Renting your house? Know the various ways you can do it.

There are numerous advantages linked with real estate investments. The most compelling of them all is the property’s potential to generate rent. 

 

What are the benefits of renting your house?

• A combination of rental income and property value appreciation can help in long-term wealth creation. 
• Getting the correct rent for your property results in a permanent source of income for you. This money will help you establish financial stability. 
• Once a regular passive income starts coming in the form of rents, you can shift your focus to other areas as there will hardly be any daily involvement with respect to rented property. 
• Incomes from rents can be used as an inflation hedge- the rental rates will rise as cost of living increases. 
• There are tax advantages that are one can take advantage of if they rent their property. For example, people owning residential property that is let on rent can claim for tax deductions under Section 24. 
• When you invest in a rental property, you are diversifying your portfolio that may include volatile financial products such as stocks.
• You can control the rental investment market by deciding on the tenure, which tenant to lease to.

 

What are the various ways in which you can rent your house?

• Rental to families

Families who stay on rent often seek longer rental term agreement. This helps you save on brokerage costs if you need to find another tenant. Also, you are spared of problems of vacancy, preparing the house again etc. when a new tenant comes. As families who would be staying will have a steady income, you won’t face risk of missed or late rents. Also, your property will be well-maintained. 

• Rental tie-ups with corporates

You can enter into a lease tie-up with corporates like banks or business houses who will either use your property as company quarters for their employees or company guest house. Either way, it’s a safe deal because you will directly deal with reputed corporate houses. You may not need to get in touch with the tenants as the corporates will handle them. The lease term will be for a longer period. 

• Paying guests 

You can let your property to many individual people at the same time who will be sharing the property. While the money as rent will be more than giving to the single family, you may have to check with your housing society if they give permissions to rent to individual PGs. A very common PG rental way is to rent the different rooms of chawls in Mumbai to individual people. These are prevalent in areas such as Marine Lines, Grant road, etc. 

• Sub-letting

If the tenant staying at your property, leases your property or a space in it to someone else, it is known as sub-letting.  This has to be done only with consent of the landlord as it has some benefits such as rental incomes comes in even when the tenant moves out. It’s also a case of easy money as there are times when the property to whom it is sub-letted pays more rent than the tenant as he may need it only for a few days. However, there are risks involved when you sub-let your property like damaging the property, not paying rent on time etc.

While sub-letting, screen the tenant properly. Get an agreement signed that includes terms and conditions such as rent, duration, maintenance etc. for the sub-lease. It should be signed by the owner and the subtenant. 

• Vacation rentals

If you have a property that’s more of a second home, you can list it as a vacation rental place. When listed through proper websites that deal with such listings, you may secure a safe deal. While the positive side is that during peak times such as holiday season, the property will command high rentals, during off-season, the rentals may go down and sometimes it may be nil too. Another issue is that it may need approval from the housing society if it’s not an independent house. 

 

What are the different ways using which you can use to rent your property?

• Go the traditional way and place a ‘To Let’ board outside your house 

This is still prevalent in many places especially in vacation home rentals. The downside is that you may get many spam calls because of your contact number being available easily. Also, as unknown people may approach you for rent, screening of people should be done in a very diligent manner.

• Advertise on online portals such as Housing.com where you can buy, sell and rent your apartment. 

If you are looking to expand your search reach, leveraging services of online portal is the most helpful. You can know details about the rentals prevalent in the area where your property is located, get help with choosing right tenant, draft agreement etc. 

• Advertise in WhatsApp groups, notice boards 

You can advertise your property on rent in your various WhatsApp groups, building notice boards etc. This is a very effective today as the reach is vast and one gets to get reference of a tenant or an owner easily without need to go to a broker. To get good leads, you can also mention about referrals to be paid to society managers and other society members for any lead that materialises. In Mumbai, this is a very common practice of which people earn extra money. Additionally, since known people recommend tenant, there is credibility. 

• Hire a broker or services of a brokerage firm

Services used from a broker or a brokerage firm comes with a fee – a commission of 1-2 month’s rental money etc. While this is a large sum, if you get a broker on board, he will take care of all legal formalities such as screening of the tenant, registration of the property etc. In case of problems such as, a tenant giving a hard time and doesn’t vacate the house, you may take help from the broker who introduced him. It is his responsibility to get the tenant vacated. 

