Over the weekend I was speaking to a friend of mine. He just moved into a new area after switching jobs. While he's checking out the property in the area he's renting a property.
One of the issues he faced was a rental deposit - and this actually affected which property he chose to rent initially.
You see, because of tenants not paying rent, or damaging property many landlords have been forced to ask tenants for two months rental deposit upfront, as well as the first month's rent in advance.
If you're looking at a moderately priced R8,000 a month two-bedroom apartment this means you need to dish out R24,000 in the first month just to move in. And that excludes moving costs!
Now as a landlord myself I would never suggest you cut down on the deposit you ask in order to win over a tenant.
But I've got a solution for you that can help you attract tenants much easier whilst lowering the cost for you, and for them!
Get 2.5 times more than your monthly rental GUARANTEED if your tenants mess up your property
As a landlord the more money you can secure from your tenant as security against any possible damages to your property the better off you’ll be.
But this obviously needs to be balanced against what tenants can afford.
And face it, not many tenants can afford to give you three times the monthly rent in advance.
So what do you do?
Well, it’s a nifty product I discovered called ‘Deposit Guarantee’ insurance.
In short, you no longer ask your tenant for any deposit.
You merely get Deposit guarantee insurance.
In short, the tenant will pay 35% of a month’s rent upfront and 1.25% of monthly rental from month two.
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Then the insurance company covers you for 2.5 times the monthly rent.
If the tenant moves out and there’s damage to your property you just send the invoices to the insurer and they will pay out the damages to you in order to fix up your property.
If the tenant moves out and the property is in tip-top shape, without a claim against them they get 40% of the premiums paid back.
So in short – on a rental of R8,000 a month your tenant will pay only R2,800 premium in month 1 and R100 per month. You will be covered for R20,000 in damages to your property as well as a month’s rent in advance if the tenant doesn’t pay rental.
If the tenant moves out after a year – claim free – 40% of the premiums they paid will be paid back to them.
The nice thing is – you are protected should your tenant damage your property and you don’t need to pay a cent for this protection!
Your tenant should also be willing to do this, as they don’t need to make a big capital outlay for the deposit any longer.
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This means less admin for you at the end of the day…
According to the latest changes to the rental housing act landlords have to put the deposit they receive from tenants in a separate interest bearing account.
That means you can’t keep the tenant’s deposit in your personal savings account.
It also means added admin for you in having to transfer money into an interest bearing account, or even worse, having to go in to the bank’s branch.
Tenants also have the right to request written proof of the interest accrued on their rental deposit – meaning more admin at the bank.
The plus-side of this is also that there’s no issues afterwards of a tenant saying you’re “looking’ for damage to keep their rental deposit or that there are issues regarding the amount of interest earned on the deposit.
You get higher cover than you would from a normal rental deposit, and your tenant feels safe knowing no-one can run off with their deposit!
Seems like a win-win for all in my books.
If you’re a DIY-landlord, this is definitely something you should look into.
Here’s to unleashing real
Author, Become a Master Property Investor in 90 Days