Many local freehold properties, especially in older suburbs, have an existing granny flat or the potential to add one. Often greatly underestimated by buyers and homeowners, a granny flat can add great value to a property and make a big difference to the affordability of a home.

In KZN, rentals from granny flats generally range from between R3000 to R7000 and this supplementary income is able to service a substantially greater bond. For those who don’t want tenants on their properties full time, many people are finding that they earn even more from letting granny flats out on Airbnb and similar sites.

Granny flats can also add huge value, either as a place for elderly parents or for youngsters that have not quite left home. Many homeowners have commented on how well the extended family environment has worked for them with an elderly grandparent or grandparents on hand to see children are home from school or supervise homework, the children themselves of course adding huge value to the lives of the grandparent/s.

Other homeowners with granny flats have commented on the extra security they add - the peace of mind in knowing that someone is on the property when owners are away to turn on lights, arm or disarm security beams, feed pets or generally be a presence. 

While many suburban homes do have existing granny flats, others have great potential as simple and clever renovations to old staff quarters, store rooms and garages can turn dingy spaces into fabulous places. For those planning to create a granny flat, a few thoughts:

• Consult an interior designer. If you are in any difficulty about the practicalities of the transformation, interior designers often have great ideas about how to turn tricky spaces into practical working areas.
• Get plans passed. If you are making changes to an existing building, or building something from new, you will need plans passed.
• Think pre-paid. Depending on whether or not you are intending to let the flat out, you may want to consider options such as pre-paid phone and electricity.
• Think green. With the ever escalating effects of global warming, it’s worth considering the installation of water tanks and solar heating. If it’s a new build or a significant renovation, this may be a good opportunity.
• Think security. You will no doubt want some security in or around the granny flat. Consider whether this will be linked to your existing security system, or a stand-alone system for a tenant’s account.

GRANNY FLATS: A VERSATILE AND VALUABLE ASSET

In today's property market, granny flats are increasingly in demand among prospective buyers. Whether used as a home office, teen retreat, accommodation for grandparents, or a rental unit, these versatile spaces are more than just an extension-they're a potential goldmine. A well-designed granny flat not only enhances the property's appeal but also adds significant financial value. However, careful planning and consideration are key to maximizing its benefits.

Choosing the Right Rental Model for Your Granny Flat

Before diving into construction or renovation, it's essential to think about the rental model that best suits your lifestyle. Will the property be empty during the day, or does someone work from home? These factors, among others, will influence your decision. You could opt for a steady income from a long-term tenant, with consistent deposits into your bank account, or aim for a higher, though less predictable, income from short-term rentals like Airbnb. Each option comes with its own set of considerations, including the effort required for maintenance and tenant turnover.

Legal Considerations: Get it Right from the Start

Once you've thought through the design and costs, it's time to consider the legal aspects. Local municipal bylaws, including the need for neighbor consent, are critical. If building is involved, professional plans must be drawn up and approved by the municipality. Skipping these steps can lead to complications when selling your property, as any new addition must be reflected in the official plans.

Budgeting and Cost Management

Budgeting is crucial. The cost of building is often higher than anticipated, so it's wise to include a financial cushion. Develop a detailed budget that covers all potential expenses, from design and construction to additional security and amenities. It's also important to assess the financial viability of the project-how long it will take to recoup your investment based on the rental income you expect.

• Rental Rates: Research the going rates for similar units in your area. Consider factors such as location, size, parking, furnishings, and amenities like Wi-Fi or utilities.
• Construction Costs: Whether you're building a new structure or renovating an existing one, get accurate cost estimates. For instance, a 40-square-meter studio could cost over R300,000, excluding finishes. Renovating an existing space can significantly reduce costs.
• Funding: Decide whether you'll finance the project through cash, an access bond, or a loan. Be sure to factor in interest costs and calculate how long it will take to pay off the debt with your expected rental income.
• Cost-Saving Strategies: Creativity can go a long way in keeping costs down. Explore minimalist designs and less expensive materials, and consider upcycled furniture or second-hand finishes.