• Social media

There are groups on social media that host home rentals. You can post your requirement on groups on Facebook, Instagram or Linkedin and get in touch with good leads. 

 

Points a landlord should remember when leasing his property 

• The property that is to be rented should be in good condition. 
• Whatever fixtures and fittings that are a part of the house and agreed to be given to the tenant should be in working condition. 
• The tenant agreement should be fair and transparent. 
• While a long tenure is a good idea for the landlord, it is also recommended to change tenants once over five years are over, to avoid any problem like tenant not agreeing to vacate the property etc. 

 

Rental agreement format

The general format of the rent is as mentioned below. Depending on the duration and other factors, the format can be edited. 

 

Stamp Rs. With No. Date. DEED OF RENT This Deed of Rent is made at ________, this _____________________ effective from ______________________ between ________________, . ________________________________________________________________________ ________________________________________________________________________ ,——————————————————————- aged Years residing at __________________________________________________________. hereinafter called the HOUSE OWNER of the ONE PART and _______________________________________________________ ________________, __________________________aged_____Years residing at ____________________________________________________. hereinafter called the TENANT of the OTHER PART, the terms the House owner and the Tenant wherever they may occur, unless found repugnant to the context hereinafter shall mean and include themselves and their respective heirs witnesseth as follows:- WHEREAS the House owner is the sole absolute owner of ________________________________________________________________________ ________________________________________________________________________ _______________________________________________________________________. WHEREAS the tenant has applied to the Houseowner for grant of tenancy on to him of the_________________ situated at the above address for living accommodation.

NOW THIS DEED OF TENANCY WITHNESSETH THE FOLLOWING:- 

1. That the Tenancy shall be initially for the period of _________________ with effect from ____________ and may be renewed from time to time with mutual consent of both the House owner and the Tenant. 
2. That the rent payable by the Tenant to the House owner or his Authorized person, in respect of the said premises, shall be Rs. _______ /- (___________________________ only) per month which shall be payable on or before th of every succeeding month in addition to the above mentioned 2 immovable property maintenance charges payable to ___________________ Association by the Tenant every month. 
3. That the Tenant has paid a sum of Rs. ________/- (Rupees _______________________ only) as interest free rent advance, the receipt of which is hereby acknowledged by the houseowner by these presents. This advance amount shall be returned to the tenant by the houseowner at the time of vacating the said premises after adjusting the dues such as rent, water charges, maintenance charges and electricity dues, apart from cost of damages if any. 
4. That the said house premises have a separate normal three phase household electricity connection and the tenant shall pay the electricity charges to the Electricity Board as per the meter Reading noted in the card. 
5. That the Corporation Property tax and water and sewerage tax shall be payable by the house owner but the tenant shall pay the water consumption charges periodically and likewise any running charges consequent to the usage/consumption by the Tenant shall be payable by the tenant . 
6. That the fittings and fixtures in the house premises are in good condition and the tenant return the same to the house owner in good condition excepting normal wear and tear before vacating the house premises and actual cost of damages if any, shall be reimbursable by the tenant to the house owner. 
7. That the tenant has agreed to ensure “minimum stay” for a period of six months. The tenant has agreed to give two months notice before vacating the house. Incase of shorter notice the tenant has agreed to pay two months rent to the houseowner. The Houseowner as agreed to give two months notice to the tenant which period does not consider the “minimum stay” period clause. 
8. That the tenant shall not sublease or sublet either the entire or any part of the tenanted house premises. The tenanted house premises shall be used only for living purpose of the tenant and his family not for any other commercial or illegal purposes. 
9. That the tenant has agreed to keep the house premises clean and in hygienic condition including the surrounding areas and the tenant has agreed not to do any action that would cause permanent / structural damages / changes without obtaining prior consent from the owner on impact and costs. 
10. That the houseowner shall be at liberty to inspect to the house premises by him self and or by any other authorized person(s) as and when necessary. 
11. That the tenant has agreed not to keep any pet animals in the house premises. 
12. That the tenant has agreed to hand over main door keys (—-Nos), bedroom keys (- — Nos), tube lights (—– Nos) and the bulbs with fittings (——– Nos) along with the EB card to the house owner at the time of vacating the house. IN WITNESS WHERE OF, both the parties have put their hands and signed on the day month and year above written. ( _________________) HOUSE OWNER WITNESS: – 1. ( ________________) TENANT 2.

