental being too high. “Don’t list above the going rate, thinking you can negotiate if you need to,” Viljoen warns. “Tenants don’t search for properties above their budget and then negotiate, but rather tend to search only for properties within their budget.”

Drawing up the lease

“It’s very important to customise your lease agreement according to your specific property and tenants,” Viljoen notes. The relevant laws and case studies about the Consumer Protection Act and Rental Housing Act need to be taken into consideration.

“If you bind yourself to a standard online lease agreement, you open yourself to risk,” she says. “Rather work with an experienced rental agent who knows what to include and how to tailor it specifically to your property and your circumstances.”

Marketing your property

“The first thing a prospective tenant looks at when viewing an advertisement online is the pictures,” Viljoen points out. Include as many high-resolution pictures as possible and try to show all angles of the rooms, the interior and exterior. Ensure the beds are made, cupboard doors are closed, lights are on and toilet seats are down.

“Many people are still wary of viewing properties in person, so we recommend filming a walk-through of the property. Making a few clips instead of a long video allows us to easily share these via WhatsApp, email and on social media.”

In your advert, include as much information as possible, says Viljoen. “If your property is connected to fibre Wi-Fi, including that in the advertisement could lead to a tenant choosing your unit above another similar one.”

Choosing a tenant

An extensive vetting procedure is the only way to ensure that you’re placing the right person in your property. Viljoen insists on the following:

1. Credit check. Study it carefully.

2. Pay slips, bank statements, employment contracts etc to verify income.

3. References from friends, family and previous landlords.

4. Copies of ID or passport and visa if applicable.

Character traits that in Viljoen’s experience can give you an idea of the applicant include how responsive they are and whether they’re good with communication; whether they pay rent on the same day every month; whether the rental amount paid varies; their spending habits and whether money is being saved. Most of this can be deduced from bank statements.

“Another good idea is to check out their profiles on social media,” she says. “You can tell a lot about a person from their online presence.”

The post What to do with your holiday rental… appeared first on Everything Property.

2 months ago

Statistics suggest that the majority of South Africans spend more than they earn, that we’re a nation up to our ears in debt – and that we’re in dire need of some decent budgeting skills

WORDS: MARANA BRAND – IMAGES: SHUTTERSTOCK

If the lockdown has taught us anything, it’s the importance of sticking to a budget and having emergency savings available should the unforeseen happen. This can be challenging for those whose credit extends beyond their monthly earnings, says Adrian Goslett, regional director and CEO, RE/MAX of Southern Africa.

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Bleak stats

A recent survey by debt counselling company Debt Rescue among 1,000 SA consumers, found that 85% needed help either financially, emotionally or both because of the pandemic. A further 55% of the respondents required financial help, but had no access to credit, and 96% were stressed about health, finances or both.

DebtBusters, a company that helps consumers restructure their loans, found that the 1,6 million residents who took advantage of payment holidays offered by financial institutions during the lockdown from April to June, will pay an additional R20,7bn in debt.

“In a country as over-indebted as South Africa, especially at a time when the economy is contracting, this is enough to push people who were just about making ends meet into a situation where their debt-to-income ratio is unsustainable,” Benay Sager, CEO, DebtBusters, says.

Neil Roets, CEO, Debt Rescue, adds that an alarming number of consumers cannot repay their debt and the extent of their indebtedness has grown substantially compared to the same time last year. “The most worrisome of all is the fact that we’re now seeing the top earners on the ladder such as doctors, lawyers and corporate executives knocking on our door to place them under debt review.”

Expensive short-term loans

According to a recent survey by fintech platform PayCurve, almost 80% of the more than 500 respondents seek expensive unsecured, short-term loans to help them meet their monthly financial obligations, while 11% spent more than half their monthly income paying off short-term debt (store cards, credit cards, short-term loans etc).

Budget, budget, budget

Suffice it to say that it’s imperative to take the time to draw up a decent budget, not only to stretch your income and cover what needs to be covered, but also because you may be surprised how much money you waste and how much you can save.

One of our biggest – and most important – monthly expenses is housing, whether renting or paying off a bond. As an affordability rule of thumb, one should not spend more than 30% of one’s monthly gross income on housing, says Goslett.

