Real Estate Investor October 2020 October/November 2020 - Page 46

MANAGING

Convenience meets security

A spike in gated estates

T he rise of gated communities has not only been prolific in the Western world but also in countries like Egypt , Turkey , Russia , as well as South Africa . Here , they meet the need not only for a sense of neighbourhood connectivity , but also for convenience , privacy , security , and even proof of status that overcrowded cities no longer provide .

According to New World Wealth , South Africa is a global pioneer of residential estates , with frequent research suggesting a shift from the traditional golf estates towards lifestyle estates . Despite a general market slowdown due to both the COVID-19 pandemic and challenging economic conditions , estates are still proving to be popular home choices for South Africans . In fact , the country ranks second only to the United States in respect of the number of these residential developments that offer every conceivable convenience .
The Amdec Group ’ s multi-generational estate Westbrook , in Port Elizabeth , is just one such example , catering to multiple generations in one secure estate . It is a safe , walkable precinct that will comprise 3 500 residential homes spread across nine residential villages , along with a “ town square ” set to feature a variety of commercial and retail spaces . A medical centre is also on the cards .
Clifford Oosthuizen , managing director of this gated community , says the vision is to construct new urban spaces that will redefine city living . He shares some of the reasons he sees for people making this lifestyle their home of choice .
Safety and security top the list
Rising safety and security concerns amongst South Africans are influencing where people want to live and drive the increasing demand for homes in security estates . The most recent crime report statistics revealed that 21 130 robberies occurred at residential homes between April 2019 and March 2020 .
For this reason alone , buyers are opting for security estate living that offers 24-hour security access control , response vehicles for perimeter monitoring , along with security cameras that pan the entire complex giving residents peace of mind .
18 OCTOBER / NOVEMBER 2020 SA Real Estate Investor Magazine
UNITED KINGDOM SERIES PART 6 How to work with a management or letting agent Sean Thomson, property investment coach at Wealth Trek, explains how to work with management or letting agents in the United Kingdom, and what this is likely to cost. I n the fifth article in this series, we looked how to refurbish property at a distance, along with how to identify, work with and remunerate reliable project managers. Our sixth article explains how to find a tenant for your property by working with a management or letting agent. Such agents vet your tenants and help you to find the right tenant for your property. We will also look at the associated costs, as well as how to evict a tenant. You will be pleased to know that tenancy law sides very much with the landlord in the UK. Pursuing a cashflow strategy in the United Kingdom will involve tenanting properties. As a South African, you will likely be investing from a distance, so it is best to work with a UK management or letting agent. To ensure you are working with the right agent, I would suggest checking which professional bodies they are affiliated with. These professional bodies claim to promote the highest standards and members must work within stipulated regulatory frameworks. Examples of these bodies include the Association of Residential Letting Agents (ARLA) and the National Association of Estate Agents (NAEA). ARLA and NAEA members follow a robust Code of Practice, which covers the key stages of letting and managing a property. Of course, affiliation to these bodies does not necessarily guarantee a good letting agent. On our Discovery Series, we go into more depth to ensure that you work with just the right agent for you. Management fees can range from 8%- 15%, depending on an investor’s strategy. For B2L property, charges typically range from 8%-12% whereas Houses of Multiple Occupation charges will be higher due to the greater amount of work involved. Agents are incentivised to collect rent monthly or they do not get paid – something to bear in mind as charges are not borne on empty property. A tenancy agreement is essential and governs the relationship between tenant and landlord. An Assured Shorthold Tenancy agreement (AST) is used by landlords to govern this relationship. An AST lasts for a minimum of six months but generally speaking a landlord and tenant will enter into a 12-month agreement. I would highly recommend entering into a proper, binding agreement that is comprehensive in nature and takes care of all the specifics. A contract bought from your local stationary shop will not cover you sufficiently – and we are all familiar with the saying, “If you pay peanuts, you get monkeys.” How to vet and choose the right tenant My mentor taught me that prevention is better than cure. This means taking each prospective tenant through an application process to ensure you get only the best for your investment property. Sean Thomson started his property investment career in June 2004 after working in the financial field for four years. He helps investors stop their wealth being eroded in South Africa, by mentoring them to buy UK property. 40 OCTOBER/NOVEMBER 2020 SA Real Estate Investor Magazine What exactly would your letting agent need to do to vet and select the right tenant? • Acquiring a reference from a previous landlord is a must. A top tip is to get references from a few landlords, to be sure that the tenants are solid. Their previous landlord may be so desperate to get rid of them that they give them a glowing reference and pass their problem onto you. • Understanding affordability means checking the prospective tenant’s bank statements to see if they can afford the rent. It also helps to know if they manage their monthly salary responsibly or not. • Acquiring a character reference by someone of good standing withing the community is something I like to see in an application. A prospective tenant who sets out to secure this when the agent requests it shows commitment and will likely be a good bet for your property. • It goes without saying that an employment reference is a good thing to have. We do rent property to tenants on housing benefit, however, so if this is the case, the agent should insist on a guarantor who is employed full time to stand surety on behalf of the prospective tenant. • Perform a credit check to ensure that the prospective tenant is in good standing. Anything untoward should come to light when the credit check is performed. Evictions: the law protects the land- lord Landlords are very well protected by the law in the UK. If tenants fail to pay their rent, there is a clear legal process to be followed. A good agent will understand when and how to issue the relevant notices and engage a solicitor if required. The following notices are in relation to the AST discussed above: • A Section 21 can be issued without a reason, giving the tenants a minimum of two months to vacate the property. If the tenant does not leave on or before the expiry of the notice, the landlord may have to resort to court proceedings to have them removed. Many landlords employ this strategy if they want to sell the property or are having other issues with their tenants. • A section 8 can be issued for rental arrears eviction only. This notice can be served when the tenant is at least two months in arrears, giving them two weeks’ notice to vacate. Again, if they do not leave, the landlord will need to start court proceedings to have them removed and regain possession of the property. There are other ways to evict tenants, but it can be tricky and the decision ultimately rests with a judge. • Landlord registration and/or accreditation is required in some parts of the UK. WealthTrek-trained investors are constantly updated on any changes and understand the implications thereof. They are also introduced to vetted agents as they go through our programme. Having a competent management or letting agent to manage your UK investment properties at a distance it vital to ensure your success. Do your homework, acquire the right agent, and reap the rewards of having a well-managed UK property portfolio. Next month we will give you some basic cashflow tips to get you started with B2L, Social Housing and Houses of Multiple Occupation in the UK. We will also explore flipping property for cash and how this can act as a vehicle for you to recapitalise your UK property business. SA Real Estate Investor Magazine OCTOBER/NOVEMBER 2020 41