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There can be different reasons to buy a second house – it can serve as a retirement home, or a long-term investment to reap profits through appreciation in capital values. Another category of second home buyers, are those who seek annual rental income, the moment they possess it.
It is obviously easier, if the second house that you wish to rent out, is in the vicinity of the first home where you reside. If this is not the case, it is better to have acquaintances in the town of your second home.
Benefits, vis-à-vis maintenance of the property and monthly charges
It is always beneficial to rent out a second property, maintains Sachin Sharma, vice-president (marketing and CRM), Logix Group, Noida. “Firstly, the monthly rent will support in repaying the EMIs of your home loan. Also, the monthly maintenance charges and electricity and water charges, are to be paid by the owner of the apartment, if the property is vacant. In case the property is rented, these charges will be borne by the tenant,” Sharma explains.
While the monthly rental from your second property is the main benefit, it is up to the owner to ensure that the process remains hassle-free. First and foremost, landlords should always do a background check of prospective tenants. A police verification is necessary. Also, ensure that the annual rental amount that you charge is realistic, by doing a check on the market. Last, but not the least, have your papers in order and enter into a rental lease agreement that covers all important clauses.
Renting out a house, also means that its maintenance is taken care of by the tenant. “Having a second property is always a good thing, but maintaining two properties simultaneously, can be a big task,” points out Sahil Gupta, director, Gupta Realtors. “So, renting the second property is always a good idea, as it gives you various benefits, along with regular income that helps to keep your financial profile healthy. Moreover, the property is kept is shape and maintained because of daily cleaning,” he explains.
Tax benefits on letting out a second home
Letting out your second property, also provides tax rebates. Your rental income will be a part of your total income and therefore, taxable.
However, if you have taken a loan to buy the second property, then, you are entitled to a tax rebate by deducting the amount you receive as rental income. For example, if your annual interest on the home loan is Rs 3,00,000 and your annual rental income is Rs 1,00,000, you are eligible for a tax rebate on the difference of Rs 2,00,000 (Rs 3,00,000-Rs 2,00,000). The deducted amount is considered as your expense and therefore, the tax (rebate) benefit is attached. This way, you can reduce the burden of your home loan.
Other benefits of renting out a second home
“One more benefit, is that the monthly rent received in the account of owner, comes under regular income. The owner can enhance his loan eligibility, to avail of a car loan or other home loans, on the basis of this additional income,” adds Sharma.