Renting out your house can be a great way to generate passive income, but it requires careful preparation to ensure a smooth process. Before handing over the keys to tenants, there are essential steps to protect your property and maximise your rental potential. From setting the right rent price to preparing the home for occupancy, these tasks will help you attract reliable tenants while safeguarding your investment. This guide covers everything you need to know before renting your house, ensuring a hassle-free and profitable experience.
Things to do before renting out your property
Before renting out the property, landlords (experienced or new) should understand that renting out a property follows a step-by-step approach. As easy as it may sound, you might encounter unnecessary challenges such as legal complications, tenant disputes, underpricing, or costly maintenance oversights without the correct chronological approach. A well-planned and organized process ensures a smoother experience and maximises the rental income while minimising risks and long-term issues.
Evaluate if renting out is the right decision for you
Evaluating whether renting out your property is the right decision involves thoroughly assessing your financial goals, property condition, and long-term plans. Start by considering your financial needs and whether rental income aligns with your investment strategy. While renting a property can give out good returns and a steady income stream, the process also involves responsibilities and costs incurred by the landlord.Â
Ask yourself if renting is the right choice, especially if the property has a personal significance, such as being inherited or previously lived in. Emotional attachments can make this decision challenging. Also, renting out a property is a time-consuming process. You’ll need to address repairs and maintenance to ensure the property is in good condition for potential tenants.Â
This process could take significant work if the property has not been used for long. Once the property is ready, you’ll face advertising it or working with agents to find suitable tenants. The process doesn’t end there; you’ll need to negotiate rent, finalize legal agreements, and complete various formalities before the tenant moves in.
Your responsibilities do not end once the tenant moves in. Regular interactions with tenants for rent collection, addressing their concerns, managing ongoing maintenance and repairs, and handling emergencies are all part of the role. Before renting a property in India, you must consider all these responsibilities and work.
Prepare your home to rent
Preparing your home to rent is crucial in attracting the right tenants and ensuring a smooth rental experience. This process involves more than just cleaning the property; it requires addressing repairs, enhancing the home’s appeal, and ensuring compliance with safety regulations. To prepare your home the best way for rent, you can follow the below steps:
- Do an inspection: Take a good scan of the property and inspect the home for any malfunctions or repairs. A thorough inspection ensures that you do not miss out on any major or minor repairs that the tenant may point out, causing delays in renting out or facing rejection.
- Do necessary repairs: Before renting out your property, it’s essential to fix any existing issues. Address structural problems, leaks, faulty electrical wiring, and broken appliances.Â
- Have the property deep cleaned: A clean and well-maintained property leaves a strong first impression on potential tenants. Invest in professional deep cleaning to ensure all areas are covered.
- Paint: A fresh coat of paint can dramatically improve the appearance of your property, making it look well-cared-for and inviting. Choose neutral colours that appeal to many tenants, as bold colours may not suit everyone’s taste.Â
- Inspect plumbing and electrical systems: Verify that plumbing and electrical systems are functioning properly to avoid issues such as leaks or power outages.
- Secure the property: Ensure that doors and windows have sturdy locks, and consider adding extra security features like deadbolts or security cameras.
Research rental trends in your area
Researching rental trends in your area is crucial before renting out your property. This involves analyzing local rental rates, demand, and vacancy trends to set a competitive and fair rent. Understanding the market helps ensure your property is priced appropriately, attracting tenants while maximizing your rental income. It also provides insight into what similar properties offer, allowing you to make any necessary improvements or adjustments to stay competitive in the rental market.
Check all property ownership documents
- Title Deed
- Sale Deed
- Gift Deed
- Lease Deed
- Revenue Record Will
- Electricity Bill
- Water Bill or Telephone Bill
- Partition Deed
- Property Tax Receipts
Screen tenants effectively
Before handing out the keys, you need to make sure that you thoroughly check the tenant’s background. This involves verifying their identity, employment, and rental history to ensure reliability. If your property is in a housing society, there may be additional rules to follow, such as obtaining society approval or conducting a police background check, often required before allowing tenants to move in.
