Landlords insisting on a 10% annual increase could find themselves losing tenants fast.
Talking recently at the inauguration of Rawson Rentals, a new Rawson Properties franchise division set up to grow and support rental franchises countrywide, Tony Clarke, MD of the Rawson Group, warned landlords that the current “dire” economic situation has created a scenario in which a typical annual increase is not advisable.
“If ever,” said Clarke, “the advice ‘do not be too greedy’ was especially applicable, it is right now,” he said.
Landlords who do insist on 10% increases, Clarke added, will in all probability find themselves losing tenants because attractive lower rentals will be available elsewhere.
“Make no mistake,” he said, “the large number of distressed properties that have come onto the market have also affected the rentals now obtainable.”
Clarke said that rent increases of 5 to 7% should be the most that landlords demand right now. He stressed that wise landlords will hang onto good, regular paying tenants by being reasonable on increases rather than risk losing them and quite possibly having an empty unit for one or two months.
“Let us assume your tenant is paying R5 000 per month. If you ask for a 10% rise you will get an extra R500 monthly. If you reduce it to 7% you will only be losing R150 per month. It is not worthwhile haggling over such amounts – take the long term view.
“If your property is left vacant for only one month, due to the tenant leaving, you stand to lose R5 000 while you desperately look for a replacement – and all too often one cannot be found in just one month. It is not worth taking this risk for the sake of a slightly higher rental.”
Ideally, said Clarke, new tenants should now be signed on for 24 months with a minimal increase after the first year.