How to maximise the potential of real estate rent

[privateproperty]

With a new year approaching, many investors are evaluating their current investments and wondering whether they should diversify their existing portfolios. While there are numerous opportunities for diversification within the property market, it is not always that simple to identify the best investment opportunities especially within a certain niche market.

One way of improving your chances to make a sound investment is to do your homework. Is it a good idea to buy a property with the intention of renting it to a tenant? How is the market for real estate rent performing while the local economy is still pretty fragile?

A recent report by the Tenant Profile Network (TPN) suggests that the rental market is currently on a steady path, although it is still struggling to recover from the economic downturn. During the third quarter of the year 68% of tenants paid their rent on time, slightly more than in the second quarter. A total of 13% paid late, 9% made a partial payment and 10% did not pay at all. Analysis by TPN indicates that households are still struggling and “non-payment remains a matter of insufficient funds, usually due to loss of income or very tight budgets that have made no provision for savings to cope with extraordinary expenses”.

According to the report tenants in the real estate rent categories from R3000 to R7000 per month as well as R7000 to R12000 continues to improve marginally, but those in the segment below R3000 and above R12000 “remain week”.

Consumers are still strapped for cash and renting that extra room, flat or even your own house to a tenant might seem like a lucrative option to improve a dire financial situation. TPN identifies certain pitfalls that prospective landlords should be aware of. If you are considering renting your house to a tenant for a while to improve your cash flow, you would probably like to handle the transaction yourself as this will potentially be much cheaper. TPN suggest that you should use the services available to you to identify a quality tenant. Saving some money on agent fees in the short run might turn out to be an expensive choice if your tenant does not pay his rent.

The network also suggests that you should not neglect the maintenance of the property. Tenants who do not pay their real estate rent will have a much easier time to convince a court that they were taken for a ride if there is a lot of maintenance work outstanding.

The best way to make sure that you do not become a victim of your own plan, is to make sure you get a tenant with a solid credit history and good track record. A tenant who has never defaulted on a payment is much less likely to do so in future than one who regularly gets in trouble with payments. Ask all prospective tenants for references from former landlords and proof that they will be able to afford the monthly rent. A payslip is usually a good indication of whether they will be able to pay the set amount.

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New Year 2011 comes with lots of raise in property in London