HOUSING MATTERS
Process Of Renting Out Your HDB Flat
Everyone works to earn an income. And having multiple streams of income is always better than just having one. In this article, we will discuss one of the ways you can earn a side income. In particular, renting out your HDB Flat.
Renting out your place always seems like a brilliant idea. But tenants do not just come to your doorstep. And you do have rules to follow. Hence, scroll down and we will guide you.
1. Check Your Eligibility & Non-Citizen Quota
Let’s get over the first hurdle first. Referring to the graphic above, those are the things that you need to “pass” in order for you to even start considering to rent out your property.
You must be a Singaporean. Unfortunately, for Permanent Residents, they are not allowed to do so.
The Minimum Occupancy Period (MOP) is a period of 5 years where you have to stay at your house prior to renting out your flat.
It does seem like anyone can rent your home. But just make sure they are a legal natural person. Foreigners are welcome. But just make sure they have the relevant documents to show the intention of their stay in Singapore.
Number of tenants
Rental Period
The regulations on the rental period are quite fair and reasonable. The maximum period for Non-Malaysian Non-Citizens was just adjusted to 2 years. Previously it was 1.5 years that many show their disagreements towards it. With the change, it is more aligned with the work permits that normally last for 2 years as well.
Non-Malaysian Non-Citizens are actually Singapore Permanent Resident and Foreigner. Just in case anyone gets confused.
2. Set A Price
Now is the interesting part. You would want to set a number that would result in a good return. You can always refer to the HDB website to know what is the benchmark. At least you will know you are not overcharging or underpaying yourself.
You should always factor in the expense for you rent out the HDB. Such factors are:
- Your Monthly Mortgage Payment
- Location and surrounding amenities
- Size of The Room or Unit
- Number of tenants sharing the place
- The Inclusion or Exclusion of Utility Bills and Air-Con Usage
From the expenses, you may have an easier time to set a price. At the end of the day, all you want is gain profit. Nothing less.
3. Market Your Home/ Room
This was exactly what was mentioned at the start of the article. Tenants do not just come to your doorstep. In other words, you have to bring in the tenants.
You can post it any of the real estate websites. Liaise with a real estate agent. Or even you can post it on Carousell. Anything you do just to make your home known to the market.
4. Check Tenant Eligibility
Tenancy Checklist
The moment you have an interested party who wants to rent your place, you should check their eligibility straight. This will at least avoid any disappointment when all is left is the handover but apparently, you are not able to rent it to him/her.
One easy way to do that is for you to use the ICA iEnquiry system. All you need is their work permit or NRIC.
5. Collect Letter of Intent & Good Faith Deposit
Let’s go straight and explain what are these two above.
Letter of Intent (LOI):
It is a letter from your potential tenant to you that states their intention of renting your place. It should contain information such as the price, security deposit, and any specific rules during the period of rent.
Good Faith Deposit:
This is normally an amount of money, normally pegged to one month of rent that is used to give assurance towards the landlord. It can be converted to a security deposit when the Tenancy Agreement has been finalized and signed.
You are able to keep the Good Faith Deposit if the potential tenant decides to back out of the deal. But if you are the one who defaults the agreement, you must return back the money.
By doing this step, it gives you more assurance. It is not an obligation to this but it would do any harm if you do implement either.
6. Get HDB Approval
You now have to ask for approval from the HDB. An Administrative Fee of $20 will be charged for every application.
It is easier now and you are able to get all the forms needed from the HDB website.
7. Sign Tenancy Agreement
This is the document that holds the legitimacy of the entire agreement. A Tenancy Agreement is a legal contract that contains the details of the landlord, tenant, and lease. Plus, it will require the signature of both the landlord and tenant.
The landlord will be the one responsible to draft out the Tenancy Agreement.
8. Collect Security Deposit
If you skip step number 5 five, you will have to do this step.
A Security Deposit is used to give you’re the assurance if there were any damages or non-payment during the tenure of the rent.
How much is the security deposit?
It normally ranges from a month worth of rent or sometimes three months rent in a lump sum. It depends on how you want to run your business.
9. Get Tenancy Agreement Stamped.
Apparently, you will need to have your Tenancy Agreement approved from the Inland Revenue Authority of Singapore (IRAS). The Tenancy Agreement has to be e-Stamped.
A Stamp Duty is payable by the tenant. It is a tax implied on the Tenancy Agreement. You are able to request for a copy of the stamp certificate from your tenant to ensure that the rental agreement has been stamped.
A fine of up to $5,000 will be implied if there is non-compliance of the obligations stated above.
To add on, do not forget the income tax on your rental income. Yes, Rental Income is taxable.
10. Tenant Inspection and Keys Handover
Last stretch!
The landlord should let the tenant a chance to inspect on the property for the final time prior to taking over the keys.
Prepare an inventory list so as to make sure your items do not go missing. And yes, do make sure you everything is in a good condition. And what you want is equally the same when you get back the keys.
Extra work for an extra income
There you go, the 10 steps for you to be a HDB landlord. Looks like tough work but it can be a fruitful mode of investment.
It is no easy task to be a landlord. You sometimes have to attend to your tenant inquiries or even fix a simple light bulb. But if you can accept all that, you can eventually see the light at the end of the tunnel.
That is the end of the article and hope the information is useful. Do share it with your friends and families. Till next time.
Disclaimer
I am a financial adviser but I am not your financial adviser. Therefore, what is posted on this website, are my opinions and NOT to be taken as financial advice. Information provided might be relevant at this period of time but may be irrelevant due to alterations to rules, regulations or policies. The information provided is true to the best of my knowledge, but there maybe omissions, errors or mistakes.
