Should you sell your investment due to lower rental prices?
Category Rentals
Some rental investment property owners might now be looking at selling instead of holding onto their investment properties to rent due to the drop in rental prices within the area. While the pandemic seems to have settled down, the economic reality is such that rising living costs continue to eat into consumer wallets which puts pressure on tenants to meet higher rentals.
Although the rental market has stabilised, overall rents therefore remain under pressure. Rental barometers clearly show that rental growth remains flat to negligent. Property is always a long-term investment which stands apart from other investments as it tends to retain its value and comes with relatively lower risk. That said, it does come with associated costs.
Owners/landlords faced with prolonged pressure on rentals may start feeling the pinch of costs such as the rates and maintenance which may motivate them to look at selling.
Holding on to your property investment is always the first prize, but there are often valid reasons to reconsider. When the costs of retaining the property are simply too high. Or the property might be older, and maintenance is too costly or cumbersome.
It might also have reached a ceiling in terms of rental income on the one hand while municipal and other costs continue rising on the other hand resulting in a situation where it no longer offers an attractive yield. Or you may just want to consolidate your investment holdings.
Whatever the reason, bear in mind that if there is a current lease, it will carry forward to the new owner in terms of the 'huur gaat voor koop' legal principle. The new owner must take over the lease on the same terms and the deposit must be transferred.
Only the tenant can cancel the lease under the CPA subject to a penalty payment. If the property is to be vacant on transfer, the seller must ensure that takes place or risk costly legal action and a potential eviction process.
It is therefore always best for the property owner/landlord to wait until the lease has ended and the tenant vacated before putting the property up for sale.
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Author: Gina Meintjes
