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.

Increasingly, estate agents consider 'granny flats' as one of the items highest on the list of many prospective buyers. It's become a generic term for a home office, teen pad, grandparent's home, or a 'lettable' asset.

A granny flat not only provides a variety of potential income streams, but it can also add financial value to the property and make it more saleable. It's all about doing your maths when you're creating it.

Some properties lend themselves to an additional little dwelling, whether it's a renovation of an existing workshop, unused staff accommodation, an easily accessible end room of the house, or an entirely new dwelling.

WHAT RENTAL MODEL SUITS YOUR LIFESTYLE?

Does everybody work, so the property is unattended all day? Somebody works from home? Many factors affect the rental model.

A potentially lower rate achieved with a permanent tenant, but stability and a regular deposit into your bank? A higher daily rate for Air BnB/self-catering/B&B, but the risk of not letting it out as often, and the associated costs and work involved with laundry and cleaning.

FIRST THINGS FIRST

Once you're given extensive thought to the position, layout, costs and other factors, think legalities.

Your municipality will have bylaws, including ensuring that your neighbours are comfortable, and you'll need to familiarise yourself with them. Clearly, if you intend to build, you'll need a plan drawn up by a professional, and passed by the municipality. It's very unwise to go ahead without approvals, because apart from anything else, when you sell your property, this new addition must be on your plans.

DO YOUR MATHS WELL

Before you begin, it's critical to do your arithmetic. The truest urban legend goes that the cost of building is always higher than you envisage or are told...so ensure that you have a little fat in your budget. And you must have a budget, including the period of time in which you plan to have repaid what you outlaid.

• Your rental: It's very simple to find out the rentals/rates which other similar units are achieving, from the internet, local estate agents, websites, newspapers etc. This will be affected by, among other factors, the area of the suburb, parking, size of unit, furnished or not, pets or not, how many people it can hold, privacy, garden or patio, and what the rate includes, like water, lights, DSTV, Wi Fi?
• Costs: Create a detailed spreadsheet with all your proposed costs: designer, plans passed, builder, labour, materials, plumbing, additional security, and so on.
• Cash or raising funds? Do you have the finance available, will you be drawing on an access bond, or applying for an additional bond or loan? Factor in interest costs, and work out, with the rental you estimate, how long it will take to repay that debt.
• Building costs: For a freestanding building, if your cost estimate is R8 000 a square metre, and you build a 40 square metre studio apartment, you're looking at over R300 000, without finishes. Not inconsiderable. Ideally, use an existing wall of your home/garage or rather renovate a structure - your cost reduces considerably. And if you, or a relative, are handymen or in the trade, that's a major bonus. Don't underestimate the value of shopping around for materials/finishes.
• Creativity pays: Homework on inexpensive finishes is well worth doing. This doesn't mean poor quality, just less costly, more minimalist looks with less expensive materials like concrete. With on-line resources like Pinterest, there's no shortage of design and décor ideas to maximise the space, and minimise the cost. Whether it's using mirrors to visually expand the space, wooden screens (from highway vendors) to create a little private patio, or second-hand materials (Atomic Demolishers) and furniture (upcycled/painted).

WHAT DOES THE PUBLIC WANT?

There's a great shortage of small, relatively inexpensive accommodation, particularly in areas near business or transport hubs. Very few permanent, fairly priced lettable units remain vacant. There's also sometimes a preference for a quieter, more independent letting situation such as this, over the body corporate/people-centric block of flats.

Know your market. Whether a self-catering, BnB or permanent let situation, go on line and ask family or friends in a similar situation, their preferences, and lessons they've learned.

Remember, an international visitor (for AirBnB) might have different needs from a local. Research it.

Today, wi-fi is a big drawcard; off-street parking is essential; a walk-in shower rather than a bath; prepaid water/electricity meters. Spotless premises is a given. No matter whether it's snow-white walls, clean carpets, or a screed floor, this is a deal breaker.

Do your homework. Streamline the letting situation, so both parties minimise impact on, or contact with, the other. People value privacy.

IT'S THE SMALL THINGS WHICH COUNT

If you want top dollar, give your client those little niceties. Air-conditioning, quality linen, wi-fi, coffee machine, emergency lights and candles for black outs; and for foreign guests, a list of, and directions to, local restaurants/activities/taxi numbers and so on. Be available to solve any problems.

SCREENING A TENANT

Clearly, securing a tenant via a reputable rental or estate agency is absolutely first prize. They have many more tools at their disposal than you do, can do more in-depth credit and reference checks, and have, after decades of experience, drawn up the most watertight lease around.

If you feel you have the skills to go it alone, be strict about two months deposit upfront - you need to follow up on references (work and previous tenancy), and you need a strong lease agreement. Make absolutely sure, particularly for permanent tenants, that you have a list of rules to which they agree in writing: numbers of occupants; noise/parties; pets, and so on. Remember, you have allowed another person or two to be within your security circle, so close scrutiny and screening is imperative. You need to know they will treat your property and security with the same vigilance you do.

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.