 Good evening, and welcome to episode 371 of the Private Property Podcast. I'm your host, Uzaman Donwa Kumalo. It's the Wednesday edition of the Private Property Podcast. And to join us for the first time, welcome to the family, you're tuned into the leading property podcast in the country, helping you on your property needs. And all our regular viewers on Facebook and Instagram or on YouTube, welcome to it. You know how we do. Every single weekday, you and I have an appointment at 7 p.m., we're always in conversation with a property expert who helps us make better property decisions. And of course, you know that you can also catch a whole host of other great shows across private properties, social media pages, every single weekday at 8 p.m. So Wednesdays or later on, you can catch Estee Klaassen on the first time home buyers show. And this evening, she'll be speaking to Proverb, who was, of course, answering some of the great property questions that you had posed, that you had sent through, so you can look forward to hearing his insight on a few of your property issues. And every Mondays and Fridays, you can catch Chad on the Home Shoppers show, where he takes us through incredible properties that you can find on www.privateproperty.co.za. And every Tuesdays and Thursdays, Umba Linnwokov brings you the farming podcast, tackling all things agriculture. If you've got green fingers, like so many of us have right now, especially as it's spring and we really want to spend a bit more time in the garden, then that is a show that you want to tune in to. And then, of course, there's myself as I'm at Umba Linnwokov every single weekday on your screens. And unfortunately, this evening, you can't see me as many of you know, we are, we are living in a simulation. I was even saying to my guests off air, I am, I am out of town as you saw yesterday and in load shedding. So in literal darkness right now, but the show must continue and we wanted to make sure that you're able to get the quality show that you deserve. And of course, keeping you company as I always do. So we made a plan. We're still going to be coming to you, but unfortunately, you just won't be able to see me. But of course, as usual, do continue sending through your questions, your comments, as we always tackle property matters. I want to find out from you, if you are also currently experiencing load shedding, what is your schedule looking like? I think the big thing now is that if you are dating somebody, date outside of the same grid as you, you cannot be with anybody who experiences load shedding the same time as you. Just so you can, at the very least, manage having hot cup of tea or, of course, a hot meal. But as we talk property this evening, you know that you can look forward to the competition that we're running on our Facebook page, where we asked you about property advice that you have certainly picked up while watching the show and we give away 500 rands in cash every single weekday right here on the show. We had a roll over yesterday. So we've got 1000 rands in the money bag. So later on in the show, you can get a sense of who's going to be walking away with that cash. And of course, the lucky winner will have 1000 rands up for brand. So I hope you're watching as you know that you've entered the competition so that you can be able to potentially win that prize. Well, to get us started with our conversation this evening, we're looking at managing investor risk in the current climate. And I'm joined by Miguel Martin. Martin, this is a portfolio head for investors at Apsa Home Loans. Good evening, Miguel. And thank you so much for joining us this evening. Azama, thanks so much for having me here. I think we're both sitting in the talk, but I have the benefit of some rechargeable lights around us. If my lighting looks interesting, that's why. And you know, and a part of me, I know if I was at home, people at home would at the very least be able to see me. I think those are the unfortunate things when we, you know, we travel because we also know that we're now living in this virtual world where we can do work from anywhere. But then it goes in and ruins the fun. But we may provision with what we've got. And I'm glad that the viewers at home are able to at least see you and can hear both of us very clearly. Now, I think, Miguel, when we look at where we currently are, especially for your property investors and having sort of gone through the storm and continue going through the storm really, of COVID and of, you know, some of your tenants, even, for instance, having lost their income, I'm keen to hear from you. What are some of the challenges, you know, that property investors are currently facing in this economic climate that we're finding ourselves in? Thanks, Sam. It's such an interesting space and can be quite scary. And one thing about a risk is that the first thing to do with the risk is first identify that it's there, understand it. And once you understand it, you're in a better position to manage it, mitigate it, and in some cases, even turn it to your advantage. And we'll talk about some of those situations. But there are the four risks that I wanted to talk about tonight. I think something that's facing all investors out there all the time, in better times, it was there to a lesser degree. Currently also there, and maybe it may be a little bit more sharp and closer to all of us. So just the four risks I want to talk about quickly. The one is tenant payment risk. So that's a risk that your tenant won't be able to pay the rent in the month or any part pay. The second one is rental increase risk, the risk that you won't be able to enjoy the same increase in rentals that you have the last couple years. The third one is interest rates risk. So the risk that interest rates increase a lot more quickly than you expect