Understanding Market Demand

There is a strong demand for small, affordable rental units, especially in areas near business or transport hubs. Permanent, reasonably priced units are rarely vacant for long. Some tenants prefer the privacy and independence of a granny flat over a traditional apartment. To maximize your rental potential, know your market and tailor your offering accordingly. Research the needs of your target audience, whether they're local tenants or international visitors, and ensure your unit meets their expectations.

Enhancing Tenant Appeal

If you want to command premium rent, focus on the details. Offer amenities that tenants appreciate, such as air conditioning, quality linens, and high-speed Wi-Fi. Provide thoughtful touches like a coffee machine, emergency lights for power outages, and information on local attractions and services. Being responsive and available to address any issues will also help secure positive reviews and repeat business.

Tenant Screening and Security

Securing a tenant through a reputable rental or estate agency is ideal, as they have the tools and expertise to conduct thorough credit and reference checks and provide a robust lease agreement. If you choose to manage the process yourself, be diligent in your screening. Insist on a two-month deposit, verify references, and have a clear, written agreement outlining rules regarding occupancy, noise, pets, and other important aspects. Remember, you're entrusting someone with your property, so ensure they share your commitment to maintaining it.

Wakefields puts the residential rental market under a microscope

The good news is that, according to data gathered for the last quarter of 2019 by TPN Credit Bureau's Vacancy Survey, the KZN rental market is relatively stable. The TPN Vacancy Survey recorded a national vacancy rate of 8.97% for the fourth quarter of 2019, but KZN fared better than most with a 5.9% vacancy rate - it's a significant improvement, and places landlords in a more favourable position. "Countrywide," says TPN, "the scales remain tipped in favour of the tenant, which leaves the landlord seeking innovative ways to overcome the prevailing challenges. "

Of course, some suburbs or parts of suburb are more in demand than others, which means some areas have an oversupply, others an undersupply. Landlords have to think twice about their rentals and annual increases, and equally, be creative about their rental offering so it's more attractive to tenants than the flat next door.

TPN describes the under R3 000 category as the strongest for landlords, because demand is high in that price band. The next band of R3 000 to R7000 comes out second best, followed by the R7 000 to R12 000 band. Rentals over R12 000 have the highest vacancy rates.

Currently, Wakefields' branches and rental division report an uptick in prospective tenants. Reasons? Some because their landlords are selling, others because of unrealistically high rental increases, and others who can no longer afford the rental they've been paying. They report too, that garden cottages continue to be popular, and in short supply. Corporate rental enquiries have risen, in particular in areas such as Umhlanga and Scottburgh.

Wakefields' rental division notes that landlords who aren't achieving the rentals they'd like, are utilising as many rental agencies and online platforms as possible to find a tenant who will pay that rental. That's not always an advisable approach, as tenants need to be very stringently vetted - a tenant with a poor credit history can slip through the net, and the landlord is then left with a delinquent tenant. Wakefields has very stringent rules for placing tenants, and although that may mean it could take longer to find a tenant, it's absolutely critical to find the right tenant.

For landlords and tenants, the market requires understanding. Overpricing a rental often results in vacancies; over demanding tenants often results in no rental. The property market is very reactive to the economic climate, and tenants and landlords need to be and do likewise.

THREE WAKEFIELDS BRANCHES

Three branches in KZN discussed their rental divisions:

PINETOWN

Who is renting?

The market here is dominated by those who have yet to qualify to buy, and they are looking for rentals in the lower priced band as described by TPN.

State of your rental market

Although we have a good supply of one bedroom rentals in the region of R4000 coming on to the market, they're let in a matter of days. The demand there is high, and we can't keep up with it.

Slower to be let out, are four bedroomed houses In the R12000 and over bracket, a sector which TPN pinpointed as less in demand.

Tenants or landlords?

We have more tenants than properties, so demand is high. Importantly, tenants won't pay 'overpriced' rentals - most are well aware of the going rate for rentals in a particular area.

Tenants are choosing to remain in the property they're currently renting, rather than move - it's more cost effective than funding a new deposit, or the often tricky retrieval of their current deposit from a reluctant landlord.

For landlords in this area, most tenants find a 10 percent rental increase too high. Six percent is the figure most tenants can bear. Low salary increases and the high cost of living is impacting on this sector of the market.

THE PEARLS, Umhlanga

Who is renting?

