 Good evening and welcome to episode 314 of the Private Property Podcast. I'm your host Usamandonga Kumalo. It's a Friday edition of the Private Property Podcast and if you're joining us for the first time, welcome to the early Daily Property Talk Show in South Africa that helps you on all things relating to property. Make sure that you catch up all the great episodes that we've already had on our Facebook and our YouTube page. And of course, you're going to find it very useful and insightful and probably kick yourself in the foot for missing out on all those great episodes. Well, welcome to the club. You certainly, we are looking forward to having you join us in future episodes as well. And all our regular viewers on Instagram and Facebook and on YouTube, you know how we do it every single weekday. You and I have an appointment at 7pm where we're always in conversation with the property expert who helps us navigate our property issues. Now, this evening, we're looking at something that I am particularly excited about for the new investment buys. So if you have either recently bought an investment property or even just about to close in on your first investment property, this is the podcast that you want to make sure you do not miss out on. But before we get to that, you know it's a Friday, so later on this evening at 8pm, you can look forward to the Home Shoppers show with Chad, where he always takes us through exquisite properties that you can find on www.privateproperty.co.za. You can also catch him every Monday at 8pm on the Home Shoppers show. Every Tuesdays and Thursdays, a world-winning farmer who brings you the farming podcast tackling all things agriculture. He's always in conversation with different farmers and certainly leaders within the agricultural sector. So if you want to get a bit of sense of how you can probably start and grow and even expand your farming operation, then that is a show that you want to make sure you do not miss out on. And on Wednesdays, you've got SD Class and who brings you the first time home by show, which is always in conversation with people who've not only walked that first time home by and journey, but have gone on to grow their property portfolios from strength to strength. So do make sure that you tune in every single weekdays at 8pm, where we've got a variety of different shows that can help you on your property needs. Then of course, there's myself because I'm at home with my law every single weekday at 7pm, you and I have an appointment and we're always learning something new together. I love running out new things on the show as I also am a student as much as I am a property investor myself and run my own property business, but it's always great to learn new things from other professionals while on the show. Talking about learning new things from other professionals, that's exactly what you're going to be tackling this evening, especially for those who are thinking or have just gotten into buying properties for investment purposes. You might already own one where you live in it, so that really is your primary residence and now you're looking at expanding horizons and having an investment of property. I want to find out from the viewers at home because I know a lot of you who have already started your investment journey. What were some of the lessons that you learned after you started investing in property that you wish you knew when you started? Whether it's something that could have saved you time or certainly could have saved you money? What were some of the things that you only learned along your journey that you absolutely wish you could have learned at the beginning as a property investor? Well, this evening, we're going to be looking at a simple guide for first-time investment buys. We want to make sure that we help those of you at home who've just bought or are bought by their investment property. Do you share some of the things that you've learned on your journey that you absolutely wish you had learned earlier on? To help us get a better sense of what we can do better as property investors, especially of course those first-time investment buys, I'm joined this evening by Danielle Creel who's a senior associate at KM Ramudike and associates. Danielle, good evening and thank you so much for joining us. Good evening. Thank you so much for having me. It's only a pleasure Danielle. I think a really great starting point for our conversation this evening as we're saying that we really are speaking to people who've probably taken advantage of the low interest rates. They may already own their first property or perhaps their own but they're not thinking actually I've just gotten an investment property. They didn't do too much research or just skipped a few steps. We typically like to say do the first things first and as far as getting your knowledge in check but maybe they're excitedly bought these so ideal that they absolutely couldn't miss out on and now they've got this investment property and they don't want to make certain mistakes, especially mistakes that could potentially cost them quite a bit of money down the line. What are some of the basic fundamental things should a new investment buyer who's probably just recently bought or in the middle of buying get right from day one? That if you do this you're actually on the right path to managing your property quite well and also probably growing it quite you're growing your property portfolio quite well as well. Okay so my thing always is education. You cannot take on something like an investment property without having educated yourself beforehand or if you did take the plan without thinking too deeply about it you need to start taking steps immediately to learn as much as you can as fast as you can. So that's what we're doing tonight a very quick crash course in what to do once you've bought your investment property. So you're super excited you've got your keys you have done all of the things that are required to get those keys in your hand and that is the starting point of your journey. You've got the easy part out of the way. So when you decide you want to have an investment property there's two types of two things you can do. The one is to buy a property that doesn't have a tenant in it and you then going to find a tenant lease it out and go that route. The other option is to buy a property that does have a tenant in it. There's a Dutch