RESIDENTIAL RENTAL MANAGEMENT
FREQUENTLY ASKED QUESTIONS
The agreement between Schmidt Residential CC and a property owner by which we manage the rental of a property is embodied in a formal contract (Mandate to Let). However, we are often asked questions about the salient issues of this service. In this document we answer the most frequently asked ones.
Schmidt Residential CC offers a personalised service to property investors, so although we describe the normal course of events here, we are always willing to negotiate around your specific requirements. We charge 10% commission of the total rent payable for the period of lease.
1 What exactly is included in your quoted monthly rental management fee?
· Finding and screening suitable tenants for your property
· Contracting with the successful tenant to lease the property
· Arranging and managing maintenance to the property
· Collecting rent
· Following up late, partial or non-payments of rent
· Initiating relevant steps to recover non-payments
· Paying over body corporate levies and municipal tax on your behalf
· Monthly reporting of income and expenses to you, the owner
· Paying over the balance due to you each month
· All administration required by the Rental Housing Act. To name one example, receipts issued to tenants must conform to certain legal requirements.
· Physical inspection of the property at least every six months
2 What is not included?
· The actual cost of maintenance
· Management of property upgrades (as opposed to maintenance)
· Legal fees to recover non-payments of rent (but we will not proceed to incur these costs without your prior permission)
3 Are there any initial charges?
We do not charge any initiation fees provided we are given a mandate to do the rental management for at least six months. However, there may be costs to prepare your property to be let. These could include, for instance, cleaning costs or the cost of a spare set of keys (which we always keep).
4 Are there any hidden charges?
No. We do not recover “re-imbursables” such as advertising charges, credit bureau fees, etc. from you. These are all included in our management fee.
5 Is it not cheaper for me to manage my own property?
It could be, depending on whether you have the time available and the expertise to fulfill all legal requirements. In addition, you should have sufficient knowledge of the particular rental market to regularly set optimal levels of rent. It also depends on the level of service you think is necessary. Many “do-it-yourself” landlords, for instance, do not think it is necessary to check, or do not have access to, the general credit history of all prospective tenants. We think it is essential. Our typical client is an investor who wants to own residential real estate, but wants to leave the day-to-day rental management to people who do that for a living.
6 Do you ever physically inspect the property?
Yes. We always inspect at the start and end of a Lease with a specific tenant. But we have also found that it is prudent to have at least six monthly inspections in case of long standing tenants (even if they are paying promptly).
7 Do you guarantee the rental receipts?
No. We will do our utmost to collect the rent, and we have an excellent track record of doing so, but we do not guarantee the rent.
8 I have heard that, under the so-called “Squatter Act”, it is impossible to ever get rid of a non-paying tenant. Does this not make rental property a very risky investment?
In 2002, an Appeals Court interpretation of the so-called “Squatter Act” gave residential tenants some new rights which made the eviction process more lengthy and costly (but not impossible). However, this was not the intention of that Act and changes were announced in August 2003 to reverse the situation. At the time of writing, however, the changes have not yet been enacted by Parliament. Provided that the correct procedures are followed with the Lease, eviction of a non-performing tenant is very possible, but it does take some time and involves legal fees. It is far better to place low-risk tenants than to have to go the eviction route. People with an unblemished credit record can avail themselves of motor vehicle finance, home loans, credit cards, clothing accounts, cell phone contracts etc. Consequently people with “clean” credit records tend to keep them “clean” and make excellent tenants.
9 Do you get your management fee if the tenant does not pay?
No. We believe our interests should be aligned with yours. If we don’t collect we don’t get paid. If we partially collect we get partially paid. If we collect late, we get paid late.
10 How much rental is realistic?
The short answer is: the maximum amount a creditworthy tenant is willing to pay.
11 What about rental increases?
In our experience, one of the most common mistakes property investors make is not ensuring that rental is increased to remain market related. Escalation clauses in our Lease Contracts and our management practices ensure that your property continues to yield the optimal rental income.
12 Who keeps the rental deposit paid by the tenant?
You specify this in the Mandate. We can keep it in our Trust account, or you can keep it until it needs to be repaid to the tenant.
13 How do you screen prospective tenants?
Rigorously. It is much easier to turn down a prospective tenant than to sit with a non-paying tenant. We officially verify the authenticity of identity documents and do a comprehensive general credit check. If a person has defaulted on his cellphone account, credit card, clothing account, etc, he does not get to rent a property from us.
