Good returns on Cape Town short lets woo savvy investors

The tourism industry has always been one of the cornerstones of Cape Town's economy and, with the city recently voted as world's top tourist destination in the 2019 Telegraph Travel Awards for the 7th consecutive year, it bodes well for the short-term letting sector. 

And, if investors do their homework with regards factors like location and expected facilities and services, holiday property investments in the City Bowl and on the Atlantic Seaboard can yield excellent returns despite the prevailing economy and general market conditions.

So says Alessia Collura Brown, short-term and holiday rental specialist for Lew Geffen Sotheby's International Realty, Atlantic Seaboard and City Bowl.

"This sector is also bolstered year-round by the Cape Town International Convention Centre (CTICC), a constant source of tenants for upmarket accommodation, as well as several major sports events like the Pick n Pay Cycle Tour and the Two Oceans Marathon.

"In recent years, sectional title properties have grown in popularity to become the preferred choice of holiday accommodation in most destination hotspots and therefore also the most attractive property type for buyers seeking short-term buy-to-let investments.

"Investors looking to enter this market should consider the newer A-Grade buildings which offer 24-hour security as well as other facilities, like gyms and on-site restaurants.

"A well-furnished apartment in building which is not only in the correct position but also offers tenants facilities and is managed by an experienced letting agent with a good online platform can almost guarantee you an excellent return on your investment."

However, with the advent of online booking spurring short-term letting, it has become an increasingly contentious issue, especially in complexes where it regularly occurs and the day-to-day lives of long-term residents are routinely disrupted.

The days of just leaving keys with a relative or friend are long gone and to optimise one's investment, secure solid returns and avoid potential pitfalls and conflict, reliable property management services are essential, says Brown. "Landlords are therefore increasingly opting to partner with a skilled and credible rental agency with managing agents who understand the market and know what is in demand, in which areas and at what price."

She says that when choosing an agent, it's essential to look for one with experience in the rental market, knowledge of the area and especially one who will always put your interests first and fight in your corner if necessary

Sectional title owners are legally entitled to let their properties for any length of time they choose, (subject to the relevant laws, title deed conditions and the complex's approved rules) and in terms of the sectional title acts and rules, the concept of short-term letting is not defined nor specifically regulated.

However, Brown cautions that this should not lull owners into complacency regarding their tenants' conduct as provisions are made in the Sectional Titles Schemes Management Act 8 of 2011 (STSMA), Management Rules and Prescribed Conduct Rules, which bind both owners and tenants.

"The rules state that it is an owner's duty to ensure that their tenant's compliance with the conduct rules of any communal or exclusive use area. It furthermore provides that the rules within a sectional title also bind the body corporate. 

"Additionally, many landlords are unaware that The Sectional Titles Schemes Management Act requires them to inform the body corporate of any change in ownership or occupancy of the unit and to provide the names and ID or passport numbers of the occupants.

"Owners or their letting agents are also legally obliged to give their tenants a copy of the scheme's conduct rules, including details about security arrangement, which must be signed by the incoming occupants. And owners will remain responsible for the actions of their tenants."

But, by the same token, the trustees are tasked with the duty of managing and administering the common property and the enforcement of the rules of the scheme, whilst at the same time not unreasonably restricting the proprietary rights of investment owners to obtain the highest rental return.

"In the prevailing economy with declining house price inflation dampening the market in most sectors, rental returns on short-term lets in sought-after areas are still consistently rewarding, especially for savvy investors who do their homework and appoint the right professionals," says Brown.