Renting from a private property owner v/s a Developer – Pro’s and Con’s

So, you’re looking for a home to rent. If you haven’t been through the process before, chances are your experience will follow a fairly standard process.

You will more than likely start off with the right location; the ideal suburb that works for you, close to work, near a good school, and in a neighbourhood that makes you feel comfortable.

Linked to that comfort is security. Once you have shortlisted the 2 or 3 locations that work best for you, you will probably lean towards the one that feels more secure and offers you piece of mind that you will be safe.

Next is price. While you may have already determined what you are willing to spend on rent, typically this only comes into play once you have found where you want to live. The location of your ideal home may very well inform what you are willing to spend.

The last two considerations are the amenities surrounding your ideal location, and the style of the suburb. Perhaps you value wide open spaces and don’t crave having the shops on your doorstep. Perhaps you prefer living in the hustle and bustle surrounded by all your worldly needs. The point is that, as with style, the amenities surrounding your new home must suit you, and the style of the suburb must meet your own. Are you ultra-modern, or are you a rustic, old school person?

The above is fairly obvious and a process I am sure you are familiar with. Having said that, have you ever considered WHO you are renting from?

Once you are sure you have found the right home, you then sign up for a period normally longer than 6 months, which binds you to an agreement with another party. It should then be considered before signing the agreement, who would you like to rent from – a private home owner, or a company / developer?

There are Pro’s and Con’s to renting from a private individual or directly from a developer. Once all points have been considered one can then make a calculated decision and go ahead with the deal, without being blinded by the fact that you have found your dream home.

Let’s consider the pros and cons of renting from a private property owner.

You are in direct contact with the owner, making it far easier to contact them should you need to. You are possibly their only tenant, if not one of a few, which means you have the opportunity to create a more personal relationship.

The rental agreement will be more relaxed and standardised, and the credit check will probably be fairly basic. You will also have a commission eager agent pushing the landlord to accept you as a tenant so they can get their commission.

With a private landlord, the residence that you live in will be most probably be surrounded by properties that have been sold so the movement of people is then less, and 98% of the time, the estate doesn’t have a large number of units (often under 100).

The cons of such an arrangement would be that renting this property is not the landlord’s primary focus but rather a side line income, making it difficult to get the attention you may require at times. As a private individual does not have standardised processes, disputes often occur over maintenance work that is required, as well as who is responsible for fixing and paying for certain items.

Something that is rarely considered is that you run the risk of the owner wanting to sell the property while you are still in your lease period. While your lease agreement still stands, this often creates an inconvenience to the tenant.

So how does renting from a private individual effect your pocket? A private landlord and thus, the tenant, does not benefit from economies of scale. When individuals purchase a property, they enter the equation at the very end of the supply chain. This means they have paid top dollar for their asset as they are consuming profit margins of contractor and the developer, culminating in a market price that is at a premium. As a tenant to this private landlord you will then be paying the price required by the purchaser to be making some kind of return on the property. In short, when renting from a private individual, you will be paying a premium.

Let’s take a look at some of the pros and cons of renting from a developer.

Although you will form part of what is typically a very large portfolio, you will still have that personal touch with the professional team that is on the ground.

When renting from a developer, you will be dealing with a large company with many systems and processes aimed at making your life easier.  This could bring some refreshing structure to some, although the application process is very comprehensive and requires a number of documents to ensure the affordability of the applicant. This also protects you to ensure you can afford the rental.

Considering some of the pros – first and foremost, you are assured that the tenants of a developer are the primary focus of that developer, for two reasons:

1              As a developer, rental income is the sole source of income. This means that your happiness        as a tenant is paramount to the developer.

2              Further, a developer must at all times look after the best interests of their assets, which              means all maintenance concerns are dealt with swiftly and efficiently.

The professional teams that a tenant would deal with on a daily basis are educated in the property and property management industry, it is these individuals whose primary focus it is to keep you happy as a client, and maintain the asset in which you live. You will find that the professional teams on site have been involved in the project since the beginning, allowing them to be able to answer all sorts of questions, as well as giving you the required information to make an educated decision on where you are going to stay and which unit type will work for you.

Furthermore, economies of scale benefit the tenants directly. When renting from the developer the rental income only needs to cover building costs and not the additional costs that come with the resale of a property. Further, you get the benefits of the quantity of the units as it makes it affordable for certain tenant focussed developers to offer free WIFI, free Showmax, free classes daily for adults and children, as well as free monthly events that encourage social community living.

An important point to consider is the operation of a developer run estate. You typically will have an onsite manager that managers the estate 24 hours a day, as well as a 24-hour maintenance line. You will also benefit by having your garden maintained as part of your rental amount.

As mentioned earlier, developer run estates usually have a very strict application process to ensure that all tenants are legal and debt free. This ensures the safety within the estate as well as the standard of tenant, ensuring a safe and pleasant environment for all tenants.

When considering your personal 5 to 10 year plan, one could consider that many developers have large rental portfolios, which allows you to grow with the company. This allows you to start in an apartment and end up in a 5-bedroom house 10 years down the line, your deposit just gets transferred and you credit check is only done if there is an increased amount, rather than having to deal with a new individual every time you move.

In short, it is clear that both avenues have both benefits and that almost certainly, the benefits of renting from a developer far outweigh the benefit of renting from a private individual. Once you have found what you are looking for in terms of location, security, price, amenities and style, sit back and weigh up which property owner type gives you more. It will almost certainly be a developer.