With the high cost of living in South Africa, many people opt to stay in a commune. Communes generally have high occupancy rates and generally higher rates of return compared to traditional rental property. It’s important to run your business in high demand in areas around universities and workplaces
How can you, as a property investor, transform your residential property into a successful commune?
How to create a commune
To create your own commune or shared accommodation, you must overcome legal, operational and structural compliance. Many municipalities require the property to be rezoned or a special license/permit be obtained. You need to adjust your property commune needs, such as adding extra bathrooms and adding an extra fridge. You will also need a marketing plan, tenant screening and insurance in place.
Or you might die.
Navigating the Legal Landscape: Zoning, Regulations, and Permits
The first critical step in establishing a rental commune is ensuring your property’s zoning allows for this communal living arrangement. South African municipalities often have strict regulations, and certain areas require rezoning to legally operate a rental commune.
Consulting a town planner can help you navigate this process. A legal expert can help you understand the potential implications for your property’s rates and taxes. Additionally, be sure to obtain any necessary permits for communal living. The specific requirements can vary depending on local laws and the number of tenants you plan to accommodate.
Securing the Right Insurance Coverage
Standard homeowner’s insurance won’t provide adequate coverage for a rental commune. Landlord insurance offers liability protection in case of accidents or tenant-related incidents, as well as coverage for the building itself. Additionally, consider contents insurance for any shared furnishings or amenities, as these may not be covered under a typical policy.
Although building insurance might look like the way to go, most do not cover rental communes. There is landlord insurance that can cover many trade risks. These risks include tenants not paying, some legal fees, and building insurance. It is recommended to have home content insurance too, as tenants can destroy property.
Preparing Your Property for Communal Living
Your property might need some upgrades and to appeal to your target market. There can be some maintenance required to fix the property to address safety issues or necessary repairs.
Some students in South Africa are comfortable living in below-standard conditions, however, some expect an immaculate setting. You might need to adjust the shared and communal spaces. Focus on areas like the kitchen, living area, and outdoor spaces. This can help to foster a sense of community.
Be mindful that these upgrades cost more than you think. For example, you will need to add locks on bedroom doors and secure shared amenities.
In most cases, appliances, cutlery and crockery will also need to be supplied.
Establishing an Optimal Rental Structure
Traditionally, a room-based rent model has worked fairly well. This is when you charge based on factors like room size, amenities, or location within the house. Alternatively, you consider a flat rate per person. This rate includes shared costs, such as utilities, and can simplify the process.
Bigger rooms can host multiple people.
In some cases, you can split your commune into smaller units through dry-walling or similar.
I have also heard of establishing a communal fund to manage household supplies and shared expenses. Include some of these in your rent rather than a separate cost.
Developing Community Agreements and Conflict Resolution Processes
In sectional title, the house rule governs how the scheme is run. In the same way, it might be prudent to have house rules for the commune. This agreement should outline guidelines for shared spaces, such as cleaning, maintenance, noise levels, and communal expenses. Set up a transparent process for addressing disputes and conflicts. Use a dedicated communication channel through a rental agent.
Marketing Your Rental Commune to the Right Audience
If you have contacts in the industry, such as NSFAS accommodation, it will simplify your tenant acquisition strategy. Use online rental platforms. Social media and local classifieds can also help you reach your target audience of students and young professionals.
Tenant Screening and Selection: Ensuring Compatibility
Carefully screening and selecting tenants is the difference between property success and court cases. When screening tenants, be sure to conduct thorough background checks, including rental history, employment status, and credit (if possible). Additionally, interview prospective tenants to gauge their compatibility with the communal lifestyle and shared values.
Maatjies.
— Frugal Sibusiso 🇿🇦 (@FrugalLocal) November 8, 2024
If your bank statement balance is repeatedly below R 100 and you have half a page of Betway transactions, then I don't want you in my flat.
Please.
Personally, I check their bank statements first. If I see pages of Betway transactions, I politely decline the prospective tenant. Some of the most important elements I look for are rent being paid on time. I also assess proper money management, such as spending money wisely, and cash flow or affordability.
Once I’m happy, I invite the tenant to view the property. If you have doubts, a request for previous landlord references and a credit check would be requested.
Managing Your Rental Commune: Self-Management or Professional Property Management
As your rental commune grows, you may find that the day-to-day management becomes increasingly time-consuming. Self-management allows you to stay involved and save costs. However, a property management firm can handle tasks such as tenant screening, rent collection, and property maintenance. This frees up your time and resources.
Conclusion
You can transform your property into a rental commune in South Africa. This change can unlock its rental potential. It is particularly beneficial if traditional leasing hasn’t attracted tenants. With proper zoning, updated insurance, and thoughtful community agreements, a commune setup offers a sustainable way to maximize rental income. It fosters a sense of community. You can create a rewarding communal living experience that appeals to students and young professionals. With the right approach, you can turn your rental commune into a hub of activity. It can also become a centre of social connections and financial success.
