Real Estate Investor Magazine South Africa August 2015 | Page 34

STRATEGIES

Tenant Risk
Risk management in buy-to-let
BY KOOS DU TOIT

M

any buy-to-let property investors have been
unnerved by urban legends of malicious
tenant behaviour. While there certainly are
types of tenants that landlords must avoid, it is a myth
that tenants are a landlord’s worst nightmare.
While it cannot be denied that there are isolated
incidents of malicious destruction of a landlord’s
property, it is but a small percentage of tenants that
display malicious behaviour. Most of us have, at some
time or another, rented someone else’s property. Did
you wilfully wreck your rented accommodation?
Do you have friends or family who have maliciously
damaged a rented property? While urban legends of
delinquent tenants abound, experienced property
investors will confirm that they are the exception and
not the rule.
Similarly, only a minority of tenants pay their rentals
late, or not at all. TPN’s Rental Payment Monitor
report shows that the percentage of tenants in good

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AUGUST 2015 SA Real Estate Investor

standing with their rental payments reached a high
of 86% in the last quarter of 2014. However, even at
the lowest point of the economic recession in 2009,
the percentage of tenants in good standing stood at
71%. The reality, therefore, is that the vast majority of
tenants nationally are paying on time and in full, even
under tough economic conditions.
It is important to understand that tenants are
not adversaries, but rather the clients of a buy-tolet investor. In every business and in every industry,
business owners face a risk of delinquent clients.
It is a risk that smart business owners and investors
identify and manage. In fact, if managed correctly,
and tried-and-tested risk management strategies are
implemented, the landlord-tenant relationship can be
a mutually rewarding one.
There is no reason for a property investor to do
business with the small percentage of tenants who
display malicious behaviour, or those that pay late or not
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