How much how good tenants actually worth??

Total rental per month say : R50,000
20 % discount : R10,000
Equates to R120,000 per annum at 10% return if invested (like your flexi bond) totals R132,000 lost

or

Rental: R50,000 pm
No discount
5% insurance against late payment, legal fees and limited damage reimbursement. R2,500 pm
R2,500 x 12 = 30,000 add 10% if invested = R33,000

Thats nearly R100,000 difference in the 2 scenarios
In addition, Western Cape tenants are nearly 90% in good standing. With due diligence, chances of a rouge agent (tenant) are quite slim

Unless I'm missing something, it simply does not make any business sense to that large of a discount

Would love to hear your thoughts cause the numbers are bothering me
 
mountainboy said:
Total rental per month say : R50,000
20 % discount : R10,000
Equates to R120,000 per annum at 10% return if invested (like your flexi bond) totals R132,000 lost

or

Rental: R50,000 pm
No discount
5% insurance against late payment, legal fees and limited damage reimbursement. R2,500 pm
R2,500 x 12 = 30,000 add 10% if invested = R33,000

Thats nearly R100,000 difference in the 2 scenarios
In addition, Western Cape tenants are nearly 90% in good standing. With due diligence, chances of a rouge agent (tenant) are quite slim

Unless I'm missing something, it simply does not make any business sense to that large of a discount

Would love to hear your thoughts cause the numbers are bothering me
Click to expand...

Side point, still boggles the mind paying R50,000 for rent..
 
Chevron said:
Like?
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there are many and threads have been created discussing them

I am using rentshield

@mountainboy

that's exactly the view I've taken, although my insurance is 10% of the rental. I also escalate my rental at 10% every year, no exceptions.
 
I think it's dependant on where your property is.

I have a property in a town that struggled with a lot of shutdowns and layoffs in 2015. When I started renting it out in 2016, I put it up for a lowish price, about 15-20% lower than similar sized places in the area.
After 2 not-too-bad-but-definitely-not-good tenants, I now I have a good tenant that always pays on time, keeps my garden neat, does some maintenance and informs me of major issues and signed long term. While the local economy in that town struggles, I'd rather keep him paying a lower rent than sitting with an open house or a difficult tenant.

An open house is more than just loss of rental income. Then I have to pay to keep the lights burning, to keep the grass short, there's risk of break-ins and vandalism.
 
cguy said:
I personally charge my good tenants about 20-25% below market.
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Personally I check what the units are renting out for around my area and charge R100 to R200 less if the tenants pay on time etc.. come increase time, if they want to stay on and had no issues = also below market related increase, works best for me :)

Also my rental agent charge penalty if they pay late etc so they have incentive to pay on time, works great
 
Goliath said:
Personally I check what the units are renting out for around my area and charge R100 to R200 less if the tenants pay on time etc.. come increase time, if they want to stay on and had no issues = also below market related increase, works best for me :)

Also my rental agent charge penalty if they pay late etc so they have incentive to pay on time, works great
Click to expand...

How much does your rental agent cost you?
 
Friedpet said:
An open house is more than just loss of rental income. Then I have to pay to keep the lights burning, to keep the grass short, there's risk of break-ins and vandalism.[
Click to expand...

I lost over R90k on a property in JHB. Was in the process of selling it and I was already down in cpt, so it was empty for a few months. Had a break-in, stripped all the taps, wiring, switches, broke the showers, basins, toilets.

Had to get all this fixed before the new owner moved in, had to pay for guards on the propery till the new owner moved in.

15-25% discount on a good tenant is a bargain.
Remember, if the monthly rent income covers the bond and other expense, you are making a profit.
Don't get greedy.
 
Added, my thoughts on an estimate... percentages can be compared equally.

A calculation on interest would have to be applied both sides anyway.

Difference between a perfect and bad tenant easily 30%:
-10% Loss of rental
-10% Loss on repairs (depends on type of property)
-10% Loss of your time (or cost of paying a rental agent) "your time" amplified by not being a tax deductible expense.
 
Chevron said:
Well think about how many months it would take to make up for a bad tenant not paying for a month or two. Or causing other issues.
Click to expand...

Or the fees you need to pay an agent to get you a new tenant that would hopefully pay.

don't let the potential money blind you from having good tenants. one drove me to sell my property to cover the enormous debt they made me incur (not paying rent for 6 months+ and then not vacating/lawyers fees/fixing up the place etc. etc. etc.)

Raise rent by 10% every year, sure, but keep the price lower than what they would normally pay currently. because less hassle/cost to you = way more benefit for you long term.
 
yebocan said:
Was renting a place...smack bang in the centre of Green Point, for an absolute steal. After 4 years of renting, with agreement up for renewal for another 24 months, landlord conveyed that the rental could achieve about 25% more than what it was going at. We all adults, I saw his point of view, as he also could appreciate mine...refusing to pay 25% more. End of the day, you want to get the maximum return out of your investment....nothing personal, business is business.
Click to expand...

Return on investment on a property isn't a get rich quick scheme. I don't think you can plan on buying a house and getting rich from tenants.
Why isn't increases on rent linked to CPI? Not everyone gets the same increases. Might frighten away good tenants.
 
