Personal Finance

Ready to hand over the house keys?

Meera Siva | Updated on February 11, 2018   -

To reduce hassles, landlords should do their homework to before renting out the house

Rent from your unoccupied property can be a sweet addition to your monthly income. But finding a good tenant and handling the issues can be a real hassle. Data from the Economic Survey shows a steep increase in the number of unoccupied homes — about 12 per cent or about 1.11 crore homes were vacant in 2011, up from 65 lakh in 2001.

The Survey noted that rent control, unclear property rights and difficulties with contract enforcement have constrained the market.

However, home owners can do some homework to protect their rights while earning regular income from rent.

Ground work

Before renting your house, fix problems such as leaky roof or plumbing issues. Find out the rental rates in the locality by talking to a local broker or checking online portals.

You can visit these properties to better understand the relative rental value of your property.

If the house forms part of a housing society, know the rules before renting it out. For example, association rules may not permit renting out for office-use or service apartments.

You can reach out to potential tenants, possibly by first spreading the word to your circle of contacts. To get a wider range of tenants, you must get contact brokers and place ads in local newspapers and online websites.

If you are placing an ad, make sure to use the right words to describe the property. Key aspects such as upgrades made to the home, any additional items that come with the house, location advantages and features of the property such as children’s play area must be included.

You must also be mindful of what time of the year you plan to rent your home. Typically, homes are rented out most during the school holiday period.

However, renting out during the non-peak season may have other advantages such as low competition. Also, the right season depends on your target tenant profile.

Selecting a tenant

From the pool of potential renters, you can select your tenant, keeping a few things in mind. One, you must ascertain they can pay the rent. You can verify their employment records and, possibly, credit report.

Two, a reference check from their earlier landlords will help verify if the tenant has maintained the house in good condition. Three, ensure they do not have any criminal background. Typically, real-estate agents provide tenant verification services, says Ankur Dhawan, Chief Investment Officer,

If the tenant negotiates on rent, weigh the economics of lowering the rent versus having the home unoccupied. Likewise, tenants may also negotiate on the amount of security deposit. You must weigh the risk of agreeing to a lower security deposit, if there are delays or issues with payments later.

Rental agreement

It is a good practise to have a rental agreement that covers important terms, drafted by an attorney.

For example, it must clearly state which items of internal property maintenance will be paid by the owner and which ones by the tenant.

Dhawan notes that there must also be clarity on the notice period for the termination of lease agreement — it should not exceed 2 months.

In the rental agreement, rent escalation rules, penalties for delays in payment and other dues must be clearly specified.

The agreement must be registered, though it is often executed on a stamp paper. Dhawan says that the registration and stamp duty charges are shared equally between landowner and tenant.

You must note that an agreement does not cover you completely. Currently, there is no prescribed Tenancy Act (akin the Stamp Duty Act) that firmly governs the rules and regulations regarding rental agreements, says Ashish R. Puravankara, Managing Director, Puravankara Limited. However, having a well drafted agreement is a good start.

The writer is co-founder, RaNa Investment Advisors

Published on February 11, 2018

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