Many are corporate overseas clients. Security is a major driver for them, and The Pearls answers those concerns.

State of your rental market?

Demand is very strong, with considerably more leases being signed now. Most owners do not want to sell as they consider these apartments to be investment properties, and prefer to rent them out.

We have not seen much in the way of rental increases year on year for the last four years in this upper end of the market (about 10 percent over that period) - it's the most sensitive sector, as per TPN, and although we're experiencing demand, there's no appetite for overly high rentals. Increases are only likely to happen when supply decreases. When Pearl Sky launched, 500 units came on the market, so there was an oversupply - that will always depress rentals, but recently, demand for the apartments has risen noticeably.

Tenants or landlords?

The demand is certainly there for those landlords who have come to terms with market-related rentals. Our tenancy rate has increased, but tenants aren't accepting substantial annual increases.

SHELLY BEACH

Who is renting?

Mainly medical staff at the new hospital, and enquiries are escalating for student accommodation for the new educational facility on the cards.

State of your rental market

Rental demand, both commercially and residentially, is high - the amount of interest immediately generated when a rental property is available has definitely increased.

Two thirds of our demand is for sectional title property rentals in the R3000 to R7000 band, and one third for freehold houses in the R7000 to R12000 band.

Landlords or tenants?

There has been downward pressure on rentals, both commercially and residentially. Landlords are competing for new good tenants and encouraging existing tenants to stay at renewal time, so rather than increase rentals, they're offering to maintain them at the same level for a period of time. The rental rates have on average held steady over the past few years.

Five Tips for Tenants looking to rent:

1. Understand that there is a process involved and plan ahead - you will not be able to see a property today and move in tomorrow.
2. Know who your rental consultant is - ask to see their Fidelity Fund Certificate, visit them at the agency. Don't take it at face value that the person you are meeting at the property is a genuine rental consultant.
3. Never hand over cash to anyone. Do an EFT and make sure you get the bank details directly from the rental agent (that you have now ensured is authentic).
4. Know and understand your lease before signing, and if there is anything you're unsure about, ask for an explanation.
5. Insist on everything in writing, and that it forms part of the lease. For example, if you request work done before you move in and the Landlord agrees, ensure it is recorded under the Special Conditions clause (all lease agreements should have a clause like this) with specifics - details of what was agreed and by when.

Five tips for Tenants already renting:

• Most important - pay your rent on time and in full. There are so many checks in place now that it is not hard to find out what your rental payment history is and, if you are not prioritising your rental payments, you will battle to find a new home to rent if and when it comes time to move on.
• Ensure you have an open and healthy relationship with your Landlord. Don't become unreasonably demanding - the relationship will fracture.
• Be aware that the property you are renting is an investment for your Landlord - that is how he will always view it when there are tenant's demands or costs.
• Do not withold your last month's rent and expect the deposit to be used in lieu - this is against the law and could mark you as an unreliable tenant. The deposit is a damage deposit and is to be used as such.
• Don't trouble your Landlord with small issues you could easily fix yourself. That way, when you do have a problem you really need him to fix, he is likely to be far more willing.

There are a few golden rules when buying property as an investment with a view to renting it out. These are the ones Myles Wakefield, CEO of Wakefields Real Estate, suggests you put top of your list.

After a few somewhat trying years for the rental market, the latest TPN credit bureau data shows a clear sign of hope as tenant demand increases. FNB's Property Barometer for April 2022, too, is also showing green shoots: "In line with expectations, a gradual recovery in the rental market is underway. Vacancy rates have descended from the peak of 13.1% in 4Q20 to 9.9% in 1Q22. On the flip side, rental escalations have gradually recovered from a trough of 0.6% y/y in 1Q21 to 1.9% in 1Q22. We expect the rental market's gradual recovery to continue as interest rates rise and employment growth gathers some traction."

The impact of a number of local and international factors on our economy and therefore property market, is reigniting the buy-to-rent market.

There are five golden rules when considering this form of investment, all equally important. Begin with the important question - what am I hoping to achieve? If you're looking for a quick profit in a year, you'll need to be pretty savvy; if you're content with a long-term investment, it's more important to judge when to sell than when to buy.