them to. Then lastly, vacancy risk. And that's a risk that your investment, your rental investment property remains vacant for one month, two months or longer than you really wanted to. So it's a four risks. They are key risks that any property rental investor managers and I just want to share some thoughts around them and maybe some ideas on how to manage them and possibly even benefit from them. And you know, Miguel, I actually wanted to start with the first risk that you've managed. I mean, that you've highlighted the tenant payment risk because I think that's probably one that is very top of mind for current investors in particular, never mind those who may want to get into the market. I know with some of them, they have the fear that, oh, my word, you know, what if my tenants don't pay a rent? Then what's going to happen? But of course, landlords who are already in right now, some of them have already experienced this happening to them where some of their tenants aren't paying. Have you just painted a picture of us when it comes to this particular risk? What are some of the factors we need to consider? And what we're looking at when it comes to even the payment patterns generally of tenants? Absolutely. So one of the industry partners, TPN and the team at TPN, they manage what they call the good standing ratio. So with all the landlords that they have on their books, they're able to monitor what percentage of tenants are making their rents, either paying their rents on time or within a reasonable amount of time. And pre-COVID, that number was sitting at about 80, 81%. That meant that 19% weren't paying their rent on time or not at all. But 81% was a reasonable average. And of course, that differs from server to server, but on a national level, we're sitting at 81%. The months that followed immediately after a lockdown, so April, May, June, that dropped right down to 71%. So 30% of all tenants were not making their rental payments as committed. I mean, that can really be a serious challenge for landlords managing cash flow, making the ability to make expenses and make your home loan payments. What we have seen in the last few months, and this is something we do every month with a team at TPN led by Michelle Dickens, is that we do monitor that. And we have definitely seen it improve and rebound back to around the 80% mark. So really a significant improvement back to where we were. So in the right direction, what the team at TPN will say is that that's great, but it doesn't mean we've necessarily got all these properties back in the markets. So they can really measure what's been loaded on their system. But that's a real key risk to monitor and to stay close to. I am this evening in conversation with Miguel Martins who's a portfolio head for investors at Apsa Home Loans. And we're talking about managing investor risk in the current climate. I would define that from investors at home, property investors at home, how you're managing risk and what have been some of the risk factors that you've identified for your own portfolio and how are you going about addressing that as best as possible? I know that this is one of those things where we want to always be able to plan for the worst. And none of us would have foreseen COVID coming to our shores. But now we're also many months into it and we need to be able to very deliberate in the decisions that we're making as we manage our property portfolios. I can see some of the love that we're already getting on our Facebook page. We've got two Los Semeños tuning in, sending through those green hearts for Rana Siddiqui saying my area starts the 8pm load shedding. Part of the things the 8pm might just be a bit better just because by then we would have had enough time to do all your work. You would have cooked supper by then. If anything, you may just have dinner in the dark and perhaps even just go to bed early. But anything earlier than that is probably just so, so terrible. Umenzi Mutilesi saying we just got out of load shedding. We are getting dating advice. No, look, Menzi, I think it's important that you are with a partner who is in a different, different grip than you because we cannot. We can you can't all be in load shedding. I think that is just a big L. Quinta was saying no load shedding tonight. Queen, this and I, I'm very envious. I'm in Durban. I don't even I don't even know where I would go if I wanted electricity while doing the show, for instance. And we've got here Sandy Stimmett also sending us some love. Do you continue showing that on our Facebook page as we continue our conversation with Miguel Martins? And Miguel, you know, so we've looked at that first risk that you highlighted around 10 payment and what the numbers look like, of course, that deep, that 10 percent decline we saw going into COVID. I'm really glad that, you know, it's been able to pick up again when we look at rental increase as the second risk. I think if you can take us through that one, because I think with rental increases, one of those areas where. Some landlords wanted to, for instance, you know, escalate rent from the, even when we were deep in, you know, I say COVID lockdown last year, and we know that different people got affected even their incomes and which I think I think may have been a very short-fighted move and perhaps just take us through rental increases and better understanding, perhaps not having a rental increase during these tough economic times. Yeah. So so one thing I always say is, you know, do the numbers. Let the numbers guard you. And when we do this before going to investment, you know, we look at it, we look at whether. Property will cash flow today and how do cash flow into the future? And we very quickly, you know, add five, eight, ten percent onto that rental number and then projected five years forward. And we