What to consider when renting out your home
Category Rentals
There may come a time when a homeowner decides to rent out their home for various reasons. This could include moving temporarily to another location for work and not wanting to sell their home, or it could be that you decide to keep the property as a rental investment.
Whatever the reason, owning a rental home differs notably from owning a home for your own use. There are many nuances to the rental market which will influence your ability to attract tenants and the rental that you could charge.
Seeff highlights a few important considerations for rental properties:
The location plays an important role because not all areas are popular for rentals. The more popular and in demand the location, the higher the chance of attracting competing tenants and a higher rental. Thus, always check whether your location is ideal for rentals.
While you can generally earn a higher rental on short-term rentals, long-term rentals tend to offer more security as tenants are contracted to occupy the unit and pay a monthly rental for a stipulated period of time.
Short-term rentals are riskier. It requires a lot of administration in terms of securing bookings and cleaning and managing the property, welcoming and checking in guests and so on. Unless you have the time or are able to outsource this, opting for a long-term rental is probably a safer bet.
Short-term rentals also require more maintenance because people come and go all the time. Long-term tenants tend to look after the property a bit better as they would regard it as their home. It is also usually easier to recover damage costs from long-term tenants because you should hold a security deposit.
Rental properties, even long-term rentals, do require more hands-on management and are not a passive investment. Unless you have the time to manage this, it is probably better to make use of a credible rental agent.
A rental property will also require a maintenance fund so that you can attend to repairs and keep it maintained to ensure you are able to attract good tenants and a higher monthly rental income. The deposit may not be used for this, and you should set up a separate fund.
You will need to keep the property insured, not just for the basics, but also for SASRIA for example if the property is in a higher risk area. You should install a good security system to keep the property secure. Most tenants ask for this in any event.
The monthly rental will be taxable, and you will need to declare it as part of your annual taxes. You will be able to offset certain expenses. You can find more information on the SARS website, but it is probably advisable that you get advice from a Tax consultant.
Author: Gina Meintjes
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