Fact: Carousellers get an average of $800 a month by renting out their spare room.
Tempting? Yes.
Scary? Probably also yes.
It’s normal for every new landlord’s journey to start off with a little bit of apprehension. But once you cross that hurdle – which is why we’ve compiled all our best tips below – things are going to be much, much easier.
So here goes!
1. How much can you charge?
2. Know your potential tenants
3. Screen your potential tenants
4. Know Singapore’s housing laws
5. Put everything down in writing
6. Special conditions for expat tenants
7. Conduct an inventory check
8. Specify the method of rent payment
9. Enlist the help of your tenant
10. Changes to your property tax rates
1. How much can you charge?
The more your home is worth, the more rent you can afford to charge, right?
Not really. It depends on whether it’d be of value to a tenant.
For instance, whether a condo is leasehold or freehold doesn’t matter to a tenant. Condos that are freehold are typically sold at a higher price than its leasehold counterparts, but this has no part to play in the rental story.
If you price your rent based on how much you bought your home for, there’s no stopping a tenant from choosing that leasehold condo across the road that’s equally nice and cheaper to rent.
Pro tip: Check the rental rates of similar units in your area. HDB has an e-service to check records of HDB rental rates, while URA has a similar tool to check records of specific condo rental rates.
2. Know your potential tenants
Of course, everyone has different preferences for the kind of neighborhood they’d like to live in, but some districts are especially popular among certain groups of potential tenants.
For instance, rooms near universities are likely to attract foreign students, while you might find yourself getting many enquiries from single expats for a studio apartment near the CBD.
The next step: market your rental property accordingly! For instance, if you’re targeting university students, specify the travel time or which buses run to the university, and mark out nearby student hotspots like shopping malls or cafe clusters.
3. Screen your potential tenants
Your prospective tenants might be expats, foreign students or locals, and of course you’d want to know who they are.
It’s perfectly okay to ask for personal details such as nationality. Just as long as there’s no discriminatory intent, of course.
According to the Council for Estate Agencies (CEA), anything that’s “discriminatory, offensive or stereotyped in nature against any particular race, religion or group” is against the guidelines pertaining to advertising properties.
Read more: Landlord’s Guide: Tips for Finding the Best Tenant for Your Rental »
4. Know Singapore’s housing laws
As a homeowner, you’ve probably heard about the whole Airbnb situation: that short-term rentals are illegal in Singapore, whether it’s a HDB or condo/ private property.
The lease period if you’re renting out your HDB room or unit should be:
- Minimum of 6 months, up to 3 years if the tenants are Singaporeans or Malaysians
- Minimum of 6 months, up to 2 years of the tenants are non-Malaysian non-citizens
The lease period if you’re renting out your private property/ condo room or unit should be:
- Minimum of 3 months, no maximum lease period, regardless of nationality
Otherwise, you won’t be able to get your Tenancy Agreement (the legal rental contract) officially recognised.
5. Put everything down in writing
Speaking of the Tenancy Agreement, do yourself a service and record everything – everything! – down in writing.
As a landlord, you’re in charge of drafting the Tenancy Agreement (Here’s a template!).
Be sure to include even the little things, such as whether cooking is allowed, the procedure for your tenant to report faulty appliances, quiet hours (especially if you’re a live-in landlord) and more.
This protects both you and your tenant – this way, you can always refer back to the Tenancy Agreement in case you need to clarify anything regarding the rental agreement.
6. Special conditions for expat tenants
Ok, tbh, not many locals choose to rent in Singapore (although numbers are rising!), so your prospective tenant might be a foreigner.
Some foreigners might request for a diplomatic clause to be included in the Tenancy Agreement. This clause basically allows them to terminate the lease prematurely, with sufficient notice, if they are let go from their job in Singapore or get transferred out of the country.
This isn’t compulsory, but most landlords include this clause if the lease period is longer than a year. Also specify the minimum notice period for them to exercise the clause, typically 1 or 2 months.
7. Conduct an inventory check
So the Tenancy Agreement is signed and your tenant is ready to move in. One last thing: Conduct an inventory check.
Make a comprehensive list detailing the current condition of the property as well as all fixtures and furniture in it.
If you want to be super thorough about it (Never hurts to be play it safe!), also include small accent furniture like cushions.
Even if you’re renting out an unfurnished property, you should still have an inventory of contents – note down conditions of fixtures like your walls, sinks, etc.
8. Specify the method of rent payment
All rent payment should be made via channels where you can prove the payment – either via cheque or bank transfer.
On the note of payment, also specify which day of the month should rent be paid, any buffer period, and the penalty for late payment.
Read more: How Much is Your Home in Singapore Worth? Here are All the Calculators to Find Out »
9. Enlist the help of your tenant
It’s the time of the year again… Not Christmas – we mean the time for your tenant to move out after their lease expires.
That also means having to market your rental property again. Try asking your existing tenant to help look for a new person to take over their lease, in exchange for, say, half a month’s rent off.
Platforms like Carousell Property allow people like you and me to list properties for rent, which makes it easy to DIY the entire rental process.
Saves you time, saves your tenant money. Win-win!
10. Changes to your property tax rates
As a landlord, the money’s great! Your side income rolls in just like that. But one thing to note when forecasting your profit is that your property tax also increases.
In Singapore, your annual property tax is calculated based on the annual value of your property and your tax rate, which differs according to whether you’re living in your property or renting it out:
Property tax = Annual value x Tax rate
The Annual Value (AV) of your home is calculated according to its rental potential, or, if it’s already being rented out, its actual rental revenue.
You can check the AV of your home by logging into your IRAS account using your SingPass login details.
There are two different types of property tax rates: One for owner-occupied property (OOP) i.e. the home you’re living in, and one for non-owner-occupied property (NOOP) i.e. any property you own but aren’t living in, whether it’s rented out or vacant.
If you’re a live-in landlord (e.g. if you’re only renting out your spare room), your property tax is still calculated according to OOP rates.
The OOP tax rates are:
And the NOOP tax rates are:
Example 1:
Say for instance the home you’re living in has a potential rental value of $2,500 a month, which means your AV is $2,500 x 12 = $30,000.
Your property tax is calculated according to OOP tax rates, which means you’ll have to pay:
0% of first $8,000 + 4% of next $22,000 = $880
Example 2:
You bought a second property, made it all snazzy, and are renting it out at $3,500 a month, giving you $42,000 a year.
NOOP tax rates, unfortunately, are higher:
10% of first $30,000 + 12% of next $12,000 = $3,000 + $1,440 = $4,440
Example 3:
You bought a second property that could be rented out for $3,500, but for whatever reason, you’re not.
The property tax for this property will still be calculated based on NOOP tax rates – that’s $4,440 a year just flowing out of your pocket.
Better to rent it out!
As a homeowner, you’re to pay for your property tax before 31st January every year.
To make things easier, simply use the interactive property tax calculator on the IRAS website to find out how much you’re liable to pay.
Beginning your landlord journey
By giving someone a new place to call home, you stand to gain the practical, financial benefits of being a landlord as well.
Ready to start renting out? Tons of direct owners are DIY-ing it on Carousell. Check out our landlord guide for more tips and tricks (Spoiler alert: A solid one-fifth of Carousellers think the most important part of the house is the bathroom!).
And to start you off on the right foot, good news: we’re making your potential rental journey a lot easier. Introducing Rental+, a free programme in partnership with FWD Insurance to make renting truly worry-free. You pay nothing AND get free insurance coverage on your room or apartment rental. Convinced yet? Click here to find out more on Rental+!
