With financial experts still concerned about the threat of a global double dip recession landlords should be extra vigilant about keeping a handle on bad debt.

Collecting incoming payments should always be at the top of any landlord’s agenda, but with the risk of there still being a fall-out from last year’s economic downturn, landlords need to be even more proactive about debt collection.

Landlords and their property managers need to get their hands dirty. First and foremost is accurate and timely reporting that will flag problems early on, giving landlords a chance to take action before the debt starts to gather.

Once landlords or property managers have spotted a problem, it’s vital that they act quickly. This generally involves a few tough decisions on whether or not it makes sense to keep the tenant or not.

If the tenant is an attractive one, that complements the property’s tenant mix, and runs a generally sound and sustainable business it is most likely worth nursing them through the tough times to benefit from a longer term gain.

Put a manageable payment plan in place, or be creative about extracting value from the tenant. For instance, retail tenants might be behind in their rent, but will still be marketing their business. Landlords should strike a deal to ensure that their property features prominently in the tenant’s marketing campaign. Another good option is to agree that the tenant arranges a promotional event in the shopping centre to help attract new shoppers.

On the other hand, if the tenant is not a particularly desirable one and/or appears to be suffering from deep-rooted and systemic financial woes, it may be better to cut for a landlord to cut their losses before they escalate – within the confines of the lease agreement with that tenant, of course.

Other tips include:

- Maintain good communication on both sides of the food chain. If your tenants are struggling to pay their rent, you might find yourself in a position where you can’t pay suppliers or your bank. Know who is likely to default so you don’t get caught by surprise, and keep your debtors informed of your position so that they remain favourable to you.

- Do take judgement against defaulters, even if they have absconded and it seems highly unlikely you will receive any money in the short term. You may at least recoup your losses in the long-term when the tenant wants to clear their black-listing.

A double dip recession refers to second recession that kicks in after short period of economic growth following an initial recession. At the Fortune-Time-CNN Global Forum held in Cape Town at the end of June, both Trade and Industry Minister Rob Davies and Absa CEO Maria Ramos warned about the risk of debt-laden developed economies slumping again.

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Speak to a home loan consultant about financing your new property or reviewing your existing mortgage. We are able to assist in lowering your bond repayments and securing attorney discounts.

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Email: morne@mortgagepluscc.co.za

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Home repos falling; small part of total

The number of houses that banks have had to repossess due to their owners defaulting on loans, has dropped.

The price categories of most repossessed houses differ at the large banks.

At Nedbank the average price of repossessed houses ranges between R300k and R400k with very few boasting price tags of R1m or more.

First National Bank (FNB) and Absa say some people in all price categories are struggling to pay their loans. Most repossessed houses at FNB resort under the R800k to R900k price category, while “houses with big loans” are problematic for Absa.

Nedbank currently has 1,800 repossessed houses, but they represent less than 1% of its total home loans.

At Absa the number of repossessed houses represent less than 0,01% of all home loans. FNB could not release its figures as it is in a closed period before the announcement of its results. Standard Bank chose not to comment.

The banks attribute the drop in the number of repossessed homes to their efforts to help homeowners to keep their houses or helping them to sell them.

Luthando Vutula, executive manager of Absa Home Loans, ascribes the decrease in the number of repossessed homes to better economic conditions.

However, FNB and Nedbank are of the opinion that consumers are still under pressure.

Jan Kleynhans, CE of FNB’s home loans division, says consumers are still under pressure due to their big debt burden and unemployment.

The banks are doing their utmost not to lose too much money when repossessed homes are sold.

The best way to sell the houses is at private auctions.

André Potgieter from legal collections at Nedbank says the bank will only buy houses back if the reserve price set by the bank is not achieved at an auction. It is also the case with FNB.

Up to 80% of the property’s value is usually achieved at auctions, says Potgieter.

Vutula says “less than 1%” of repossessed homes are currently being sold as people are looking for bargains. “Affordability remains a problem due to the fragile economy.”

Kleynhans says the majority of repossessed homes at FNB do find buyers.

Potgieter says the bank helps clients with repayment options if they go into arrears.

The loan period is sometimes extended when someone is in deep trouble.

The extension of the loan period is equal to a new loan agreement with which the stipulations of the National Credit Act (NCA) is taken into account. It means that some people don’t qualify for a new agreement.

Nedbank currently grants one out of every three home loan applications.

Some of the reasons why banks reject applications for loans include the fact that the applicant is on a credit bureau blacklist or that he won’t have enough money to meet his other obligations if the loan is approved. – Adri van Zyl, Sake24

By choosing Mortgage Plus for a loan, you will get that continual service to make sure you are getting the best deal possible.

CONTACT US

Speak to a home loan consultant about financing your new property or reviewing your existing mortgage. We are able to assist in lowering your bond repayments and securing attorney discounts.

Complete this short form online
Call us on 011.327.4489
Email: morne@mortgagepluscc.co.za

www.mortgagepluscc.co.za