Subletting your apartment (be it a single room, or the entire apartment) is a great way to make passive income. But before you become a landlord, be sure you understand all the rules and regulations with regards to subletting your flat. Read on to find out more!
Rules regarding your eligibility to sublet
If you wish to sublet your entire flat, you need to be a Singapore Citizen who has fulfilled your Minimum Occupancy Period (MOP). Regardless of whether your flat is a BTO flat or a resale flat, the MOP is five years; however, if you own a resale flat purchased before 30 August 2010, you’re looking at a shorter MOP of three years.
If you wish to sublet your bedrooms, you may do so without prior approval from HDB. Do note that only rooms from HDB flats which are 3-room or larger are eligible to be rented out.
Rules regarding your subtenants
Firstly, be sure to keep to the maximum number of sub-tenants for the type of flat that you own. For one and two-room flats, there can be a maximum for four sub-tenants; if you own a three or four-room flat (or larger), you’re looking at a maximum of six or nine sub-tenants respectively.
Secondly, all sublets need to fall between the minimum lease period of six months and the maximum lease period of 18 months (if your sub-tenant is Malaysian, the maximum lease period is increased to 36 months instead). Before subletting your apartment, you’ll need to ensure that your sub-tenants are legally residing in Singapore, and that they meet the non-citizen quota (more on that below)!
The non-citizen quota states that only 8% of a neighbourhood’s residents can be non-citizens, and only 11% of the occupants in a block can be non-citizens (with Malaysians being exempt from this rule). To check the current quota for your block or neighbourhood, use this HDB link.
Last but not least, sub-tenants are not allowed to be tenants or owners of other HDB flats unless they are divorced or legally separated, or owners who are eligible to sublet their whole flat. In addition to this, sub-tenants are also not allowed to be owners of Executive Condominium (EC) units unless their 5 year MOP has been met.
Additional taxes borne by landlords
Where property tax is concerned, you’ll be taxed at lower owner-occupier tax rates if you’re sub-letting out your rooms whilst still staying in the same apartment. Make sure that you get your sub-tenant or agent to stamp the rental agreement as “partially let” instead of “wholly let”, so that your owner-occupier tax rate will not be withdrawn.
However, if you’re sub-letting out the entire apartment, you’ll be taxed at a higher rate (10% of your home’s Annual Value, or AV). AVs are calculated according to IRAS’s assessment of the recent rental rates for various HDB flats. Should you wish to estimate the amount of property tax you’ll have to pay upon renting out your apartment, you can do so using IRAS’s online calculator.
In addition to property tax, landlords are also liable to pay additional income tax based on the amount of rental income they earn. To learn more about the income tax imposed upon rental income, as well as what kind of expenses are deductible, check out IRAS’s guide here.
Things to take note of when looking for tenants
Ideally, your sub-tenant should have a stable job and be willing to commit to a long term lease. Make sure you also check up on his/her references, and ask to speak to his/her previous landlords to get a better picture of what you can expect. You’ll want to lay down the ground rules clearly and explicitly in order to avoid any miscommunications and unpleasant surprises further down the road.
Check out other rental related articles here: 5 easy ways for savvy landlords to increase rental income, 5 problems landlords may not see coming and how the new occupancy laws will affect Singapore’s landlords.
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