With improvement in the overall economic and job scenario, the middle-class has been buying second homes, unlike earlier when HNIs dominated the space. Second homes are mainly an investment. And can also be a source of income post retirement by way of rental. And the rental market in the residential property segment is looking up.
However, renting out a house may not always be a cake walk. You need to be aware about certain aspects of renting out your house which many owners may not be ..
Rent expectation
Wanting to a rent of your choice is easier said than done. You cannot ask for more than the prevailing market rate. Hence, you need to do your homework before quoting a figure. The important factors to consider here will be the location of the house, its size and age.
You could also list your property with local brokers and aggregation websites to understand the rate your locality commands.
Research your locality and get a sense of the average rent you can charge. If your house boasts of a well-maintained, well-connected with offices, marketplace, hospital, bus/train station/airport and schools nearby you can earn a high rental yield
The tenant base for smaller houses is higher and that also ensures better chances of earning a higher rent. Also, newer houses including the renovated ones command higher rents compared to older ones.
Also, ensure the flooring, plumbing and paint job is good to attract the kind of tenants who are willing to pay a little more.
Tenant segment
You need to decide on your target tenant --- corporate, individuals or family. Renting out apartments to individuals is riskier than families because the agreement is usually for shorter time period (11 months) and there could be notoriety. But this could fetch you better rent than families would pay.
Tenant verification
It is essential to do a thorough background check of the tenant. The house owners is required to fill the verification form, which should be submitted to the local police station along with identification proof of the tenant. The local police then conduct the background check and gives the approval for the rental agreement.
Costs to be borne by house owners
Typically, house owners letting out their homes need to incur transnational costs like brokerage (one month's rent), registration cost (1% of market value of property), stamp duty (5% Aprox )of the rent This apart, if the property is being leased out to a corporate then the house owner would have to incur a capital cost towards furnishing the apartment.
Tax implications
A second house is deemed to be let out and taxed for the notional rent it earns. Notional rent is calculated by taking into account the municipal valuation and the fair rent of the property. However, the rent from the second home is taxed at 30% standard deduction not the entire rent.
There is no annual limit for the home loan interest you can claim as a deduction, unlike in a self-occupied house. Amount paid towards municipal taxes are also deducted from the income.
For further details you can contact us :
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Pimple Nilakh
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website: www.magicmakaan.com
Ref : http://economictimes.indiatimes.com/wealth/savings-centre/analysis/factors-to-consider-before-renting-out-your-house/articleshow/48581645.cms