see this fantastic net rental cash flow increase over time, right? Because the rental increases, your cost might also increase, but not the same rate as rental. And that's really not where things are at the moment. What we see at the moment is that rents are increasing on average nationally, they're not increasing, they're flat. So the various reports to the market either from our partners at TPN and other people reporting the market is that nationally, rents are flat year on year. We're not seeing those increases. Obviously, each and region will be different. But this is a challenge because as comes increasing, you know, that might not give you the power, but they'll definitely increase the rate, your rates and taxes are increasing, maintenance, et cetera, all those other costs keep on increasing. But if your rents don't increase, at least at the same level, your net rental starts to shrink. And in worst case scenario, you might even be looking at a negative rental being achieved on your properties. So it's a real, real concern. What I had to do on my investment property is I had a rental increase, but it was half a percent. It was just to cover, I agreed with my tenant that we would just cover just the basic operating costs. And very clear that it was not coming to my pocket, but just to help cover the costs. So really one thing to do is negotiate and come to an agreement with your tenant. What you don't want to do is price or stuff out. You lose a tenant, then in reality, you find a new tenant, you're having to actually move backwards in rent. So very, very situation. And really, this is where a good relationship with your tenants and a good discussion and negotiation is invaluable. Absolutely. And I think one of the things that you realise with that is when you know you've got a good tenant, when you know you've got a tenant who's always pays rent on time every time, you'd much rather have that conversation and not escalate rental the way you perhaps may have wanted because you understand the how expensive it is to get a good tenant and a good tenant who even communicates when things go bad, right? And in the event where, especially what we saw last year, in the event where perhaps their income may have been affected or they were going to make rent late supposed for a month and they still honour their word, that's probably a much better tenant to deal with than people who either go AWOL, who don't pay their rent. And of course, you may have to send letters of demand or even evict them. So understanding just how risky or rather how expensive it is to get a good tenant is such an important thing to know to the property investor. And always one of those things where when you understand your tenant better and you have that kind of relationship, it's easy for you to have a conversation with them as opposed to, you know, saying I'm always escalating rental every single year without fail. Because as you've highlighted, you're going to price yourself out and their entities tenants are spoiled for choice right now. So they they they're able to go next door and probably even get a lower rental than what you were charging them. I wanted to go for a quick break and see who the lucky winner is of the competition that we are running. We've got one thousand rands in the money bag. And of course, this is the competition on our Facebook page. And if you want to enter, go through to our Facebook page and look at the pinned post on the page and you'll be able to get all the great details, comment, comment, comment. The more times you comment, the higher your odds of walking away with that money. Let's see who the lucky winner is. I hope they're watching us this evening and of course, can I have access? Can be able to, of course, win that one thousand rands. Let's see who this evening's lucky winner is. And the lucky winner this evening is none other than Oglad Shirinda. Glad Shirinda, one of the top band gang members is the lucky winner this evening. I hope that she is watching. And if you are, of course, do drop us a text down here below to claim your prize. One thousand rands is in the money bag this evening. And I continue my conversation with Michael Martin, who's a portfolio head for investors at Absol Home Loans. As we talk about in managing investor risk in the current climate, we know that so many of us who are property investors, we've had to make different kinds of decisions as we sort of navigate our own property portfolios and sort of get closer to our tenants. I think this is the one time we're getting close to your tenants, becomes such an important thing. And I want to find out from your home how you've, you know, ultimately manage your risk as much as you can. And and and what are some of the things that are potentially helping you make better investment decisions during this economic time? I want to go to a few of your of your comments that the team has just sent me through. We've got all Rose and so on the same private property. Show me some love, please, just because you're just I don't have the full message. I'm going to ask the team to send me that full message. But Rose and so on him always showing you love, I always see you in the comment section down here below. So do thank you. Thank you very much for continuing to, of course, always send through your comments. And Irene, Irene Lasagnana, sharing with us, of course, one of the things that she's picked up in the advice that she's picked up while watching the show. And to say is the advice I picked up from some of the episodes is research first time home buyer assistant programs and compare mortgage rates and fees. And that's a really, really big one. And I mean, we've had that kind of conversation with different people, even from different people within the Apsa Home Loans team who really help first time home buyers