Many people own more than one property due to inheritance, decision to retain an old apartment when purchasing a new home, or simply because they have chosen to invest in real estate. Whatever the reason, it makes sense to use the property you own to earn extra money. Here are some points to consider when renting out your property and setting the price.
Take into account tax liability. Be aware that when you legally lease a property, the payments made by the tenant are your income and you are obligated to pay income tax from them. The amendment to the Income Tax Act, effective from 2016, allows the deduction of additional rental expenses from rental income. This means that, as a landlord you can deduct up to 20% from your rental income before submitting your income tax return. There is also no need to provide any additional documents about this when submitting income tax return. It is important to note that this benefit applies only when you are renting as a private person not as a self-employed person.
Pricing might seem like one of the easiest parts of the rental process. Actually, it is not that easy and needs proper analysis. It is natural that landlords want to maximize revenue and tenants want to pay as little as possible. Try to find a good balance that is acceptable for both parties.
Check out real estate portals to see the rent for similar properties. This will give a good understanding about reasonable rent price for your property. View similar apartments, keeping in mind these aspects:
- Location of real estate. This is one of the most important factors that influences the price.
- Property condition. For example, the rental price of an apartment in average condition cannot be as high as for recently renovated apartment.
- Additional values. An apartment with a private parking space and essential household appliances is certainly more valuable for the tenant than similar apartment, where some of these amenities are missing.
If the rented property is an apartment, be sure to remember that a repair fund and loan payment may be involved. They are intended to preserve and increase the value of the owner's property and are actually not related to the use of the property. Therefore, the tenant is not obliged to pay for them. You can read more about it from our post: “What additional costs should be covered by the tenant?”.
As a first-time landlord, finding a good tenant might not be easy. Having the option to choose between multiple candidates, will definitely increase your changes though. We recommend to promote rental property on several platforms to increase the amount of candidates. If there aren't any applicants, reconsider the price you have set and channels you use for promoting your rental ad.