maxim in our law that says which means if you buy a property that has a tenant you are obliged to keep that tenant. So that's also something you need to consider when you are looking to buy a property. Is that an option for you? Once you've got the property if you've gone the route of not getting a tenant getting a tenanted property what you need to do first and foremost is to get the right tenant. There are tenants out there who are really wanting to go into a property that they want to be happy in for a few years that they want to build a good relationship with their landlord and so that it's mutually beneficial for both sides and of course on the flip side of that coin you've got the tenants who are not looking for that. They some call them career tenants. They are playing the system. They are looking to catch out a landlord who isn't as savvy as they could be. So finding the right tenant is your number one step. Whether you do that by using an agent which is something that I normally would advise because the property professional knows what they're doing. They're going to be doing the proper pre-screening. They're going to make sure that they've done all the correct background checks. For example checking up with previous landlords. Is this a good tenant? Do they pay on time? Those are the sorts of things you want to know before you even get to the point of signing a lease. So when you've done your homework and you've found the right tenant your next biggest thing that you need to do is getting your lease in order. And the first thing you need to do when you're getting your lease in order is to know your lease. So don't receive a lease from someone or purchase a lease from someone and you don't know what it says. You can't enforce something that you don't know and you are going to get swindled by a tenant if you don't know what your lease agreement says. So that's your most important step always. And the reason why the lease is so important is it forms the basis of your relationship not just the contractual nature of it. Obviously that's the most important thing while you have a lease in place. But it forms what's going to come in the future. So with regards to investment property and tenants you have to unfortunately begin with the dismal end in mind. And the dismal end is having to get rid of a tenant that isn't performing as they should be. And I think you know and I think that Danielle I want us to look at the that dismal end in mind right. And what it means if you have that in mind as you even work on your lease agreement and and get your we'll say that your admin ducks in a row from the get go because I tend to find that a lot of us as landlords when we started our journey some it wasn't a very deliberate sort of path where you first started with getting a good sense of the knowledge as much as possible and then you're walking the path with some you kind of bought your handling across certain certain things you made the move off for example getting a lease online without properly reading it and say to people stop doing that. And they are great resources that you're able to use to get really good your lease agreements in place don't go downloading a random one online. And there's a whole host of different mistakes that we make I think you're fortunate if you make them and they never catch up with you and you learn quickly and are able to rectify those mistakes but unfortunately not everyone sort of falls within that realm. And so when we talk about having the dismal end in mind what kind of what kind of scenarios are there that we should absolutely make sure we buckle proof our systems against from the onset. Okay so when you buy an investment property what you want to do is make money surely and in order to do that you need a tenant who's paying you. So when you enter into the lease you want to make sure that you've got in that lease everything that protects that income in the future. So for example a scenario of a dismal end is a tenant who hasn't paid you for six months they haven't paid services they haven't paid rent and they potentially are causing damage to your property. That's a really difficult position to find yourself in as a landlord. The other potential is that that situation gets worse and you find yourself in a position where you have to evict this tenant. So when you start your process you want to make sure that you've got all of the information that you may need should it get to that point where you've got to evict. So the important thing in your lease is going to be obtaining as much information about the tenant as you possibly can. So the basic details obviously name, ID number, contact details, previous contact details or an alternative address that they give you because if you get to the point where you need to claim against them for something and potentially they're not in the property anymore you've lost that confirmed address if you can say that. So you want to make sure you've got alternative information as well and then you need to make sure that the lease clearly stipulates what is required of the tenant. So you want to be sure that it it sets out what the deposit amount is. You want to be sure that it sets out what the rental amount is and if there's going to be a rental escalation what that amount is and to make sure that your tenant understands what those things mean. Then obviously you want to make sure that they know when they're supposed to pay you. Is it the first of the month? Is it the last of the month? Is it the 15th? Are they paying weekly? That is something that's very important. You also need to make sure they know where to pay you. So make sure that you've got your correct banking details in there. And then there's a number of really basic sort of information like that that you need to make sure you've got. Then you're going to move on to things like breach of the agreement. What happens when they don't pay? Now normally the lease will stipulate that they've got a certain time period to remedy the breach. You need to be aware as the landlord what that time period is because if your tenant breaches and I say this all the time is don't wait. Don't wait to start taking steps. You have to take steps immediately and in order to take steps immediately you need to already have the information that you need to take those steps. So for example if you your tenant is due to pay on the first of the