14 Are you willing to undertake “unofficially” to place only tenants from certain race groups?
No. Firstly, this would be illegal. Secondly, and having experience with tenants from all race groups, we can honestly say that it is not necessary. A tenant who conforms to our strict commercial criteria is a good tenant.
15 Apart from what you collect on my behalf, do you recover any charges from the tenant for your own benefit?
Yes. In cases of late payment, we charge the tenant an administration surcharge. We do NOT (and are not allowed to) charge the tenant a management fee over and above the management fee which we charge you.
16 What is the typical duration of rental contracts?
Typically 12 months, with a minimum of six months.
17 What is the difference between maintenance and an upgrade?
Maintenance is fixing or replacing something that was there before. An upgrade is improving something that was there before, or adding something that wasn’t there before.
18 What type of upgrades would you typically recommend?
We have found that rental returns and rentability are greatly enhanced by proper maintenance (e.g. regular painting) and by relatively cheap upgrades. Some examples are:
· Adding a shower head and curtain over the bath
· Security gates and burglar-proofing
· Ceramic tiles in kitchen and bathroom areas
· Upgrading kitchen working surfaces to “Postform” tops
Although we will recommend upgrades to your property, we never proceed with them unless you agree.
19 Do you contact me first before doing maintenance?
In the Mandate, you set the level of expenditure at which we must get your prior permission. We recommend 20% of one month’s rental, but it is entirely up to you. Below the chosen level, we proceed with the maintenance without bothering you. You will see the details on your next monthly report. Above the chosen level, we contact you to get your permission first.
20 What reports will I receive from you?
· A monthly statement showing rental collected, maintenance expenses, body corporate or municipal charges paid on your behalf if requested, management fees and the amount payable to you
· A six monthly inspection report
21 What about my tax return?
We are not accredited tax advisors. However, from the reports we send you, it is very simple to fill in the property rental section of your tax return.
22 Can I sell my property while it is being let?
You can sell your property at any time, but there is an old legal principle called “huur gaat voor koop”. This means a new owner will automatically be bound by a valid Lease with a tenant. If the Lease allows the owner to give the tenant notice to terminate it, he can do so. But the new owner cannot simply evict the tenant
RESIDENTIAL RENTAL MANAGEMENT
FREQUENTLY ASKED QUESTIONS
The agreement between Schmidt Residential CC and a property owner by which we manage the rental of a property is embodied in a formal contract (Mandate to Let). However, we are often asked questions about the salient issues of this service. In this document we answer the most frequently asked ones.
Schmidt Residential CC offers a personalised service to property investors, so although we describe the normal course of events here, we are always willing to negotiate around your specific requirements. We charge 10% commission of the total rent payable for the period of lease.
1 What exactly is included in your quoted monthly rental management fee?
· Finding and screening suitable tenants for your property
· Contracting with the successful tenant to lease the property
· Arranging and managing maintenance to the property
· Collecting rent
· Following up late, partial or non-payments of rent
· Initiating relevant steps to recover non-payments
· Paying over body corporate levies and municipal tax on your behalf
· Monthly reporting of income and expenses to you, the owner
· Paying over the balance due to you each month
· All administration required by the Rental Housing Act. To name one example, receipts issued to tenants must conform to certain legal requirements.
· Physical inspection of the property at least every six months
2 What is not included?
· The actual cost of maintenance
· Management of property upgrades (as opposed to maintenance)
· Legal fees to recover non-payments of rent (but we will not proceed to incur these costs without your prior permission)
3 Are there any initial charges?
We do not charge any initiation fees provided we are given a mandate to do the rental management for at least six months. However, there may be costs to prepare your property to be let. These could include, for instance, cleaning costs or the cost of a spare set of keys (which we always keep).
4 Are there any hidden charges?
No. We do not recover “re-imbursables” such as advertising charges, credit bureau fees, etc. from you. These are all included in our management fee.
5 Is it not cheaper for me to manage my own property?
It could be, depending on whether you have the time available and the expertise to fulfill all legal requirements. In addition, you should have sufficient knowledge of the particular rental market to regularly set optimal levels of rent. It also depends on the level of service you think is necessary. Many “do-it-yourself” landlords, for instance, do not think it is necessary to check, or do not have access to, the general credit history of all prospective tenants. We think it is essential. Our typical client is an investor who wants to own residential real estate, but wants to leave the day-to-day rental management to people who do that for a living.
