Dos and Don’ts for renting out your house
Enjoying high returns in the form of rental income is one of the biggest benefits of investing in real estate. However, whether you are a first-time home buyer or an experienced investor, letting your property out for rent can be tricky. From the types of tenants, you prefer to the expected rental rates, there are a plethora of factors that influence your decision. Here are a few pointers to keep in mind while renting out your house.
Research on rental rates
Researching on the rental rate of your locality will give you a clear idea on how much rental income you can expect from your property. Make sure you keep the social infrastructure of the neighbourhood in mind before finalising on the rent. For example, if the locality is packed with good schools, retail stores, restaurants and hospitals, you can expect more rent from potential tenants. Similarly, if your property is located in the outskirts, you can expect higher rent over the course of time, as the locality develops further. The rental rates also depend on the quality and age of the property. Additionally, if you own a property with a reputed developer, like Brigade Group, homeowners have the added advantage of higher rent due to the global amenities and world-class construction provided.
Ensure all the legal documents are in place
Draft a rental agreement that includes details of rent, license fee, the frequency of rental increase and clauses of termination. Make sure the names of both the parties – the lessor and the lessee – are clearly stated. Furthermore, ensure the duration of the agreement and the criteria for renewal is also mentioned to avoid any hassles in the future. In general, it is a good idea to limit your rental agreement to a period of three years. Another important clause in the rental agreement is the list of fittings and fixtures in the property while it is being handed over for rent. When the tenant leaves, you can refer to this list to ensure all the fittings in the property are intact and in good condition.
Fix a security deposit
A security deposit is important to take care of repair and damage caused by the tenant. It also accounts for unpaid rent and other unmet conditions of the agreement. You can either calculate your security deposit as the accumulative rent of six to ten months or decide on a whole number that both the parties agree on. However, it is important to make sure the security deposit is mentioned in the agreement as written proof of the amount collected. While fixing on the deposit, brief your tenants on the terms and conditions regarding electricity, sewage and maintenance charges, for a smooth tenure. It is a good idea to maintain a separate meter for water and electricity for clarity on payments.
Perform a background check on the tenants
It is natural to perform a background check on tenants to ensure you do not rent out your property to the wrong hands! The easiest way to do this is by looking them up on social networking sites. Another great way is to ask them what they do for a living to get a better perspective of how long they will be renting out your home. For example, if they frequently travel for work, you can decide if you are fine with your property being locked up for a long time. Similarly, if they have a small home business, they will be a lot of visitors to the apartment which may demand more parking space. Examine all the scenarios and narrow down on the tenant that fits all your requirements, like a glove. It is also advisable to collect their valid ID proofs such as Aadhaar or PAN card to maintain records and transparency.
Insure your property
Insurance is a safety net which will come to your rescue during natural disasters and other unforeseen circumstances. Just like car and medical insurance, insuring your home is also vital, especially since you are going to be renting it out to a third party. Make sure you also have a clear idea on what is covered under your insurance policy to keep your property safe. As per your preferences, you can opt for policies that cover damages caused due to fire, theft, mould and natural disasters like earthquakes and floods.
These pointers are the holy grail of the things to remember while renting out your property. You can also read our blogs on the pros and cons of buying vs. renting a property and how apartments these days focus on privacy for further insights. Planning to buy a house to reap the benefits of a secondary income? Head out to the Brigade Group today and get one step closer to your dream home.