and around some of the things that you should be doing before you're even ready to sign an offer to purchase during your very aggressive stage of looking. And of course, the different ways that you then can continue your relationship, for instance, with an Apsa or any financial institution afterwards. The team has let me know that Ocletruin that is indeed here in watching. So congratulations to you walking away with that one thousand rands in cash. We've got Irene also saying make ten and pay seven hundred a month. I want to increase it to eight hundred any advice. And of course, that's to to to Miguel, as we talk about, sort of that rental, you know, increase that you want to increase it by a hundred rands, for instance. How should we be thinking of even the small increases that from another person may seem very small, but you know that perhaps in your bottom line, that's quite significant and may even be quite significant from your tenants perspective. Yeah, absolutely. So so my one principle here is treat your tenant as a partner, value them for the role of their play in building your property portfolio and not just as a user of a product that you provide. And I think once you start thinking about your tenant like that, your relationship and the way in the way you deal with your tenant just really takes a different approach. Having having honest conversations with the tenant and talking to them about how they doing in their jobs, in their businesses. That starts not only to show interest in them as as as a person, but starts to break down that landlord tenant to divide that sometimes can can exist. And by doing so, and remember, what is keeping a good balance between between being friendly and being professional with other professional routes and in doing so really allows you to to to have a conversation with your tenants about the increase about what is a fair increase given where we all are and and and be able to do that in a very productive and and an easy manner. What one thing I do every Easter and it's a small token, but I'll buy my tenant and say a box of easter eggs and just wish them well around around the Easter weekend. And it's it's a small gesture, you know, cost me 50 or 60 or whatever box of the like it costs. But really, I think the bridges that it builds and the relationship that it supports is invaluable when it comes to having a tougher conversation down the line. So really value your tenant and that's where it's. And that's such an important one value, value, value your tenant. It's almost like that thing where sometimes going just that little extra mile and you're doing a gesture like that certainly does go a long way. I want us to to look at then the interest rate increases, Miguel, because I know that this is also one of those things where some some people who especially want to get into property investing right now and trying to say, well, we have, you know, historically low interest rates. This is and by virtue of that, this is a great time to get in, except we all know that the interest rates are going to go up and that that shouldn't be the primary driver of, you know, getting an investment property can be one of the factors that you use when you make your decision, but it certainly cannot be the only one. How do we think through if a, you're already a property investor or B, you want to get into property investing? How do you think through the interest rate increases that we know are going to happen? So we know that they're coming, they're inevitable. Inevitable. So the Slapkin Reserve Bank meets every two months with the next meeting coming in November. And for the last few meetings, they have been forecasting that interest rates will go up by one and a half percent by the end of 2022, by the next year and up by four percent over three or four years. So so really, they are going to increase. It's definitely it's it's definitely coming into question of of when. So I mean, that that's a very scary thought on a on a on a loan of of a million rand and in a monthly payment on seven percent when that increases to 10 percent, you're looking at extra two thousand rand per month. So the the forecast of that is going to increase gradually. But that's just a forecast. You never quite sure what's going to happen. But in a two thousand rand on on on on on a on a property rentals can't keep up with that. So what what one can do is understand the risk, do some numbers for the plenty of calculators online that one one can go and use. You go to Absa dot Coza, there is a loan payment to calculate that that you could use that play with interest rates. Understand what could happen and then put a plan in place. Definitely look at managing your costs so that you can keep that net rental figure as as as as as as wide as possible. And then start starting up putting a fund aside, just a provision that can handle those kind of increases and keep your float for for a couple of months whilst you adjust your portfolio, your your your expenses, etc. This is definitely not the time to be putting one's head in the sand and ignoring what what's coming down the line and definitely time for action and then making a plan and then putting a plan into action. And I couldn't agree with you more. It really is that time where you need to be clear on what your plan and put your plan in action. And, Miguel, when we then look at the vacancy risk, I think the vacancy risk is also one of those that landlords right now have conversations with. I mean, I'm in different groups with landlords and some of them saying that they of course, to fear not being able to fill their their property with a good quality tenant. And then those who are looking to get into property investing. That's also a risk that they said that, oh, my word, I get this, you know, investment property. But what if I