One of the most common ways to earn money is by renting out your apartment. The rent that a property commands depends on various factors, such as location, size, configuration, amenities and connectivity. Landlords often seek methods to increase the rent their property can command. Thus, they strive to enhance their property to secure a good rental income. However, there are external factors that also drive a surge in rental values, such as timing the rental market. Read this guide to find out the best times for landlords to rent out their property.
Why is the rental market an important factor?
- Increased urbanisation: With rapid urbanisation across India, people are moving to Tier-1 and Tier-2 cities for jobs prospects and education. This ups the rental market.
- Change in demographics: While a decade or two back, owing a house was a priority, today people prioritise flexibility. The Gen Z and the millennial prefer rented accommodation because of the convenience it offers.
- Plethora of options: The rental market offers housing across configurations, which is why people choose to rent. One can choose from 1 BHK, 2 BHK, 4 BHK, standalone building, gated community etc. Like in the case of Amit Tripathi who after his marriage lived with his wife and parents in their own house- a 1BHK. After the birth of his twin children, with number of people increasing in the house, he started scouting for a home. “Buying a 3 BHK immediately in the locality I stay in is difficult owing to the price it commands. While a property in this area is around Rs 4 crore for a 3 BHK, a 3 BHK property on rent is around Rs 60,000 per month. Thus, I put my 1 BHK on rent for Rs 24,000 per month and shifted to a 3 BHK on rent.”
What factors favour landlords in earning maximum rents?
The rental market in each area behaves differently based on local characteristics.
- Education hubs: Cities with a strong educational presence see higher rentals at the start of academic years. For example, Kota, Rajasthan which is known for its coaching classes for IIT JEE, sees an influx of students ever year. According to Numbeo.com, a 1 BHK in city centre in Kota is available between Rs 14,000 to Rs 18,000 per month and a 3 BHK in city centre is available between Rs 15,000 to Rs 35,000 per month. Similarly, rentals in Pune, which is an education hub, sees a spike from May to September. “There is a difference in rentals in the same area with same configuration of properties. This is because there is a difference in facilities like lift availability, 24 hours water supply, secure society, proximity to main road etc.”, says Jay, an independent broker.
- Vacation homes: Peak holiday seasons can maximise rental income, while off-peak periods may see lower or no rental income.
- Presence of corporate offices: Young professionals moving for work often prefer shared accommodation close to their workplaces, allowing landlords to rent out properties to multiple tenants. However, this requires society permission and may involve upkeep concerns. Also, there are other downsides to this. According to Sangamitra Ghosh, “I had bought a resale flat in Thane and was going to rent it out. I had an option to continue with the 5 people who were staying on rent and earn considerably higher. However, I opted to give the property on rent to a family, importantly because I was more concerned about the upkeep of the house in which I was planning to move in later.”
- Tie up with corporates: Entering a lease agreement with a corporate or bank can provide higher and more stable rental income while avoiding direct tenant interaction.
What are not favourable times for landlords to rent their apartments?
- Non-peak seasons for vacation homes
For example, Mahabaleshwar sees reduced tourist activity from July to September due to the monsoon, impacting rental income. Like in the case of Mahabaleshwar which sees a reduced tourist activity between July and September because of the monsoons that hit Maharashtra. “While my cottage is booked in the remaining nine months of the area, these three months hardly see any business. However, since this business gets covered and I don’t end up much in loss,” says Chirag Patil, who owns a cottage in Mahabaleshwar that he has listed in a holiday home renting portal.
- End of an academic year
This is true for educational hubs where children may go back to their home towns when academic year ends or the course is over.
- Better properties in the vicinity
If nearby properties are more appealing or better priced, it can affect your rental potential. Consider upgrading your property or adjusting rental terms to stay competitive.
How can a landlord time their rental game?
While there might not be a perfect time to buy a house, timing is crucial for renting out a property.
Know the market well: Understanding local market trends and peak times can help you set the right rental price and timing.
Make an offer: Adjust rental offers based on demand, tenancy duration, and security deposits. For instance, Poonam Singh adjusted her rental offer and terms to secure a long-term tenant after her initial rent was unsuccessful. Singh initially sought a rent of Rs 36,000 per month. However, because of difficulty to find a tenant, she signed a deal for two years instead of 1 year and rented her 2 BHK apartment for Rs 34,000 per month for the first one year and Rs 36,000 per month for the next two years thereafter. She also reduced the deposit money from Rs 1 lakh to Rs 75,000. “Keeping the flat empty for even one day is a loss. Hence, we signed a two year contract with the tenant,” she said.
3 key points for renting out your property
Know your tenant: Conduct a thorough background check and ensure police verification, as required by most societies.
Documents to provide:
- Sale deed proving property ownership
- Electricity bill
- No objection certificate (NOC) from the society
Rental agreement
- Specify monthly rent
- Security deposit
- Any future rent increases.
- Clearly define who is responsible for maintenance charges.
- Detail the rental period.
- Outline tenant responsibilities for property damage, with deductions from the security deposit upon vacating.
Housing.com POV
One should be aware of the prevailing market rates with respect to rental before putting your house on rent. While a favourable time boosts the market, not knowing anything about the market, will end you up with a loss that you will be making on rentals. So, for people especially who have bought properties in locations that is not their area of residence, should depend on agents who are the local experts. Additionally, to safeguard your property, do insist on registering the rental documents instead of opting for notary.
FAQs
What should a landlord do in case of a dispute with a tenant?
In case of a dispute with the tenant, a landlord should promptly communicate and try to reason. In case of a bigger problem, he can call for a mediator or take legal help.
What is landlord insurance?
Under this, home owners are protected from financial losses that may occur when they rent out their property. This includes damage to property, fire etc.
What does the security deposit cover of?
The security deposit covers money towards any damage done by the tenant while staying there, money towards unpaid rent etc.
What are the reasons why a landlord opts for notary instead of registering the rental agreement?
Notary is less expensive and is not time taking. But it is not as legally binding as a registered agreement. For a property worth your life savings, it is recommended to not take any risk.
What is the best way to screen potential tenants?
Do a clear background check, including criminal history, credit score check. It will help if you get previous landlord references. Before renting, know what is the tenant’s income and if he can afford the rent. Meet the tenant in person atleast once before giving property on rent.
| Got any questions or point of view on our article? We would love to hear from you. Write to our Editor-in-Chief Jhumur Ghosh at jhumur.ghosh1@housing.com |