Balancing your books is crucial, but that happens if you abide by the advice from those who've made it work. Remove emotion from the equation - this is a business you are creating, so it's not about an apartment you like in an area you like. Don't overpay for the property.

1. When to invest. This is a tricky one - it's easy to say, 'read the market correctly', but it's not so simple. What is a truism is that the market usually goes in cycles, so choose the right point on the curve.

A property investment is rarely a quick one, so unless there's an exceptional property boom which allows you to dip in and out, see it as a medium to long term investment to get that capital appreciation.

2. The right tenant. This is critical. You can DIY it, but it needs rigorous investigation for which you may not have the skills or time. If you use an experienced rental agent to secure a tenant, they have access to specialised on-line tools that can ensure the tenant has a good credit record, as well as a good history with other rentals.

3. Research. Investigate other rentals in the area you're looking at (property websites/classifieds etc) - what rentals are these homes achieving? What kinds of properties are in demand? Look at nearby industries/employment versus housing needs? Your rental must be market related, to ensure your apartment is never or rarely vacant. Are there lots of properties to rent/too many vacancies in your chosen area - if yes, hear the alarm bells.

4. Location. Buy where there's a need, and make sure you fulfil that. For example, if it's in the lower price category, is there accessible public transport, schooling, shops; higher price range, is there on-site and visitor parking? If you're managing this property yourself, factor in reasonably proximity to your work or home - it makes management a great deal easier.

5. Sums. Ideally, your tenant should be covering your monthly home loan cost, the levy, plus a little left over for maintenance. In a perfect world, you'd like a little 'fat' too, to cope with bond rate increases and any unexpected expenses (which always happen). You need to get the best possible rate for the home loan, and if you can, put down a good deposit to reduce your monthly costs. Lenders generally expect borrowers to put down larger deposits on buy-to-let bonds.

Don't only keep a spreadsheet of initial costs but keep a strict ongoing record of every cent spent.

Rhys Dyer, CEO of ooba Home Loans, South Africa's largest home loan comparison service, unpacks a few of the common terms around buy-to-let investments, "You'll often hear buy-to-let investors talk about the rental yield on their properties (or property portfolios). It's an important figure and it's simple to calculate. The yield is simply the annual rent you're earning on the property divided by its value, expressed as a percentage. So, a house worth R1 million, on which the annual rent is R120 000 (R10 000 a month) would be yielding 12%.

"If you can find the right property and the right home loan, it is possible to make a rental yield of as much as 5 to 10%, depending on where you're based".

Whether you're a tenant or landlord, there are important aspects of the letting and renting process which needs smart and meticulous management. Are you up for it, or is this a job for the professionals?

At Wakefields' Pinetown branch, Linda Mitchell has just received her seventh consecutive award for top rental agent in KZN for the Wakefields' group. What's her secret, you ask? The answer's easy for somebody who lives and loves her work: "It's not about the property practitioner, it's about the tenant or landlord. That's the focus. It's all about relationships. I'm on an absolute high when I've found a tenant a home, or a perfect tenant for a landlord...and ensured that the lease protects both parties and is to their mutual satisfaction."

We all know the last few years have been challenging financially and emotionally for so many people, and whether it's a divorce or retrenchment, certain people needing a home can and will try to circumvent legal and ethical processes. Tough situation if you aren't knowledgeable on the process, and its potential loopholes. Linda says that while she certainly feels sympathy for those in difficult times, experience has shown her where transgressions are likely to occur, and she can spot them quickly. The increased pressure of the country's economic situation has put a great deal more on the shoulders of rental agents, who have to make doubly sure that background checks, scrutinising of documentation, and investigations are extremely thorough.

Bottom line is that a good lease, drawn up correctly, it's worth its weight in gold - especially when the chips are down.

In today's market, when choosing a rental property practitioner, you'll want somebody who's responsive on the phone and emails.

"I respond almost instantly to requests for help regarding rentals," says Linda. "The public expect instant responses on the various media platforms, and it's certainly a contributing factor as to why I get so many referrals from satisfied clients."

Renting out your own property is perfectly possible, but it's not for the faint-hearted. You're unlikely to have the legal knowledge, IT and other support systems, not to mention the 'people' experience to deal with a situation when it goes wrong: "And it can," says Linda. "With little official assistance out there when that happens."