This way you ensure you have enough budget to pay for other living expenses including transport, food, education, medical care, insurance and other essentials. “This should also allow you to still have some money in the bank for savings each month,” adds Grant Smee, MD, Only Realty.

Saving is imperative when it comes to owning a home. “A burst geyser, plumbing or appliance issues, special levies and perhaps a non-paying tenant are just some of the unforeseen costs that could arise at any time,” he says.

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That’s where a decent budget comes into play.

If you have created a budget, you know exactly how much money you have coming in and how much is going out. You can make some plans concerning those big expenses. But if you don’t have a budget, you probably don’t have a very good picture of your finances. You may also be tempted into borrowing more money. It’s definitely better in the long run – for you and for your money – to have a budget.

Plan of action

A good place to start budgeting is by looking at your income. By knowing just how much money you’ll have coming in every month, it will be easier to know how much you’re spending. The more realistic you’re about each of these numbers, the more likely you will be to stick to your budget.

To help homeowners and tenants create a monthly budget that will reduce the risk of losing their home owing to unforeseen circumstances, RE/MAX of Southern Africa suggests becoming financially prepared for the unexpected by doing the following:

1 Categorise your expenses

If money is tight, differentiating between your needs and wants can help you stay within your budget. Needs come first, and if there’s money left over, only then can you spend money on wants.

The first step in budgeting is to find out where you’re spending your money. To do this, look at your bank statement to create a list of all your expenses and then break the expenses down into the following categories:

  • Fixed essentials: these include rent, insurance instalments etc.
  • Variable essentials: these are variable costs such as groceries and petrol
  • Inessential expenses: these include entertainment spending and shopping sprees
  • Long-term savings: payments towards pension funds and investments
  • Short-term savings: informal savings such as stokvels and emergency funds

2 Cut back to save more

If you aren’t already putting away a healthy amount into savings, then you’ll need to cut back somewhere. Variable essentials and inessential expenses are the easiest areas in which to cut back to make more funds available for your savings.

Cutting back on fixed expenses like housing, on the other hand, usually involves doing some research to find cheaper alternatives and the consequent process of switching or cancelling the expense.

Whether you own or lease a property, sub-letting is an option to help cover your costs during difficult times, says Smee. “Renting out unused space such as a garage for storage or an extra, unused bedroom can help to generate cash flow and cover the cost of utilities. If you’re renting, be sure to get permission in writing from your landlord prior to subletting any portion of the property”.

In other cases, particularly for tenants, Smee says that depending on your lease agreement, there’s the option to terminate and scale back. “Consider the current economic environment we find ourselves in and take a look at your immediate environment – perhaps you’re paying for space or amenities (like those in an off-plan development) that you’re not making use of but are paying a premium for. Shop around to compare.”

National Debt Advisors (NDA) suggests that cutting back on bad habits like alcohol and smoking can be considered to have more money available for your other expenses or for savings.

3 Set savings goals

Setting savings goals is vital and these should be included in your budget as an expense. Determine an amount that you would like to put aside each month that will help you afford the various expenses incurred when owning a home.

A good rule of thumb is to have two to three months of your salary saved in a readily accessible account in case of an emergency. You can invest these savings in a tax-free savings scheme to help you reach your savings goals quicker – just be sure to find out if there are any costs involved when withdrawing from these accounts.

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4 Create a facility for crisis cash

While you are building up your emergency savings, make sure you’ve got some form of credit or overdraft facility set up to use in case something happens and you need access to emergency funding to see you through the crisis. Avoid racking up unnecessary debt by only using this facility if you truly need to.

Live and review

Once you’ve completed your budget, NDA suggests, see if your money plans align with your short-term and long-term goals. Do this after you’ve attempted to live within your budget for a few months. If you’re having difficulty adhering to your budget, you may be spending money on things that aren’t within the goals that you’ve set for yourself.

Review your budget every month and don’t beat yourself up over small transgressions. In essence, a budget is an estimate of money coming in and going out. Take the time to go back and review what actually happened. Where did you overspend? Where did you save? What can you do differently next month?

While it’s important to review your budget every month, you’ll also probably need to recalculate your budget every three to six months, or whenever something changes dramatically in your financial life.

