How much do I lose on a bad tenant? | How bad tenants damage your investment ROI
- Property Protect
- 3 days ago
- 6 min read
How much do I lose on a bad tenant? If you're a property investor, you know your return margins can be slim. After deducting bond payments, if you have anything left, there are still levies to be paid, managing agents' fees, maintenance and repairs to damages. If your bad tenant hasn't paid utilities, you'll have to cover those too or risk legal action from the municipality.
The reality is, you cannot afford to have a bad tenant not pay rent, especially if the property is bonded.
If you're building your property portfolio using a gearing strategy, your portfolio depends on consistent rent collection to pay off the bond. If you have just one or two bad tenant incidents, your entire portfolio is at risk. It's essential to understand just how much damage a bad tenant can do to your investment portfolio.
How much does a bad tenant hurt my investment?
Let's use a common scenario for a young investor, John, who dipped his toes into the property market by buying a two bedroom apartment in Greenstone, Johannesburg. As a young investor looking to get into the property market, John had to apply for a bond.
Average data per property24.com listings as of March 2026.
Investment Expenses
Purchase Price: R1,200,000
John was smart and purchased at a price just under the 2025 Transfer Duty threshold.
Transfer Duty: R0.00
Transfer fees (conveyancing): R35,000
Bond Registration Costs: R40,000
Renovation costs: R0.00
John was lucky and didn't have to renovate the property at all.
Total Costs: R1,275,000
Rental
Rental income: R14,000
Less: 8% ex VAT managing agent's commission = R1,288 incl. VAT
Less: Bond repayment R11,799
Less: Levies to Body Corporate: R2,500
Less: Rates and Taxes: R900
Total running costs: R16,487
Gross Profit/Loss: -R2,487.
John had to buy the property via bond. Assuming 100% occupancy, and assuming his tenant is paying rent consistently, he'll still have to contribute R2,487 per month from his own funds for the next 20 years, until the property is paid off.
Now let's look at the effects of inconsistent yield, caused by less than 100% occupancy rate, or less than 100% rent payment consistency. If John has just one incident of his tenant not paying rent during the year, this is what happens:
John's tenant pays rent on time for 6 months, but sadly loses her job and misses her first rent payment. She promises John she'll won't miss the next month's rent, and she'll catch up the missed payment. But unfortunately, she struggles to find a new job in time, and misses the second payment too. By then, the financial strain on both John and his tenant has soured their relations, and she stops promising to pay, stating simply that she's trying her best, and he can't expect any more than that. She has become a squatter. John's losses have started to pile up, and they're going to continue.
Losses
Month 1 running costs: R16,487
Month 2 running costs: R16,487
John understands that he needs to fix his situation fast, and calls a local attorney for help.
Legal costs for eviction: R50,000
It takes John three months to evict his bad tenant.
Months 3-5 running costs unpaid: R16,487 x 3 = R49,461
Let's assume John has been proactive in the meantime, and has engaged his managing agent to find a new tenant to put in the property as soon as the bad tenant has been removed. Let's also assume the bad tenant didn't cause any damage to the property, and it only needs a minor refresh before welcoming the new tenant. After the admin and some cleaning, John has only lost one more month.
Month 6 running costs unpaid: R16,487
Subtotal Loss: R148,922.
Worse, these are not losses which can simply be written off. John is behind 6 months on his bond - over R70,000. The bank has put enormous pressure on him and by now has probably started the legal process to foreclose on the property. He owes the Body Corporate over R15,000, and is behind over R5,000 on rates and taxes to the municipality. Interests on these debts is mounting as well.
Additional Losses
Now for a final kick in the teeth: John's tenant hasn't paid the utilities for 6 months. Although the lease agreement makes the tenant responsible for payment of utilities, the municipality doesn't care about that. As John is the owner of the property, he is ultimately liable to the municipality for payment of utilities.
Months 1-6 unpaid utilities: R2,500 x 6 = R15,000
John's Total Loss: R163,922.
Recovery Time
Can John recover from this loss using profits from the property? If so, how long will it take to recover? If the property is bonded: impossible to recover, since he has to contribute to running costs for the next 20 years.
If the property was bought cash: Assuming John can retain a monthly profit of R11,799 instead of paying a bond, it will take R163,922 / R11,799 = 13.89 months to recover from this loss. During this time, he has to suspend his hopes of recouping his initial purchase costs.
The point is clear. You cannot afford a non-paying tenant.
So, the burning question: how much can Property Protect save you in such a scenario? As property attorneys, we want to see you deriving the maximum possible benefit from your property investment, with the minimum of stress. When dealing with a bad tenant, our advice is always to be ruthless - get rid of your bad tenant the moment they miss the first month's rent (read our article on that here).
Neither Property Protect, nor any other attorney, can guarantee a zero loss in such a situation, because the legal process takes time. But through efficiency and ruthlessness, we can help you minimise your losses. Here's how we would have handled the case, to save you money:
Your tenant misses rent: We send a Notice of Termination of Lease two days later. Even if the tenant promises to catch up rent, we continue with the legal process until they do - keeping the pressure up on them and making it clear they're not going to squat in the property.
Legal costs: Property Protect removes the normal legal costs system, reducing your costs from R50,000 to R299 per month.
If you were proactive and signed up for Property Protect before placing your tenant in the property, you could build the costs of Property Protect into the lease and make the tenant pay for it. Legal costs reduced to R0.00.
Property Protect's attorneys run the eviction process efficiently and reduce the loss from 6 months to 3 months.
Losses saved
Legal costs saved = R50,000 - R299 = R49,701
Running costs saved = 3 x R16,487 = R49,461
Total saving: R99,162.
Our data shows that in 60% of cases, we manage to get the tenant out in less than 3 months, without having to go through with the eviction case. Once attorneys are on the case, many tenants recognise that (a) they are not going to manage to stay in the property, and (b) they are going to be chased forever for the lost revenue.
The law and the courts often favour tenants, so no attorney can guarantee that an eviction case will go perfectly, with no postponements. But even in the worst case scenario, Property Protect will save you over R49,000 on legal costs, and is also the only service that guarantees we'll secure an eviction order against your tenant - or we'll refund you in full.
Contact us to find out more or sign up today to protect your property investment.
The above information is for illustrative purposes only and does not take into account your specific circumstances. It therefore does not constitute legal or financial advice. Please contact us for comprehensive advice to address your circumstances. Under no circumstances should any person use the above information in an attempt to circumvent the provisions of legislation or contract, or to cause damage to any other person. Always ensure you and your company are in compliance with the law in all dealings. This information is accurate as of the date of publication. Property Protect is not insurance and does not pay out any claim amount. It is a Value-Added Service (VAS) provided at a discount, directly from our law firm. © 2026 Maybery Attorneys Inc. All rights reserved.