TPN recently released a new rental report for the property industry which will give investors all the data they need to know to make investment decisions. The report will also give valuable information to franchisors and rental companies across South Africa.
In July this year, TPN announced the launch of RentReport, but this report claimed to be more than just numbers and stats on the rental industry. RentReport is a new suburb-specific reporting system, which is based on all of TPN’s current information databases. These sources include TPN’s RentBook, RentBay and credit bureau data, as well as suburb demographics sourced from Stats SA population census and General Household Surveys.
How does this help you?
“RentReport generates reports which are based on a number of crucial suburb demographics,” says Michelle Dickens, managing director of TPN. “For example, the most important demographic from a buy-to-let perspective is how many properties within an area are rental properties (rental stock). This can indicate the kinds of volume of tenants looking to rent in that area.”
Dickens goes on to explain that RentReport also distinguishes between property types in a specified area, such as townhouses, clusters or freehold properties. The database then goes on to detail rental percentages of those property categories in that area. “For example, in an area like Sunninghill, there are more townhouses for rent than townhouses that are occupied by owners,” says Dickens. “In contrast, there are more owner-occupied freehold properties in Sunninghill than tenants renting this type of property. Therefore, potential investors in Sunninghill properties can deduce that townhouses would be a more valuable buy-to-let investment.”
RentReport gives a holistic view to professionals in the property industry of the demographics of not just residents but the property types in the area too. This data is broken down between owners and tenants, and includes the average number of tenants per household, the dynamics of these tenants, i.e. single, family, couples, their ages, their income, their employment.
Dickens says: “The quality of a rented investment is based on the quality of the tenant that is placed.” Never before has this been truer as people are struggling to meet their financial responsibilities, and in a tough economic climate, it really pays for landlords to know whether they have the right tenant to ensure they don’t lose money. There are currently 36 million households in South Africa which use rented accommodation, that’s roughly 25% of the population, and the demand is growing. The last thing a landlord wants is to have to go through a lengthy eviction process because they have a defaulting tenant, and that’s where the other aspect of RentReport comes in.
The report also provides the employment status of tenants in specific areas, their education level and the standing of tenants in that area. The standing of tenants in the area is quite vital to the process whether a landlord is looking to invest personally or as part of a property company. By providing landlords with the good standing levels in the area, they can see the payment performance to date in that area, whether or not people paid on time, in full or if most tenants pay late or give partial payment. How many tenants are in their grace period? Nationally 86% of all renters are in good standing, but the RentReport goes one level deeper and provides the good standing level of tenants in that area, in surrounding areas and the national average.
“This means potential investors are able to view a breakdown of payment performance in an area and to analyse this performance against the national, provincial and other local averages.”
The biggest differentiating factor of RentReport is that it is suburb specific, giving an advantage to those who don’t know an area or, as a franchisor, if you are looking at dividing an area between your franchisees. With this report you can get an overview of rental prices achieved in a selected area, which is further broken down into what the property is; one bedroom, two bedrooms or three, then you can take a look at the average maximum and minimum rent over that period for each category. This information gives you an in-depth look at what is popular where and what you can expect to get back from a property in that area.
There is no doubt that the quality of tenant is vitally important for any successful buy-to-let portfolio. Rental agents often assist landlords in vetting prospective tenants, among other things.
This is where another new rental reporting tool could well serve the industry. PayProp, South Africa’s largest processor of rental payments for the residential letting industry, recently announced the launch of the PayProp Tenant Assessment Report. CEO Louw Liebenberg says that the report offers a far more comprehensive assessment of a potential tenant than a standard credit check.
“It is increasingly clear that credit checks alone are not adequate to fully understand the extent of non-payment risk that a new tenant presents. It’s important that estate agencies and landlords seek more forward-looking indicators of affordability in order to better anticipate if a tenant will be able to pay in future or not,” says Liebenberg. The PayProp Tenant Assessment Report lists all prior credit behaviour information as well as taking an all-encompassing look at a tenant’s current level of debt relative to income and the rental value applied to form a comprehensive view of a tenant’s level of non-payment risk.
To build this revolutionary report, PayProp Capital, a sister company of PayProp, developed a statistical model in partnership with Compuscan, one of South Africa’s leading credit bureaus. Based on the analysis of millions of actual rental transactions, the model helped the company to better understand the predictors of tenant behaviour and formed the basis of developing a customised decision making tool for the rental industry. According to Colin Habberton, CEO of PayProp Capital: “It is incredible how, even with the same dataset that is available to all credit bureaus, one is able to get a more comprehensive answer around tenancy risk if you ask very specific questions.”
PayProp actively encourages its clients to share the information with their tenants. “Historically, there seems to be a perception that the public need to be excluded from being able to view or manage their credit history, but landlords and agents are now encouraged to share this assessment report with their tenants.” The report uses an easy to interpret graphical interface to help tenants understand exactly how different behaviours impact on their perceived ability to pay.
Liebenberg adds that a Tenant Assessment Report can only be conducted with the consent of the tenant. “Securing total peace of mind when it comes to rental transactions is vital to ensure a harmonious relationship with a new tenant.” Furthermore, PayProp keeps a detailed audit trail of exactly which system user requested a report – with each report request time and date stamped so that an exact trace of every request exists.
These reports look ready to revolutionise the rental property industry, so when it comes to advising clients on their investment or business decisions, or securing reliable tenants for your clients’ property, you have the data on hand to make the best decisions.
Words: Angelique Redmond