Purchasing a second home in another country is a big investment for anyone, and while you may plan to use it for yourself as a holiday home, perhaps you buy it with the intention of renting it out.
In South Africa, if you’re a Non Resident and are planning on renting out your property, there are a few factors to consider and be aware of to ensure that you protect yourself and your investment. These not only relate directly to the property but to monies earned and how to repatriate those funds back to your home country.
Finding a good rental agent
One of the key things when renting out your property is to find a good rental agent, who will manage and ensure that your investment is looked after. This is even more prevalent when you’re not in the same country and really need someone you can rely on.
Understanding how an agent operates, and their policies and procedures is paramount when selecting them to manage your asset.
Find out what background and financial viability checks the agent does when considering potential tenants and any other questions you may wish to know about future tenants.
If you’re planning on doing long-term lets, regular inspections of the property need to be conducted. It’s worth noting the agent’s inspection policy, how often and to what extent do they do property inspections?
Detailed lease agreement
The lease details all the terms and conditions of the agreement between the property owner and the tenant.
This agreement should be drawn up by a professional, such as an attorney or Non Res SA, to ensure it covers all bases.
Having an adequate deposit is vital to guarantee that should there be any damage or nonpayment of rental, there are monies that can be recouped. General rule of thumb for a deposit is a minimum of one and a half months rent; however, a full two months’ rental is preferred.
The deposit needs to be held in an interest bearing account, and any interest accrued is due to the tenant at the end of the agreement, except in circumstances where there is damage to the property or other issues where funds need to be recuperated.
When drawing the lease agreement, the notice period for the end of the agreement or cancellation needs to be considered. The guideline for a notice period is three months for either of the parties to the agreement. This notice period gives the lessor time to notify the tenant should they want to terminate the agreement, while also giving the tenant enough time to plan and vacate the property.
If towards the end of the agreement both parties wish to renew/extend the lease, this can be done through an addendum to the original document. The addendum should state any changes to the original agreement such as a price increase or changes to the original terms and must be signed and dated by both parties and witnessed.
If you’re renting your property furnished, it is recommended to create a full inventory of all items in the property. This ensures that any items broken or lost can be claimed for from the tenant. When the agent does the handover with the tenant, they need to run through the entire inventory and the tenant will need to sign an acknowledgement to confirm this.
Short Term Lets (Airbnb)
If you plan to do short-term lets, as mentioned above, a full inventory should be drawn up, confirmed and signed off with the tenant. In the cases where a deposit has been taken, this should only be returned once a full inspection of the property has been done.
A nice touch when doing short-term lets is to leave a folder with some basic rules for staying at the property together with information about the local area and fun or interesting things to do.
This folder and information should include notes about quiet times in the building, Wi-Fi passwords and where to place trash.
If you have personal items that are left in the property that you do not wish to have used or on display, it’s advisable to lock them away or rent a storage unit and store them away from the property.
Rental Payments and Non Resident Bank Accounts
Non Resident bank accounts generally do not allow local funds to be paid into the account. However, you can have your rental income paid into your Non Resident bank account, however the lease agreement needs to be lodged with the bank ahead of any funds being paid into the account. If you are doing short-term/Airbnb type lets, this still applies, and each rental agreement needs to be lodged at the bank. Non Res SA can attend to this on your behalf.
Repatriating rental income
If you have a Non Resident bank account, and have rental funds paid into it, those rental funds can be repatriated. It should be noted that to do this, all documents pertaining to the purchase of property need to be lodged with the Non Resident Centre of the bank. Furthermore, all lease agreements relating to the lease of the property and the subsequent rental income will also need to be lodged at the bank.
When wanting to repatriate the proceeds of the rental income then a BOP (balance of payment form) must be completed and lodged at the bank. This document should be signed in wet ink and the original document must be lodged at the bank unless you have email indemnity set up on your account, in which case the BOP can be emailed across to them.
Renting out a property in South Africa as a Non Resident offers an excellent way to earn additional income but comes with responsibilities that need to be managed to avoid any issues. By staying informed and working with reputable professionals, you can navigate the rental landscape confidently and make the most of your overseas property.
If you require further information or assistance, please contact info@nonres-sa.com