In a move to entice investors in a depressed rental market, development and management company Renprop has introduced a rental guarantee product, which delivers an 8% net return to investors, outpacing money market products. 

While South Africans are buying houses in droves given 50-plus year low interest rates, the rental market has had to decrease monthly charges to attract tenants.

The SA Reserve Bank last week left its repo rate at 3.5% for a fifth meeting in a row.  

Nevertheless, the sluggish economy over the past decade has negatively affected residential property landlords.  

Some tenants in the R1,000 to R7,000-a-month range are battling to meet rentals, having lost their jobs or having had to close their small businesses, Chris Renecle, founder and MD of Renprop said in an interview with Business Day.

But he said that his company had the scale to offer people who buy Renprop housing units an inflation-beating return, which it will pay as an annual income.

“An investor buys a property from us. We then manage it on their behalf and pay an annual sum into that person’s bank account. This is a guaranteed 8% net return, which is achieved even after costs such as levies, rates and taxes, and refuse have been deducted,” he said.  

The new guarantee was introduced a month ago and Renecle said that, depending on the agreement, an investor could receive the income on a six month basis.

“As a developer, we are guaranteeing a rental income for the investor buying the property. This is typically set to between six  and 12 months, depending on the value of the property. It takes a substantial level of risk away from the investor, who can then rent out the property,” Renecle said.

Renecle said while activity in the buy-to-let market was subdued, it was a “perfect opportunity for investors to snap up properties” as the current low interest rate environment makes it a good time to buy.

The segment with the most activity in the present climate includes properties in the R800,000 to R3m price category. 

Another selling point for the rental guarantee is that investors receive the return immediately without having to wait for a tenant to occupy their unit.

Renecle said a rental guarantee was a “way to offer investors income security for their purchased property, from the very first day they take ownership”.

“The residential rental market hasn’t dropped as much as interest rates have, meaning that if you invest in a property for the purposes of letting it out, this 8% return is a lot higher than what would generally be offered for fixed deposits,” he said.

He said the guarantee applied to developments that were still to be built, under construction or completed, “allowing investors to reap the benefits of rental income from transfer, for between six and 12 months”.

He said he expected low interest rates for possibly another two years, which should draw more buyers into the SA residential property market.



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