Source: Housing.com

The copy can be accessed at https://assets-news.housing.com/news/wp-content/uploads/2020/05/20194609/Rent-Deed-English.pdf

 

Process to put your property on rent

• Calculate the costs that will be attached with the property including repair costs, property tax, brokerage etc. Next, fix the rental costs based on the condition of the house, the competition in the market, whether it is furnished, semi-furnished or raw flat.

• Make the property that you are going to put on rent livable. If there exists any breakage, plumbing problem, electrical issues etc., get it fixed. Apply a fresh coat of paint and clean the house. 
• Take pictures of the property such that space and facilities are clearly visible. 
• If you are not getting ahead with getting a tenant on board by yourself, engage the service of a broker. 
• Sign the registered agreement with the tenant that outlines his duration of stay in the property, the rent he is supposed to pay, the security deposit he is supposed to pay, the rules and responsibilities that he is supposed to follow. This will also mention the notice period in case each party wants to vacate. Also, the document will include details of action that will be taken in case the tenant defaults on rent. Remember to get the rent agreement registered and not just notarised.  
• Do a police verification of the tenant and submit the documents with society. 

 

Why should you register your rent agreement and not opt for notary?

Registering your documents	Notarising your document
It is a legally binding document as it is recorded with the government. As it is verified by government authorities, the document is authentic.	A notarised agreement is certified by a notary public. This does not carry the same legal authority as a registered agreement.
In case of any dispute, the registered rental agreement will act as proof and will be recognised by legal authorities.	In case of any dispute, this may not hold ground as it is registered in government records.
This can be used as proof of residence.	This cannot be used as proof of residence as it doesn’t have government certification.
The cost involved in registering a rental document is around Rs 5,000 which is shared between the tenant and the owner.	Notarisation costs only around Rs 200 as it is only the cost of stamp paper. While registering your documents is expensive as compared to notary, the latter is risky.
If you have registered your rental agreement, this official record makes it easier for future transactions like renewal of rent agreement, property transfer etc.	As there is no official document, referencing for future is not possible.

 

What can impact rent of your property?

• If there is competition around your property, then there is a chance that the tenant will have an upper hand and negotiate on the rent. 
• If the approach route to your house is unsafe or unhygienic, then it impacts the rent of your property. 
• If there are too much pests in the area like mosquitoes etc., people avoid. 

 

Finding the right tenant

• Know about the background of the tenant
• Find out about the job condition of the tenant and if he will be able to pay the rent on time. 
• Evaluate the behavior of the tenant and see if he will be a fit in your society.
• In case the tenant has a pet, ensure that he is aware about the pet policy in the society and that he needs to be responsible towards his pet. 
• Check if he is agreeable to all rules that are made in the society. 

 

How do errant tenants behave?

• A tenant didn’t pay the rent for six months and now the when the landlord is asking him to vacate, he is not doing that either. Finally, he vacated the house, after stealing properties of the house such as fan, tubelight etc. and ruined the walls. 
• A tenant of a semi-furnished vanished with TV, Fridge, Washing Machine and Utensils while vacating the house. 
• A broker on whom the landlord trusted to put their property on rent, moved in without telling the landlord and stayed for months without paying any rent. He threatened the landlord with the SC/ST act. Finally, the landlord had to finally pay the broker money to move out. 

Source: Reddit

 

Housing.com POV

Renting a property is a way of passive income that is beneficial in building your financial corpus. But, the obvious point where people make mistakes is when they screen the tenant. Next, to save time and money, most owners do the mistake of opting for notarising the document instead of registering it. This can be dangerous as if the tenat refuses to pay rent or vacate the house, it will require too much effort for the owner to get things sorted. 

 

FAQs

How can a tenant prepare to be chosen by the landlord?

Take references from previous landlords. Show your bank statement and three month’s salary. Show your credit score. Have documents of your permanent place of address, place of work etc. Get two witnesses.

Can a landlord visit his house that is on rent whenever he wants?

No. In India, tenant has the right to privacy and so a landlord should take appointment from the tenant and then visit him.

What is the minimum time period for rental agreement of a house in India?

The minimum time period for rental agreement in India is 11 months.

Should the landlord return the security deposit or keep it with him once the tenant vacates?

The landlord should return the security deposit to the tenant once he is done checking the apartment thoroughly and finds that it has been given the same way as it was handed to the tenant.

Can a landlord force a tenant to leave forcefully?

Evicting a tenant forcefully is illegal in India.

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