struggle to to get a tenant? How do we sort of think through but also solve when it comes to vacancy risk? Absolutely. So so so an experienced landlord will tell you that that rather go month vacant, then put in a lower quality tenant. So it does take that foresight and and really the ability to do so to help you to take the vacancy, but then make sure that when you can, you do put in a good quality tenant. So so this is this is an interesting one. But this is also an opportunity for those landlords or a little bit more astute. And I spoke just now about about valuing your tenant. And by doing so, the kind of things you do is you ensure that you provide the best amenities that you can. So if you if you can afford Wi-Fi within your rentals, provide Wi-Fi, not only will your existing tenant probably stay longer, but when you when you have a new tenant coming in, they'll appreciate the fact that they're getting that freebie. If you can install additional kitchen cupboards so that your kitchen has more cupboard space than other competitive kitchens to do that. They again, that investment will help with the current tenants and it will help when you are when you're showing your property off to prospective tenants. So look at the value proposition that your property holds. Is it is it in good condition? Is it neat? Is it well looked after? Does it have a few other extras and other properties that prospective tenants would be looking at in the area don't have? Look for those, build on those and then highlight them when it comes to to your your adverts and to when you're doing a viewing that will set you apart from the market. And as opposed to having in the risk of vacancies, you'll be the one who's actually at the right parental. You'll you'll be the one who's actually taking on a better quality tenants. So it all comes back to valuing your tenant, valuing your property and providing the best product you can at the right price for the market. Now is the time to keep your vacancies down to minimum. Now is not the time to try and squeeze out excess profits. I think that taking that approach might actually come short in the in term. Now, I agree that value value value, you want to make sure that you're providing value because value does attract value. And I think when you when people when your tenants or prospective tenants see the the work that you've put into your apartment, to see the will call them the extras or what comes with your apartment. You're also your property. You're also able to attract a certain type of tenant. And that's precisely what you want. You don't want a tenant to kind of grabs whatever the lowest denominator is because they very well may not look after your place. You want the person who values value and is also going to take care of the, you know, of course, your property and won't leave it in a worse of state than what they found it in. And I think, Miguel, as we wrap up our conversation this evening, any final insights for firstly for current investors when it comes to navigating the economic climate we're finding ourselves in. And then secondly, insight for prospective investors who are either on the fence or just trying to make sense of the market and whether right now is the time to to invest or they should rather just stay put for a bit longer and assess whether the market is going to significantly change. Absolutely. So so for existing existing investors within the market, property is expensive to get into and expensive to get out of. So so do the numbers, understand the risks, come up with a plan, put them into action and really treat your property like a small business and do what you can to get through what might be a couple of tough times ahead. So I think be proactive and really choose action over in action. For prospective investors, absolutely, do the numbers. If you're looking at a potential investment, do the numbers, base your interest rates on old prime interest rates of around 10 percent, work on that. If the properties to cash flows positively at that, then fantastic. Then you're going to have a very high cash flowing property currently, at least when interest rates rebound and start increasing again, at least you know that you that you're safe. If you are concerned that you don't quite understand the market and that you can't get some good answers from either listening to shows such as this or from other experience investors. And rather take a step back, watch the market and then rather enter the market when you feel comfortable that you're ready to take on property investments and all the commitments that come with it. Either way, take a long term view with the existing or a future investor. Take a long term view. Property is not a business that will provide you overnight benefits. It is. It is. It is a business that you really got to commit to and will give you all those benefits over the long term, but you also got to commit to over the long term. It's very rewarding, but it does take a special kind of investor who is enthusiastic and passionate about property. And that's actually a really great note to leave it at, Miguel. Thank you so much for joining us. It's always such a pleasure to have you on the show. Thank you. It was really good. And that is Miguel Martins, who's a portfolio head for investors at Absa Home Loans, wrapping up the Tuesday edition, the Wednesday edition, rather, of the private property podcast with my son, who's a man. Don't walk home alone. It has been a pleasure to be with you this evening. I'll be back on your screens tomorrow evening at 7 p.m. And I do hope I'm going to have electricity. So, I hope where I am, this is what is going to be different at 8 p.m. Catch the first time home buyers show with Isti Klassen, where she is in conversation with Proverb. Until then, hope you're staying home and staying safe.