The post When the going gets tough appeared first on Everything Property.

2 months ago

Laying the foundations for future growth when the Covid-19’s uncertainty and volatility slows, Redefine has managed risk through a streamlined, more focused offshore asset platform by zoning in on higher quality and well-located domestic assets.

However, CEO Andrew Koning says that “property fundamentals are going to be challenged for the rest of 2020 and beyond.”

He says that Redefine’s asset platform has been significantly readjusted for prevailing conditions and the company is now more focused on a single external geography offshore in Poland.

This reduces our risk profile, improves our liquidity position and eases our loan to value ratio, which has been under a lot of pressure.” 

The sale of Redefine’s stake in the UK fund, RDI REIT for R2.3 billion in June has enabled the fund to focus on local and East European investments. Other recent changes to streamline the business includes the sale of its 90% interest in two Australian student accommodation facilities as well as its residual interest in Cromwell Property Group.

The elimination of non-recurring income also comes on stream through the acquisition of 100% of the equity value in M1 Marki from Chariot for €122.8 million. Redefine owns 25% of Chariot which will be disposed of as part of the transaction to settle the bulk of M1 Marki’s purchase consideration.

CFO Leon Kok says that early action on balance sheet strengthening and selling non-core assets means that Redefine has undrawn access to R3.8 billion in cash, while having liquidity headroom to absorb as much as a 50% rental decline and 100% dividend withholding from foreign investments.

We have not yet seen a dramatic loss or material increase in lease cancellations – which is why our attitude towards rental relief has been generous. While we realise there may be short-term pain, our emphasis remains on sustainability as we would rather retain tenants for the long term” says Kok.

He says stringent liquidity and risk management practices – which were established well ahead of Covid-19 – now stand the company in good stead: “We are fortunate to have sufficient headroom to absorb headwinds if the recovery is slow.” 

Rental relief in the second half has amounted to approximately R270 million with an increase in rental arrears of approximately R400 million over the five months of the various levels of lockdown. Average cash collections over this period have amounted to about 82% of monthly gross billings. However, the brunt of this occurred during the hard lockdown in April and May and it has since ‘recovered to some extent’.

Redefine supported its suppliers despite not being in receipt of any or receiving limited service delivery, such as cleaning and security services and to avoid suffering layoffs.  

This has ensured our relationships remain entrenched and places us in a strong position to continue providing high quality services during and after the lockdown,” says Kok. 

However, he emphasises that the next three months “remain critical, as the economy and property market is not out of the woods yet”. The focus remains on keeping liquidity levels bolstered, focusing on cutting back on non-essential expenditure, while still supporting tenants through rental relief. 

Following the recent news that Redefine disputed the validity of the put option exercised by property investment and development company Zenprop and RMB to sell the Mall of the South, Konig says that the parties are engaged in constructive discussions to resolve this dispute which is expected to result in a mutually satisfactory outcome for all parties.

Konig says the hard work done to right size the footprint of the capital base has provided space to expand development activity in the logistics sector in Poland which is offering attractive investment opportunities in an expanding market. This is expected to yield capital growth from further yield compression.

The European logistics platform is expected to grow significantly through exciting new opportunities on our doorstep, funded through our equity partnership with Madison.” 

Two recent completed developments in Poland of over 40,000 square metres add to an exciting further pipeline of seven projects of just over 189,000 square metres, which are 75% pre-let at an average income yield of 7.1%, and all funded via proceeds from the Madison transaction. 

Konig points out that Redefine has “done very well at working from home”, leveraging off its IT platform and instilling a culture of innovation and learning. 

Our early commitment to refreshing our values, culture and focusing on our people has seen us make great strides in facing and overcoming this crisis together,” he says. 

Our purpose remains to create and manage spaces in a way that changes lives and we have, for instance heightened our focus on ESG initiatives to further protect property values,” says Konig. 

Renewable energy remains a key strategic focus, with capacity expanded to 25.9 kw peaks during the period: “We will carry on ensuring the rollout of green energy and at the end of this financial year will have 100 office properties that are green star rated,” says Konig.  

Covid-19 has intensified and sharpened pre-existing challenges. But we have done the hard yards and now stand in good stead as we prepare to enter recovery,” he concludes. 

 

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