You can complete this process by requesting identification documents, proof of employment, and references from previous landlords to get a clear picture of the tenant’s credibility.
You can follow the below steps to ensure screening the tenants the right way:
Request complete information: Full name, contact information, employment details, income proof, identity proof such as Aadhar card, pan card, passport, etc., previous address and rental history.
Conduct a criminal background check: Many landlords fail to do this despite numerous warnings by experts and the law. Conducting a background check ensures safety for you and your property. You can approach the local police station to conduct police verification.
Verify employment and income: Verify the tenant’s employment and income to ensure they can pay rent consistently. You can contact their employer to confirm their job status, role, and salary, providing insight into the tenant’s financial stability and reliability as a renter.
Cross-check references: Contact the tenant’s references, such as previous landlords or employers, to gain insights into their rental history, behaviour, rent payment habits, and reliability as a tenant.
Check for fake documentation: To avoid tenant fraud, thoroughly examine all documents provided for verification, check for inconsistencies or tampering, and confirm their authenticity with the issuing authorities when needed.
Get a clear rental agreement
Clearly state the lease duration, eviction terms, and notice period in the rental agreement. Specify who is responsible for utility payments and outline the rent and security deposit terms. Using a bookkeeping system can help track rent payments and expenses for better financial management.
Details to be included in the rent agreement
- Tenant and landlord names and addresses.
- Both parties must sign to make it legally binding.
- Clearly state the monthly rent and other charges.
- Outline the security deposit amount and terms.
- Specify the tenancy start and end dates.
- Specify the frequency of rent increases and the period after which the new rate applies.
- Define landlord duties (repairs, maintenance, entry rights).
- List tenant duties (cleanliness, property upkeep, privacy rights).
Familiarise yourself with landlord rights
The landlords must know about their legal rights when renting out their property. These important rights are as follows:
Right to fair rent: Landlords can charge rent that aligns with the state’s Rent Control Act, ensuring fair pricing and regulated increases.
Right to receive timely rent: Landlords are entitled to rent payments on agreed dates, with legal recourse for non-payment, as per the Indian Contract Act 1872.
Right to security deposit: Landlords can collect a security deposit to cover damages or unpaid rent, with terms outlined in the rental agreement.
Right to increase rent: Landlords may raise rent annually according to local laws and the rental agreement, with proper notice.
Right to access property for repairs: Landlords can enter the property with prior notice and at reasonable times, per the Transfer of Property Act 1882.
Right to screen and reject tenants: Landlords can vet potential tenants by checking financial stability and rental history to ensure reliability.
Right to retain premises for personal use: Landlords can reclaim their property, as outlined in Rent Control Acts like the Delhi Rent Control Act.
Right to evict tenants: Landlords can evict tenants legally for reasons such as non-payment, lease violations, or personal use, following the process under relevant Rent Control Acts.
Familiarise yourself with tenant rights
Just like tenants have to familiarise themself with their rights, they should also know the rights of the tenants. Here are some tenants rights in India:
Tenants cannot be evicted without a valid cause: Landlords can only evict tenants based on legally valid reasons like non-payment or lease violations.
Renters must receive essential maintenance services: Tenants are entitled to necessary repairs and maintenance to ensure the property is livable.
Tenants have the right to privacy in their homes: Landlords must respect tenants’ privacy and provide prior notice before entering the property.
Tenants can refuse/reject the renewal of a rent agreement: Tenants are free to decline their lease renewal once the rental term ends.
All tenants can obtain rent receipts: Renters have the right to receive a receipt for any rent paid, ensuring proof of payment.
Renters must receive a notice period: Tenants are entitled to a notice period before eviction or rent increases, as per local laws.
Tenants can rightfully claim the security deposit given to the property owner: Tenants can recover their security deposit after vacating, provided there is no damage or unpaid rent.
