Additional earnings through short term rentals a plus for property owners

MAIN IMAGE: Max Urban, MD of Propr; Johette Smuts of PayProp

Staff Writer

A bumper tourist season, driven largely by pent-up demand from international visitors, is awaiting South Africans and creates an opportunity to cash in on short term rentals.

Max Urban, Managing Director of Propr, South Africa’s largest short term rental management company, says: “This presents homeowners with an opportunity to profit by listing their properties on short-term rental platforms like Airbnb and outperform the long-term rental rate.”

Long-term gains

Urban says that over and above earning money from the rent itself, hosts benefit from the value of their property increasing since it can be sold with existing bookings as a going concern which is attractive for investor buyers.

“Additionally, with the right management company, the property will always be kept in showhouse-ready condition, which is helpful should hosts decide to sell.”

“Short term rentals mean that homeowners won’t have to spend time and money bringing the property back into a rentable condition once guests leave,” adds Urban. “Hosts also get to use the property whenever they like, which is not possible with longer lets.”

Longer term rentals

“It’s important for rental agents to understand specific tenants’ spending behaviours. Not all tenants’ expenditures will look the same as the averages in this Index. In the current economic climate where prices are rising rapidly and debt is becoming more expensive, a good agent should understand the potential effects of this on a tenant’s expenditure and in turn, their ability to pay rent,” says Johette Smuts from PayProp.

Smuts says South Africans are battling high inflation, rising interest rates, and increased load shedding exacerbating trading conditions in recent weeks. It seems likely that this would lead to further economic pressure, and potentially also to defaulting tenants, Smuts says that any effect of the cost-of-living squeeze and other factors on tenant payment has been marginal.

Boosting bookings

Urban shares some suggestions on how bookings can be attracted. These are valid for both long- and short-term rentals:

  • Make sure the property is in good condition. 
  • Get professional photographs taken of the property
  • Put load shedding measures in place. 
  • Make use of dynamic pricing.
  • Have a flexible cancellation policy.
  • Offer shorter stays and/or accept same day bookings until extremely late in the evening.
  • Research articles on how to optimise the listing score on Airbnb.

Considerations

For those who are only hosting for a few weeks a year, Urban says doing it on their own is manageable. “However, most hosts are better off letting a reputable management company run their short-term rentals for them. If they are good, they will make up for their commission through higher earnings, time saved and a well-maintained property.”

When it comes to rental payments and arrears, Smuts says it is not surprising that, as the cost of living continues to rise, residential agents and owners worry that the increasing pressure on tenants could lead to non-payment.

According to Smuts the PayProp Rental Index for Q2 reported a slight increase in residential rental arrears – the first increase in this metric since the peak seen in Q2 2020, the start of the worldwide pandemic.

However, she says fewer tenants are in arrears now than in Q1 2020. In the most recent quarter, 18.5% of tenants were in debt to their landlords, compared to 18.4% in Q1 2022.

“While the quarterly uptick is small, it could still be indicative of rising financial pressure on tenants,” says Smuts. She says the onus is on landlords and property professionals to keep a close eye on tenant arrears within their portfolios and work with their tenants to find solutions together.

She says that while tenants in the lower rental brackets spend proportionately less of their income on rent, they spend a much greater percentage than higher income cohorts on debt repayments. The opposite is true for tenants in the higher rent brackets. “This further illustrates the point that lower-income tenants are more likely to be affected by rising inflation and interest rates as the cost of servicing debt goes up,” she concluded.

Share this article:

more top news stories

Another repo rate cut, what now?

Another repo rate cut, what now?

Last week, the repo rate was cut by 25 basis points for a third time, bringing the prime rate to 11%. In our quarterly update on the repo rate, industry leaders explore what this cut means for buyers and sellers and what to expect for the rest of 2025.

Berry Everitt

SA’s new Expropriation Act: key facts

The most important thing to know about South Africa’s new Expropriation Act is that it does not put the owners or buyers of residential or commercial properties in South Africa at risk of having their homes expropriated without compensation.