month and it's now the seventh of the month and they haven't paid that's a week that you've lost. Whereas if you knew your lease and you knew your breach period you would have sent that breach notice the day after the rent was due. And I say that because your time frames start running the minute you start the breach process and we'll go into a little bit more detail about those time frames a little later on and discuss what actually takes place once that breach has been dealt with and the lease is now terminated and we're going to go into the eviction side of things. But in terms of your basics those are the things you need to be keeping in mind and taking cognizance of when you are entering into the lease. I was even in conversation with Danielle who is the senior associate and network break there and I'm sure it probably is either on my end or on Danielle's side I said is on my end do apologize for that. As I was saying I'm in conversation this evening with Danielle Creel who's the senior associate at KM Ramoudike and associates and we're looking at a simple guide for first time investment buys. I want to find out from your home those of you who are property investors, property investment jury that you wish you knew when you started off and it could be something that could probably you know have saved you time or of course have saved you money from the onset. Do share with us down here below. I see some of the love that we're getting on Facebook. I'm sending those green hearts, one of our very regular top fan gang members, Women Queen B Mabunda saying happy Friday, fam of course joining in on the love whether you're watching us on Instagram and YouTube or on Facebook. Now before you, the gremlins got to us, you were still explaining of course and when we now have you know we've certainly looked at what it means to have the unfortunate end in mind which is such an important part as an investment, as a property investor rather because one of the key things is that you have a fundamental understanding of some of the things that can systems from the get go that should you unfortunately deal with the tenant who ends up defaulting, you know what to do, you don't want to have to wait until a month after they you know having paid or of course results and what happens when people or what happens rather when your tenant goes into areas. I want to take this question from Prince Jonas Mazabogo on Facebook who asks is it normal to put in a late payment fee should a tenant big one because with some tenants who are probably chronically late, let's say almost on a regular basis they're paying on the third even though the payment should be on the first, is it normal practice to have that late penalty fee and what should that amount be? What should the percentage be? Yeah so it's a fairly common close to have an lease agreement is a late late payment penalty. What has to be borne in mind is that any kind of penalties must always be considered to be reasonable. Now in terms of the consumer protection act a lease is a fixed term agreement and in because it's a fixed term agreement it means it falls within the ambit of the CPA. So one of the general guiding principles of the consumer protection act is fairness and being reasonable. So yes you can have a late payment penalty but be reasonable about it and you know and a 10% a day late penalty is not fair to the tenant. So you want to make sure that you're giving something that is fair and reasonable and that is going to be not a hindrance to the tenant but going to encourage them to make their payments on time. Yeah one of the things I mentioned earlier and I'm not sure if it if it came through or not is related to breach. You don't want to be waiting two weeks after the breach before you start sending notices and letters and yes you may have a late payment payment penalty in place that's not going to help you in the long run. In the long run you want to get that process of recovering your rental as soon as possible. So if your rent is due on the first of the month and by the second or the third your tenant hasn't paid send them the breach notice immediately. The purpose of the breach notice is to say hey we've got an agreement in place you're meant to pay by this date you haven't paid please pay me within seven days, ten days, fourteen days whatever it is in terms of your lease agreement. So you want to make sure that you get that person as quickly as possible. We're taking more of your questions and comments this evening as I'm in conversation with Danielle Preal's senior associate it came Ramudike and associates. We've got one of our top FENGAN members Matha Shingani sharing what she wished she knew when she started off saying I wish I had known that you need some of your personal money to get started no blesses there. You know Matt I think that's also a shock that a lot of people you know get especially when they also realize how much of your own money you need and even if you go and get it elsewhere you still need to raise that money right so it doesn't just sort of come out of nowhere they are some funds that you're going to have to put down if it's not coming out of your own pocket or your business's pocket then you're having to raise it whether it's from friends family or some other mechanism but you're certainly going to have to have some capital from the onset. Now Danielle then went to to to you know wrap the the areas part and quite nicely for for landlords what should landlords not do in the event where their tenant goes into areas because as much as they can understand systems they need to put in place and some of them probably can understand the skills gap that they have you know the areas that should look like or a little demand should look like those are things that they're able to fill in the gaps on what should they absolutely not do when it comes to dealing with tenants who are who go into areas. Well first of all don't do anything illegal that's the best advice I can give them on that score don't start locking out tenants don't start taking off doors don't turn off electricity don't turn off water all of those things are illegal you're not allowed to do that what you should do is make sure that you put them to breach it's the most important thing because if you haven't done that you can take no steps thereafter once you put them into breach and they haven't attended to their payments or done