I never put up the rent more than 6%. However, when they leave I do a big renovation and then charge market rates. People love fancy kitchens and bathrooms, the garden is neither here nor there, since they usually know nothing about plants. I fit a borehole and make them use it

Since Nov, when CT Council put up the water rate, I charge them the difference between their previous average fee and the new total charged. There have been no complaints so far
 
As somebody that pays their rent on time all the years, notifies the landlord of maintainence problems, and has to put up with the landlord not fixing stuff. I get naar when landlords want to increase the rent by 10% every year. I wish mine would let me pay less %increase for once.
 
smb3 said:
As somebody that pays their rent on time all the years, notifies the landlord of maintainence problems, and has to put up with the landlord not fixing stuff. I get naar when landlords want to increase the rent by 10% every year. I wish mine would let me pay less %increase for once.
Click to expand...

do yourself a favour and consider your options, if you move will you pay more or less rental?

I don't charge my tenant's deposit for example, and I maintain the property, so I feel the tenant receives more than a fair deal in return for me asking a 10% increase every year.
 
I charge about 20% less than the cheapest similar rental on Private property.

I don't have a managing agent nor rental insurance, so save on that cost.

My tenant is extremely low maintenance, and she takes care of most of the issues herself. Stove repairs, geyser thermostat etc. I get notified, and if I get a copy of the receipt I deduct her expenses from the rent.
The couple of time I have been there to look at issues, I could see that the place is in better condition than when she moved in.
 
saturnz said:
do yourself a favour and consider your options, if you move will you pay more or less rental?
BET YOU I'LL PAY LESS WHEN I MOVE AWAY FROM YOU.
I don't charge my tenant's deposit for example, So after 3 months this nice couple brakes everything in your unit (having great sex) then deside to go tour the world. GREAT BUSINESS YOU RUNNING. and I maintain the property, (REALY, SO IT IS ACTUALLY THE TENANTS RESPONSIBILITY??) so I feel the tenant receives more than a fair deal in return for me asking a 10% increase every year.So you pay of the property in 10 or 11 years? I want that list of fool pool of tenants
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Then Albert.

If there are no maintenance needed for....lets say.... 5 years. Do the tenants get a break for that 5 years??
 
SAMongoose said:
Then Albert.

If there are no maintenance needed for....lets say.... 5 years. Do the tenants get a break for that 5 years??
Click to expand...


if you pay less elsewhere, then surely its logical to move?

as for damage you don't read hey, I have insurance that covers me that's why I can charge no deposit

property is a great wealth management tool, which is why you see me keep encouraging others to invest in property, location matters though.

but I see you are new here, maybe one day you will learn
 
saturnz said:
if you pay less elsewhere, then surely its logical to move?

as for damage you don't read hey, I have insurance that covers me that's why I can charge no deposit

property is a great wealth management tool, which is why you see me keep encouraging others to invest in property, location matters though.

but I see you are new here, maybe one day you will learn
Click to expand...

Learn, Property?

I have a question.

I need to know the most important tool I must use to evaluate a unit already in possesion a few years.

Dont need to read further, but is just to explain why I need the tool

I have 7 days to make a call on 1 - whether to accept an OTP (property was not on the market) , 2- reject the OTP
OTP is 40% more than valuation of 6 months ago.
I am booked full for 7 days and must make a judgement call in 15 minutes.
 
SAMongoose said:
Learn, Property?

I have a question.

I need to know the most important tool I must use to evaluate a unit already in possesion a few years.

Dont need to read further, but is just to explain why I need the tool

I have 7 days to make a call on 1 - whether to accept an OTP (property was not on the market) , 2- reject the OTP
OTP is 40% more than valuation of 6 months ago.
I am booked full for 7 days and must make a judgement call in 15 minutes.
Click to expand...

create a new thread
 
mountainboy said:
I have a few rentals where tenants has been there approx 5 years on average

Always pays on time, few maintenance issues, general little to sometimes no problems

But over the last few years, rentals has skyrockted to a point where the existing rentals are now becoming significantly lower than asked in the market, such as

Unit 1: Current R6050, proposed by the the agency few months ago to be between R7000 - R7500
Unit 2: Current R5500, proposed R6500
Unit 3:Current R5950, market anything between R7000 - R9000 for high end units in the complex

Increases over the years has been 7 - 9% (I charged 10% once I think)

The difference is starting to add up to a princely sum

I have checked on market rates of what is being advertised and there is a severe shortage of stock and even when I gasp at rentals charged, the add is removed shortly after indicating tenant found.

Landlording 101 always states to hang on to good tenants at all costs but at what point is the difference worth the risk of losing them and possibly replacing them with potentially equally good tenants or possible defaulters, which I have never had BTW

And with junk status upon us, cost of credit will force more ppl into renting
Click to expand...

You gained more than 6.5% per year in rental increase.

a few reasons these differences between your rentals and the market ave have occured are
- you started too low with rental
- you got a very good price in the beginning, making low rental viable
- you paid in from the beginning, if you bought at market valuation
- old area (no new units on market)
etc. etc.

You allowed this.
Important to you are the ratios. If the ratios are in order. Leave it.

Remember. YOUR ratios. YOUR strategy. YOUR criteria.

If your Cap Rate is lower than the interest rate you are into negative leverage.

If you have criteria of 35% ROI and this one hits 30%, you must fix it or sell.

So with cash on cash return, current ratio, debt/equity ratio, return on assets, debt coverage, LTV, IRR.
Only you can work that out.
 
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