Define pet policies
Many people have pets with them and would wish to move in with them. As a landlord, you should clearly inform the tenants if pets are allowed. As people move in with pets in your home, certain adjustments may be made by the tenants in the house, which should be discussed with them before handing the keys. Additionally, people with pets take them for walks around the neighbourhood or neighbouring parks. It would help if you guided them about what is and isn’t allowed in your neighbourhood.
Enhance security
Before your tenants move in, ideally, you should install security cameras outside your home. This is important for the safety of your tenants and yourself. Even if any unfortunate circumstances occur, you will have a recorded proof of it, which will be helpful.
Key handover
Key handover is the last step before the tenant moves in, and it plays a significant role. During key handover, you should conduct a final property inspection and verify the property’s present condition. You should also take a reading of both electrical, water, and gas (if applicable) meters. At this step, you should also give clear instructions to the tenant about how and when he/she is supposed to deposit the rent. Many negotiations often happen during the key handover. Hence, you should act professionally, listen to the tenant’s words and devise a finalised amount together. In cases where the rent amount is negotiated in the later stage, the rent agreement is made only after the final rent amount has been decided. After everything has been discussed and decided upon, you can hand over the keys (including duplicates) to the tenant.
Documentation requirements before renting out a house in India
Property ownership documents:
- Sale deed: This is the primary document proving ownership of the property.  Â
- Property tax receipts: These receipts demonstrate that property taxes are being paid regularly.  Â
- Possession certificate: If applicable, this certificate confirms possession of the property.
Additional documents:
- NOC (No Objection Certificate): An NOC might be required if the property is part of a society or association.  Â
- Electricity and water bills: These can help verify the property’s address and utility connections.  Â
- Property insurance: Consider having property insurance to protect against potential damages or losses.Â
Renting out vs. selling: which is better for your situation?
When deciding between renting out or selling your property, consider your financial goals, market conditions, and long-term plans. Let’s look at this comprehensively:
There have been enough debates around the topic of renting vs selling. In the current real estate scenario where rental yields and property prices are increasing, this question carries even more importance in being discussed thoroughly.Â
Current market: The rising rental yields provide landlords a steady income source, and property values have also appreciated over the years. Hence, the right decision will depend on your goals and the nature of the property you are dealing with.Â
Prime location properties: If your house is located in a gated society, in a prime location, you can consider renting out as such properties have a higher demand among tenants, and the landlords can thrive on consistent rental income. The real estate market runs as a cyclical business, where if your property is between 3-5 years old or younger, it would be beneficial to draw some rental income out of it before selling it when the timing is right.Â
It’s a seller’s market: Another reason why you should consider selling your property is if there is a seller’s market. Renting out means you may need to spend a significant amount on fixes to make the house rental-ready. The maintenance charges are also high for older properties, which can reduce your rental income.Â
Gated society flats but older: If your property is located in a gated society but is older than ten years, chances of seeing a significant appreciation in the future are slim. Thus, if the market is right, selling may be the right option for you.Â
Individual goals: The decision to rent or sell heavily depends on the landlord’s goals. If getting a stable rental income from your property seems beneficial, you should rent your house. However, if you have an older property that requires heavy repairs and costly upkeep, selling may be a better option for you.
Rental yield in India in 2024
As a landlord looking to rent your property, you should know the rental yields in at least the top Indian cities. Check rental yields in top Indian cities from below:
| City | Rental Yield |
| Delhi NCR | 2.79% |
| Bangalore | 3.45% |
| Mumbai | 2.44% |
| Ahmedabad | 3.22% |
| Chennai | 3.10% |
| Hyderabad | 3.16% |
| Pune | 3.09% |
| Kolkata | 3.96% |
Can you survive on rental income in India?
In short, one can survive on rental income in India. However, that would ultimately depend on the rent you receive each month, your city, and most importantly, your lifestyle. It is suggested to set aside 10% for annual maintenance costs and plan for the future when the property deteriorates and will need to be renovated or rebuilt.
