How to Make Money as a Landlord in South Africa Today

Four tips from one of South Africa’s leading real estate agencies on how to make money as a landlord.

Good news for aspiring landlords with their eye on buying property to rent: the residential rental market has stabilised, with fewer tenants in arrears and a promising increase in rent compared to previous years. While economic pressures remain, the rental market is recovering; specifically the luxury rental market, as Seeff reports that properties in prestigious areas such as Constantia Upper and the Cape Town Atlantic Seaboard are reaping healthy monthly rentals of more than R100,000.

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There’s no reason why you can’t make money as a landlord if you consult with an experienced Property Practitioner and understand the market before you purchase your first rental property.

Seeff shares four ways to make money as a landlord in South Africa today. 

One: Rent Out Property to Quality Tenants

Tenants can make or break the success of your rental. As a landlord, you want to choose reliable people who will make life as a landlord worthwhile. If you choose the wrong tenants, you risk losing money, either because they cannot pay and you have to consider eviction or because they cause damage to the property, and you must now repair it. An expert Property Practitioner can help you vet tenants so you make the best choice.

When choosing a tenant, consider the following:

• Good financial history. A landlord should evaluate the credit history of their prospective tenants if they want to guarantee the tenant doesn’t have significant debt or a history of late payments - anything that could cast doubt on their reliability as a tenant.
• Their general demeanour. You should never be biased, but you should ask yourself if you can trust the prospective tenant. Are they happy and willing to answer your questions, or do they give vague answers? Are they professional and organised? Are they respectful?
• Employed and with a steady income. Your tenants need to be able to pay you on time and beyond the first month. Of course, a person can lose their job unexpectedly, but if you want to make money as a landlord, you can at least ensure your tenant has regular money coming in when they’re interested in your property.

When you do find fantastic tenants, keep them. This means following through on your responsibilities, communicating with your tenants when they need something fixed or have questions, and making the home fit for them to live in. You don’t want to discover the perfect tenants only for them to move out because you never got around to fixing the plumbing or installing an alarm.  

Two: Let Your Property Assets Increase in Value 

Consider your long-term goals. If you’re serious about property investment and how to make money as a landlord, you’ll need to make an effort to increase the value of your rental properties. You can achieve this through thoughtful renovations and upgrades and necessary maintenance. Whether you plan to sell the properties one day or simply want to charge a higher rental, you should be willing to pour some money into your properties.

If you maintain your properties to the highest standard, they can increase in value. There are several ways to increase the value of your properties:

• Clean. Carpets, bathrooms, the kitchen, gutters…you want your home to sparkle.
• Paint. A fresh coat of paint breathes new life into a space, and sometimes it’s a necessary facelift if you want your property to appeal to different people over many years and trends.
• Keep things functional. Is your security system working? Does water come out of the kitchen taps, and do the electrical sockets work throughout the house? Don’t let your home fall apart. 

Three: Consider Investing in Short-Term Rentals 

Ah, the power of seasonality. There’s nothing like an influx of tourists, summer heat, and school holidays to promote short-term rentals such as Airbnbs, guest houses, and hotels. If you’re wondering how to make money as a landlord in South Africa, why not consider short-term rentals for that rush of quick and seasonal cash? 

There are several things to consider when purchasing a property for short-term rentals:

• Short-term income. Some seasons will see higher levels of tourist activity for your rental, and other times you’ll experience periods of vacancy. Be prepared for this, and plan ahead so you can still make a living during the quieter times.  
• Upfront costs. You’ll likely have to furnish the Airbnb when you purchase it and equip it with the necessary appliances, television, and bedding. Can you afford that?
• Legal regulations. Before you turn a property into an Airbnb, check you are compliant with local municipal laws. 

Four: Choose a Competitive Rental Price

It’s tempting to set a high price for your rental and expect the cash to come in. However, the price isn’t 100% up to you, not if you actually want to attract and secure tenants. Your price needs to be high enough that you make a profit yet competitive enough that tenants choose your property over another property.

The following are two factors that influence your rental price:

• Consider the location. What are the rental prices of other properties in your area? Is your property close to grocery stores and schools, and is this a safe neighbourhood? All of these will affect the price.
• What does your property offer? If your garden is unkempt, the paint in your bedrooms is peeling, and the house has leaky faucets and problematic electrical wiring, you’ll struggle to get a high rental for your property. But features such as a sophisticated security system, modern finishes, and a clean interior can all help you increase the rental price. 

We suggest you speak to a Property Practitioner before setting a price. A local Property Practitioner will be familiar with your area and the current state of the real estate industry and share what you can expect to charge as your rental price.

Are you ready to become a landlord and launch a profitable career? Read our blog on a landlord’s responsibilities for more guidance. If you have questions or concerns, this piece on tips for first-time landlords might be helpful, too.