- Date : 08/12/2017
- Read: 4 mins
Renting out an additional property can be a good income source. But there is a process to follow before handing over the keys.
What do you do with a residential property you own, but are not living in? Do you leave it unattended to collect dust? Or do you treat it as an investment? If you want additional income, it is best to rent out the property. This way you can recover some mortgage, and there will be someone looking after the property.
However, you cannot simply hand someone the keys and ask them to pay you rent. There is a process to follow when planning to give out your property on rent. So here is the right approach to follow if you want to successfully rent out your home.
Related: Financial steps to take before major milestones: House [Infographics]
Get the house rent-ready
Before renting out the property, there are certain things you should check for-
- Leakages and cracks in the walls or floors
- Paint, electrical and plumbing repairs
- Rodent or any other insect problems
Attend to these before renting out the property to avoid problems later.
Look for a tenant
When it comes to searching for a tenant, a good option is to contact a realtor. Agents normally charge a month or half a month’s rent as brokerage. But paying that amount is worth it as agents are better equipped to find a suitable tenant, and can handle the necessary paperwork. You can also opt for listing the property on real estate websites or put an advertisement in the local newspaper.
Related: 6 compelling reasons why you need Home Insurance
Screening a tenant
Don’t settle on the first tenant that comes your way. Take time to screen potential tenants. After all, your property will be in their hands. Police verification of the tenant is a must before renting out your home. For this you need to fill out a verification form, which is available on websites of state police departments. Submit the form at a local police station, along with identity proof of the tenant.
Decide the optimum rent
The rent amount should be in line with other similar constructions in the locality. It should be realistic; not too low or obnoxiously high priced. Semi-furnished or furnished properties usually demand a higher rent amount. Similarly, if the property you are renting out includes additional facilities, such as housekeeping, clubhouse, parking etc., you might have to consider including these costs in the rent amount. Ask your realtor or check property websites to get an indication of the ongoing rental rate in certain localities. You can also speak to neighbors who rent out their property.
Legal requirements for renting a property
Rental leases in India generally last for a period of 11 months (since this tenure is not governed by rent regulation laws). However, under Section 17 of the Registration Act, 1908, rental agreements with a lease period of 12 months or more are governed by Rent control laws, and must be registered. As per the regulations, these rents are also determined by local state government.
Important components that your rent lease should mention include
- Lease date
- Security deposit amount
- Payment frequency – monthly/ quarterly/ yearly etc.
- Rental due date
- Late rent submission penalty
- Pet policies
- Eviction and behavioral rules
- Maintenance responsibilities
Additionally, some societies state certain qualifying conditions, that could deem potential tenants fit or unfit to occupy a house. If the property you are renting out is part of a housing society, check for any limitations or by-laws stated by the society. This could be related to number of occupants, type of job, etc. Get all the necessary clearances before handing over the keys, to prevent any trouble later.
Related: 5 reasons to go for home loan refinance
Property experts also advise that if you are letting out a furnished or semi-furnished property, you should ensure the list of fittings and fixtures is mentioned in the lease, along with penalty for damage decided in advance.
What do you do with a residential property you own, but are not living in? Do you leave it unattended to collect dust? Or do you treat it as an investment? If you want additional income, it is best to rent out the property. This way you can recover some mortgage, and there will be someone looking after the property.
However, you cannot simply hand someone the keys and ask them to pay you rent. There is a process to follow when planning to give out your property on rent. So here is the right approach to follow if you want to successfully rent out your home.
Related: Financial steps to take before major milestones: House [Infographics]
Get the house rent-ready
Before renting out the property, there are certain things you should check for-
- Leakages and cracks in the walls or floors
- Paint, electrical and plumbing repairs
- Rodent or any other insect problems
Attend to these before renting out the property to avoid problems later.
Look for a tenant
When it comes to searching for a tenant, a good option is to contact a realtor. Agents normally charge a month or half a month’s rent as brokerage. But paying that amount is worth it as agents are better equipped to find a suitable tenant, and can handle the necessary paperwork. You can also opt for listing the property on real estate websites or put an advertisement in the local newspaper.
Related: 6 compelling reasons why you need Home Insurance
Screening a tenant
Don’t settle on the first tenant that comes your way. Take time to screen potential tenants. After all, your property will be in their hands. Police verification of the tenant is a must before renting out your home. For this you need to fill out a verification form, which is available on websites of state police departments. Submit the form at a local police station, along with identity proof of the tenant.
Decide the optimum rent
The rent amount should be in line with other similar constructions in the locality. It should be realistic; not too low or obnoxiously high priced. Semi-furnished or furnished properties usually demand a higher rent amount. Similarly, if the property you are renting out includes additional facilities, such as housekeeping, clubhouse, parking etc., you might have to consider including these costs in the rent amount. Ask your realtor or check property websites to get an indication of the ongoing rental rate in certain localities. You can also speak to neighbors who rent out their property.
Legal requirements for renting a property
Rental leases in India generally last for a period of 11 months (since this tenure is not governed by rent regulation laws). However, under Section 17 of the Registration Act, 1908, rental agreements with a lease period of 12 months or more are governed by Rent control laws, and must be registered. As per the regulations, these rents are also determined by local state government.
Important components that your rent lease should mention include
- Lease date
- Security deposit amount
- Payment frequency – monthly/ quarterly/ yearly etc.
- Rental due date
- Late rent submission penalty
- Pet policies
- Eviction and behavioral rules
- Maintenance responsibilities
Additionally, some societies state certain qualifying conditions, that could deem potential tenants fit or unfit to occupy a house. If the property you are renting out is part of a housing society, check for any limitations or by-laws stated by the society. This could be related to number of occupants, type of job, etc. Get all the necessary clearances before handing over the keys, to prevent any trouble later.
Related: 5 reasons to go for home loan refinance
Property experts also advise that if you are letting out a furnished or semi-furnished property, you should ensure the list of fittings and fixtures is mentioned in the lease, along with penalty for damage decided in advance.