The answer to this question also heavily depends on who plans to live on rental income in India. If you are a working-class individual earning enough income and have already purchased their first home, saved enough for your key goals, children’s education (if you are in that bracket). If you have any surplus, you can consider rental income. However, even in that case, since you are young, you are suggested not to quit your job to keep a continuous cash inflow, which can be set aside to build your retirement corpus.
Another group of people who plan on surviving on rental income in India are retired professionals. They usually have a lump sum PF accumulation which they are willing to spend on real estate for stable rental income. While the current rental yield in metro cities is between 3-5%, adding property taxes to that figure leaves us hanging around a 3% yield. Hence, retired people hoping to earn rental income for survival should reconsider spending their accumulated EPF money on buying real estate.
Additionally, if you are a retired professional with a diversified portfolio of investments and funds for emergencies, investment in real estate for rental income can help you survive beyond average in India. Generally, rental income is inflation-adjusted. Currently, rental appreciation is around 8-10% annually, and inflation is around 3.54%, below the rental appreciation rate. Such a condition is perfect for seeking rental returns, as landlords can expect their rental income to grow faster than their living costs. Higher rental appreciation often correlates with rising property values, which can lead to more significant capital gains if the property is sold in the future.
Thinking of renting out property without involving a broker?
Renting out your property without involving a broker can lead to a mix of advantages and challenges. While bypassing a broker might save you on brokerage fees and offer direct control over the leasing process, it also requires handling all aspects of renting yourself, which can be demanding.
In one instance, a property owner rented out their 2BHK flat in Navi Mumbai directly to a tenant found through an online portal. Although the initial phase went smoothly, complications arose when personal issues between the tenant and their spouse led to rent payment issues and eventual property misuse. The landlord, unfamiliar with eviction processes and local legalities, faced delays and potential losses due to the tenant overstaying and not paying rent.
Despite having a security deposit, the landlord struggled with the eviction process, finding it difficult to manage without the expertise of a local broker. Eventually, they sought the help of their previous broker, who could handle the situation efficiently, leveraging local connections to expedite the eviction process and minimise further losses.
This experience highlights the potential pitfalls of renting a property without professional help. While it is possible to manage the rental process independently, having a knowledgeable broker can provide valuable support in navigating legal issues, managing tenant relationships, and ensuring a smoother resolution to any problems.
Common mistakes landlords make
While renting out a property in India is extremely common, many landlords make common mistakes that can cause legal complications or otherwise account for a bad renting-out experience. Here are some common mistakes that landlords make and how to avoid them.
Not conducting background checks on the tenant
This is the most reckless mistake landlords make in India. Many landlords choose tenants based on their appearance and first impression. While the first impression is usually the last, it is not so true when renting out a property. Tenants are often selected based on a reference or randomly through a broker who may or may not know much about the tenant. Hence, a thorough verification should be conducted before renting out.Â
Take note of both the tenant’s personal and professional details. Do not hesitate to ask for salary slips or previous rent receipts to ensure timely future payments.
Undervaluing the cost of maintenance
Maintaining a property is the responsibility of the landlord. While the tenant usually handles minor repairs, the landlord is responsible for significant fixes such as painting the house, leakage and major electrical repairs.Â
The landlords must factor in timely repair costs when deciding the rent amount. They must also save money for one-time repairs such as structural damages to the property or buying new appliances.
Improper documentation
Renting out a property is a business and should not rely on verbal promises alone. Many landlords neglect proper documentation, considering it insignificant, and often complete the paperwork only after the tenant has moved in. This is a severe mistake. It becomes challenging to address issues like property vacation or rent adjustments without a formal rent agreement.
Follow the legal procedure by having a lease agreement signed by the tenant and ensuring a local notary notarizes it. Make sure the tenant fully understands all the terms of the contract. A signed and dated written document from both parties will be essential if any issues arise.
Missing out on regular property checks
Regular property inspections are essential for landlords to ensure the tenant keeps their property correctly. Timely visits ensure the property remains free of major damages done by tenants that may involve significant repair costs.