what they need to do your next step is to actually terminate that lease and the termination of the lease is a further notice with a further 30 day period that has that is attached to it which is why I say start the process as soon as possible and I think it's such it's such an important one for so this is obviously for many of you who are either have just started your property investment journey or exploring going into your property investment journey perhaps you're looking at taking advantage of the historically low interest rates as you think through what you want to do perhaps you've been expanding your property portfolio as much as possible now Danielle I think when we then look at some of the best practices that really will make a property property investor thrive what would you say some of the sort of best practices as a property investor and especially one who works with an agency and because I mean we've been looking a lot with you know people who landlords who are pretty much doing it by themselves so when you work with an agency what would be you know some best practices because I think landlords sometimes don't have the greatest understanding of you know how to best manage that relationship because it's also a relationship right the state agent that you work with or the agency that you work with you also need to cultivate that relationship in as much as they have to cultivate the relationship that they have with your tenant so any best practices that you like to share that really will help in you know in that relationship between the landlord and the agency that they choose to work with yeah so this whole relationship is is um is governed by mental housing act and the soon to be rental housing amendment that now it separates or sets out all of the steps that a landlord should be taking in making sure that their tenant is taken care of so whether you're doing it as a DIY landlord um or you're doing it through an agency you need to make sure that you know what is required of you so the first step obviously is the lease you want to get that all tied up in order and in terms of uh unexpected costs that may be something that you want to add onto your list of um things to budget for is getting a proper lease in place whether you're going to go through an agent or you're going to use an attorney to prepare a lease for you that's something that you really need to do second of all whether you're using the agent or you're or you're doing it yourself very importantly is invoicing um of the tenant invoices must include the full address of the property it must include meter readings from the previous month and the current month um it must include the uh interest on the deposit that's being accrued so those are things that you need to make sure on a monthly basis are being taken care of um and that your invoicing is correct you want to lay in a Rears claim later you better have invoices showing exactly what those Rears are so those practically those are two things that you need to focus on as a landlord um making sure and I keep saying it now the lease agreement is very important but the lease really is the guiding light for a landlord it's going to um it's going to determine how your process with your tenant goes in the future so if you find yourself in a position where your tenant is now not paying and you go to an attorney or you go to agent or you go back to your agent and they want to now assist you those are the things they're going to ask you for first where's your lease where's your invoices so practically you want to make sure that those things are very much in order um taking more of your questions and comments at home we've got all prints um as we were coming back asking on facebook if they are in breach can I include a clause in the contract that says that legal costs will be to their expense so in that lease agreement let's you know can you say to can you add a clause that says that uh in the event where they're in breach and you know the landlord has to take legal action then the the cost of the you know legal action is going to be to the tenants account yes so that's a very good question um you most certainly can include that the um legal cost would be for the defaulting party what's important to remember there is that it goes both ways so if you as the landlord bring an eviction application or a rear rental claim and you haven't done something correct on your side and the court finds in the favor of the other party you are going to be responsible for those legal fees as well so yes you can but just remember goes both ways and it's such a great one thank you for that question um prince Danelle before we wrap up any final tips for our viewers at home are looking to walk down we've already started walking down that property investment journey when it comes to making sure that they get their you know admin ducks in a row so they don't come so they certainly don't have any you know financial issues that or administrative issues that could potentially backfire in the future yeah so really the most important thing is um getting rid of a tenant is a very lengthy very costly process and you don't really want to find yourself in that position so make sure that from the start you take the right steps such as if they do breach immediately send them a notice if they don't remedy immediately terminate and then immediately go to a property professional who will assist you with an eviction process you don't want to hang on i've had some horror stories of tenants being hundreds of thousands of brands in areas and the landlord is simply at the point where they they cannot anymore they cannot afford the property they cannot afford to carry a tenant so you really don't want to find yourself there you want to take steps as soon as possible and that would be my my advice is do your homework educate yourself and take steps as soon as you can and that's a great place to leave it at Danielle thank you so much for joining us on the show this evening thank you so much for having me and that is Danielle Creel who is a senior associate at KM Ramudike and associates wrapping up the friday edition of the private property podcast with myself Osamandouma Kumalo Monday is a public holiday so we are only going to be back on tuesday evening at seven p.m i do hope that you're going to enjoy the long weekend and as usual hoping you'll be staying home and staying safe