Linda has three quick questions she likes to ask a prospective tenant, before she can proceed with helping them: When do you need occupation? How many occupants? You just can't squeeze five people into a two bedroomed unit); and what's your net salary? For example, for a R5 000 rental, the net income needs to be R15 000 - three times the rental figure. When she has all that information, there's a final qualifying question: Employed by a company? A salary slip makes everything run far more smoothly and can be a deal breaker when finding a property in a competitive rental market.

As a caring person, Linda puts in a great deal of effort trying to assist those who might not have a good credit rating: "I look into that credit check very deeply, to see if it's possible to assist them. Everybody makes mistakes at some stage in their lives - I hear tough life stories on a daily basis."

One thing you want if you're looking to rent - or rent out your property - is somebody knowledgeable and straightforward to assist you: "I'm as straightforward as I'm knowledgeable," says Linda. "It's far better for all parties to know the reality of the situation, even if it means bluntness. But having said that, most people appreciate straight talk because we ultimately have the same goal. If you think in terms of a tenant, we will have at least a 12-month relationship, so best we understand each other from the onset."

Advice to landlords:

• The most important thing, above all else, is to find a good quality tenant with a proven track record, a clean credit record and a good, solid job with a salary that pays at least 3 times the rental. The better the condition of your property, the higher paying tenant you will attract, so it may well be worth spending a little upfront to make your property stand out from the crowd.
• It is worth remembering that it is not always possible to cover your bond and other expenses with the rent so ensure you have sufficient additional income to cover any shortfall. Try and keep some funds in reserve for emergency repair work.
• Pricing your property correctly is key. If your property is vacant, it is creating no income for you, whereas, if you are prepared to lower your asking rental just enough to make it a viable option for tenants, you will make more in the long run. It can easily take a year to make up one months missed rental, not to mention that when empty, your property is vulnerable, not just to break-ins but also to maintenance issues that may go unreported if no-one is there to do so.
• Once you find a good tenant, who is paying the rent in full and on time, ensure you keep that tenant by being a pro-active landlord who deals with any maintenance issues efficiently and keep rental increases to a minimum so as not to lose the paying tenant. There are costs associated with finding a new tenant which could easily outweigh your potential increase over the next 12 months.

5 reasons why you, as a landlord, should use a fully registered agency to source your tenant and manage your rental:

1. Having a rental property, like any other investment, comes with its own set of risks. In order to mitigate these risks, it makes good financial sense to have someone who has the knowledge and expertise to look after your investment for you.
2. Residential rentals in South Africa are governed by a diverse and often confusing set of laws and legislation. When managing your own rental, it's easy enough until, for example, your tenant wants to leave before the lease has expired. What are your rights and obligations in this scenario? What can you do to ensure you get re-imbursed for your expenses whilst keeping within the constraints of the law? Or your tenant stops paying. How do you go about attempting to evict him? What steps can you take before you involve attorneys that will incur costs? A good managing agent will handle all of this for you.
3. You will not need to interact with your tenant at all. You will not receive a weekend or nighttime emergency call for burst geysers, flooding, etc.
4. At the end of the tenancy, you will not need to concern yourself with getting the inspection completed at the right time in the right way, or how to deal with the deposit return. All of this is taken care of for you.
5. If you use an agency registered with TPN (Tenant Profile Network), your tenant's payment profile is uploaded every month, and any other member agency who does a credit check on them can see if they are good paying tenants. This gives a huge incentive to the tenant to ensure they pay on time and in full. It is also easy for the agency to load a default on your tenant if they do not pay their rent for at least three months in a row - this includes if they leave without paying the full amount they owe. Your deposit is also protected because, by law, it must be held in a trust account and is secured by the Fidelity Fund.

If you choose to deal with an unregistered agency, be aware of the potential pitfalls. Only registered property practitioners have the legal right to claim commission from you, however, ask yourself whether it is worth entrusting your most valuable asset to an unregistered agent. If anything should go wrong when using a registered agency, you have the backing of the PPRA (formerly the EAAB) who hold all registered property practitioners accountable in terms of the Code of Conduct.