While following a schedule for property inspections is essential, it is also important to keep tenants’ privacy in mind. You can schedule a visit every quarter or every six months to not intrude into tenants’ privacy while keeping an eye on your property.
Delayed eviction
Delayed eviction is another common yet less discussed mistake that landlords make. Such a situation is more prominent when the landlord has the property in a different city. Even if you face problems with the tenant, experts suggest never delaying the eviction process.Â
You should ideally begin the eviction process as soon as you face any significant difficulty, such as continuous delayed payments or non-payment by tenants, any issues related to tenants’ behaviour, etc.
How to increase your rental property’s value
If the offers that you are receiving from the tenants do not match with what you are expecting, it is possible that you overvalued your property. However, it is also true that you are not getting what you should because of your old-fashioned or cluttered property. Hence, fixing these minor issues can help increase the value of your rental property.
Deep clean your home inside out: Renters are naturally attracted to uncluttered spaces that are kept neat and clean. If you notice dust around your property, too much useless furniture lying around, or, put, if your property looks messy, chances are that the tenants will hesitate to move in. Hiring a professional deep cleaning service ensures your home becomes rental-ready.
Make some changes in your interiors: Making changes to your interiors can boost rental income by enhancing the property’s appeal. Simple updates like fresh paint, modern fixtures, or upgraded appliances can make the space more attractive to potential tenants, allowing you to justify a higher rent.
Fix kitchen: The kitchen is the heart of your home and an area that tenants would inspect more than once during their visit. If your kitchen has old-fashioned cabinetry, you should work on that and get a modular kitchen. Similarly, if the kitchen marble or tiles look old or the cabinetry is worn out, you should also work on repairing these.
Remodel bathroom: Tenants will not take it lightly if your bathroom has leakage, water stains or discolouration. Usually overlooked, the bathroom faces the most wear and tear. Hence, if you find anything out of order, do not ignore it; you will see an increase in your rental value.Â
Invest in energy efficiency: Energy-efficient homes are eco-friendly and appealing to buyers. Consider installing solar panels, upgrading insulation, or replacing old windows with energy-efficient models to enhance your property’s attractiveness.
How much rent can you increase?
In India, no fixed law mandates how much rent a landlord can increase annually. Rent increases are usually determined by mutual agreement between the landlord and tenant and are typically outlined in the rental agreement. While a 5-10% annual increase is common, especially in cities like Delhi and Bangalore, it’s not a hard rule. Market conditions, location, demand, and the specifics of the lease agreement play a significant role in determining rent hikes. Depending on negotiations or market trends, rent may remain unchanged or decrease.
Housing.com POV
Preparing your house for rental involves thorough planning and attention to detail. By addressing essential tasks such as property maintenance, legal compliance, and tenant screening, you can ensure a smooth and successful rental experience. Investing time in these preparations not only enhances the appeal of your property but also minimises potential issues down the line. Renting out is a long process involving much groundwork before a tenant moves in. Hence, potential landlords must stay abreast of these things and evaluate every possible aspect of your property that needs fixes to ensure a promising renting-out experience.
FAQs
What should I do to prepare my house for rent?
Clean and repair the property, ensure all appliances are in working order, and consider updating outdated features to increase appeal.
How can I determine the right rental price for my property?
Research comparable rental properties in your area, consider the size and condition of your home and consult a real estate agent if needed.
What are the key elements of a good lease agreement?
A good lease agreement should include rental terms, payment due dates, security deposit details, maintenance responsibilities, and rules for property use.
How do I screen potential tenants effectively?
Conduct background checks, verify employment and income, check previous rental history, and consider using a rental application form.
What are some common mistakes to avoid when renting out my house?
Avoid underestimating repair costs, neglecting tenant screening, failing to understand local rental laws, and setting an unrealistic rental price.
How much rent increase is legal in India for residential property?
Usually, the rent is increased periodically every year by 5% to 8%. However, this may differ in various cities and also depends on the negotiations with the landlord.
| 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 |
