Rent is one of many passive income options available to homeowners. Investing in this process without the proper knowledge can result in financial setbacks. If you are new to residential rental and want to avoid rookie errors, we will guide you through the process of renting out your home.
The ‘ask price’ is one of the most important factors to consider when renting out your house. Renting at a rate too high can deter tenants while setting a bar too low could result in you losing money. The rental value of a property is determined by factors such as the market value, similar properties, location, amenities, etc.
It is also important to know how the rental income in India is taxed. This is particularly true for NRIs (Non-resident Indians) or first-time landlords. What else should you consider before renting out your property? This article offers five tips for new landlords to better prepare themselves.
Renting your home is easier with these 5 tips
Here are some practical tips that will help you start your rental journey.
Assess the condition of your house
You will need to spend more money on maintenance if your home has been empty for some time. It may be necessary to make basic repairs, such as fixing the wiring or replacing leaky plumbing. You may have to paint walls stained by seepage. A deep clean of the room may be required to remove dust and stubborn particles from corners and crevices.
Don’t forget the maintenance costs and condition of the property when setting the price for the property. A well-maintained house will always have a higher value for rent than a shabby home.
Maintenance costs should be considered
During the negotiation, most landlords only consider the monthly rent amount without taking into account recurring costs like maintenance. You can, for example, decide to shift the maintenance costs on to the tenant, or you can share them with the tenant, depending on type of tenancy agreement.
If the tenant is responsible for the cost of maintenance, then the rent should reflect the additional costs incurred by the tenant. If the cost of maintenance is shared by both parties, you should factor in these extra expenses and set your ‘ask price’ accordingly.
Marketing your property is important
In the past, finding a tenant was primarily done through word-of mouth and real estate agents. The world has gone digital, and landlords are now able to connect with a larger pool of tenants through verified property websites. Consider online listing platforms. You can market your rental property from the comforts of their own home.
Here’s what you should avoid: Digital platforms are a breeding ground for fraud and scams. Both landlords and tenants must be aware of the rental scams and fraudulent practices.
Finding the right tenant
It is important to note that the term ‘right tenant’ is subjective. The definition of the right tenant is not universal. Renters who are neat and clean may be a good fit for some landlords, but others may want tenants who pay on time. Some homeowners prefer to rent their properties only to families. Others, however, prefer bachelors and students due the shorter rental terms. When screening tenants, it is important to be very clear about what you expect and the rules that you would like your tenant to follow.
Register your rental agreement
Rent agreements should be registered and notarised, and contain all relevant information, such as the maintenance obligations, the notice period to vacate the property, the rate increases during renewals, the grounds for termination, the security deposit refund guidelines and more.
The agreement must be signed by the parties involved. The agreement should be signed by all parties involved, including tenants. Also, make sure to review all local laws. Hire a real estate attorney to register the contract legally. This last step ensures that your property will be protected in the event of a conflict. Here’s a guide for new landlords on what should be included in a rental agreement:
- Names of both the landlord and tenant
- Address of the rental property
- The length of the rental period
- Rent payable by tenant each month
- Security Deposit Amount
- Conditions for the application of late penalty fees
- No-pets policy, visitor parking restrictions, etc.
- Repair responsibilities
- Eviction Terms
Renting out your house can be an excellent way to maximise your investment in property, if you take into account the tips and pointers above. You can minimise the risk associated with renting and also benefit from passive income.
