After nearly two years of COVID-19 and an ongoing economic slump, residential rentals provide an exciting opportunity for real estate agencies in previously underserviced areas, according to PayProp, South Africa’s leading rental payment platform.
PayProp CEO Jan Davel says residential rental business opportunities are plentiful in the fast-growing formal private rented sector in emerging market areas, such as Soweto in Gauteng and areas of the Cape Flats in the Western Cape.
“People will always need a place to stay, and with growth in both residential rental demand and supply according to the latest PayProp Rental Index (Q2, 2021), landlords and tenants will need competent agencies in these areas with the necessary tools, knowledge and credentials to manage their investments and tenancies.”
Overcoming barriers to entry
A hurdle for many property entrepreneurs focused on rentals is the significant ongoing payment administration and strict industry regulations. Davel says that it’s important to identify the right tools that will automate all the critical payment administration required each month.
“Consider all the invoices, statements, reminders, receipts, reconciliations, and payments at month-end. Even if you manage 10 properties it can add up to a day or two each month.”
Precious Thoka, Principal at Thoka Properties in Gauteng says he initially refused to take on rental business due to the level of administration required. “The input and output didn’t seem to make business sense. So, when we started Thoka Properties, rentals were not part of the plan. However, after a few months we realised that we were losing out on a lot of potential business. I thus decided to reconsider.” Thoka Properties is now a PayProp-powered agency, helping Precious Thoka to build a thriving rental business without the heavy administrative workload that previously put him off.
Davel says finding the right technology to automate much of the administration makes rentals a far more viable option for many property professionals. “The right partner can help you build a sustainable business by automating your admin in a compliant, transparent way.”
New law, new opportunity
To make the job easier for new market entrants in historically disadvantaged areas, the law is changing.
For years, the Estate Agency Affairs Act (112 of 1976) required property practitioners to manage a trust account environment that lets them separate their client and business funds. However, when the new Property Practitioners Act (22 of 2019) comes into effect after the incoming Property Practitioners Regulations are finalised, this will change.
“Under the new Act, an agency can apply for exemption from operating its own trust account and from having it audited – as long as they follow the prescribed procedure and use an ‘approved payment processing agent’ such as PayProp,” says Davel.
“Agencies using PayProp get a bank account that complies with all trust account regulations out of the box. Tenants simply pay their rent via PayProp, and all the agent’s trust account compliance worries are automatically taken care of.”
Tenants of PayProp-powered agencies can pay rent in many ways – via EFT bank transfer, debit order, instantly using Ozow, in retail stores, or in bank branches. The administrative burden of collecting rent from all these sources and then matching it to the right tenant and property is substantial, but an integrated technology platform can reduce it down to a quick and easy ‘five-minute task’ at the end of each month. Davel says this allows agency principals to focus on marketing and other income-generating activities while still enjoying a stable income stream, often making their residential rental portfolios the star performers in their real estate businesses.
Growth in underserviced areas
PayProp has noticed a steady increase in the opening of smaller agencies servicing historically disadvantaged areas and run by local entrepreneurs – and they say that powerful, affordable property technology will help this exciting trend to continue from strength to strength.
“As the Property Practitioners Act states, the property market is a national asset that restores the dignity of all South Africans through the basic constitutional right to ownership of immovable property,” says Brenda Matyolo, member of the board of PayProp in South Africa.
“We are proud to help the industry redress historic imbalances by opening up business opportunities in the private rented sector. PayProp’s offering represents the state of the art in rental payment automation and out-of-the-box payment compliance, all for a minimal monthly percentage fee affordable to all sectors of society.”