6 Do you ever physically inspect the property?
Yes. We always inspect at the start and end of a Lease with a specific tenant. But we have also found that it is prudent to have at least six monthly inspections in case of long standing tenants (even if they are paying promptly).
7 Do you guarantee the rental receipts?
No. We will do our utmost to collect the rent, and we have an excellent track record of doing so, but we do not guarantee the rent.
8 I have heard that, under the so-called “Squatter Act”, it is impossible to ever get rid of a non-paying tenant. Does this not make rental property a very risky investment?
In 2002, an Appeals Court interpretation of the so-called “Squatter Act” gave residential tenants some new rights which made the eviction process more lengthy and costly (but not impossible). However, this was not the intention of that Act and changes were announced in August 2003 to reverse the situation. At the time of writing, however, the changes have not yet been enacted by Parliament. Provided that the correct procedures are followed with the Lease, eviction of a non-performing tenant is very possible, but it does take some time and involves legal fees. It is far better to place low-risk tenants than to have to go the eviction route. People with an unblemished credit record can avail themselves of motor vehicle finance, home loans, credit cards, clothing accounts, cell phone contracts etc. Consequently people with “clean” credit records tend to keep them “clean” and make excellent tenants.
9 Do you get your management fee if the tenant does not pay?
No. We believe our interests should be aligned with yours. If we don’t collect we don’t get paid. If we partially collect we get partially paid. If we collect late, we get paid late.
10 How much rental is realistic?
The short answer is: the maximum amount a creditworthy tenant is willing to pay.
11 What about rental increases?
In our experience, one of the most common mistakes property investors make is not ensuring that rental is increased to remain market related. Escalation clauses in our Lease Contracts and our management practices ensure that your property continues to yield the optimal rental income.
12 Who keeps the rental deposit paid by the tenant?
You specify this in the Mandate. We can keep it in our Trust account, or you can keep it until it needs to be repaid to the tenant.
13 How do you screen prospective tenants?
Rigorously. It is much easier to turn down a prospective tenant than to sit with a non-paying tenant. We officially verify the authenticity of identity documents and do a comprehensive general credit check. If a person has defaulted on his cellphone account, credit card, clothing account, etc, he does not get to rent a property from us.
14 Are you willing to undertake “unofficially” to place only tenants from certain race groups?
No. Firstly, this would be illegal. Secondly, and having experience with tenants from all race groups, we can honestly say that it is not necessary. A tenant who conforms to our strict commercial criteria is a good tenant.
15 Apart from what you collect on my behalf, do you recover any charges from the tenant for your own benefit?
Yes. In cases of late payment, we charge the tenant an administration surcharge. We do NOT (and are not allowed to) charge the tenant a management fee over and above the management fee which we charge you.
16 What is the typical duration of rental contracts?
Typically 12 months, with a minimum of six months.
17 What is the difference between maintenance and an upgrade?
Maintenance is fixing or replacing something that was there before. An upgrade is improving something that was there before, or adding something that wasn’t there before.
18 What type of upgrades would you typically recommend?
We have found that rental returns and rentability are greatly enhanced by proper maintenance (e.g. regular painting) and by relatively cheap upgrades. Some examples are:
· Adding a shower head and curtain over the bath
· Security gates and burglar-proofing
· Ceramic tiles in kitchen and bathroom areas
· Upgrading kitchen working surfaces to “Postform” tops
Although we will recommend upgrades to your property, we never proceed with them unless you agree.
19 Do you contact me first before doing maintenance?
In the Mandate, you set the level of expenditure at which we must get your prior permission. We recommend 20% of one month’s rental, but it is entirely up to you. Below the chosen level, we proceed with the maintenance without bothering you. You will see the details on your next monthly report. Above the chosen level, we contact you to get your permission first.
20 What reports will I receive from you?
· A monthly statement showing rental collected, maintenance expenses, body corporate or municipal charges paid on your behalf if requested, management fees and the amount payable to you
· A six monthly inspection report
21 What about my tax return?
We are not accredited tax advisors. However, from the reports we send you, it is very simple to fill in the property rental section of your tax return.
22 Can I sell my property while it is being let?
You can sell your property at any time, but there is an old legal principle called “huur gaat voor koop”. This means a new owner will automatically be bound by a valid Lease with a tenant. If the Lease allows the owner to give the tenant notice to terminate it, he can do so. But the new owner cannot simply evict the tenant