Big summer events bring more people than usual to the city and give the property owner an opportunity to earn extra money by renting out their home. Karin Ossipova, head of Coop Pank’s home loans business line, explained what to watch out for when a home for rent has been bought with a loan and how to ensure a smooth additional service.
Providing accommodation through intermediary platforms has become an active form of business, and some real estate investors are also focusing on providing short-term rental services. Summer also offers an opportunity for those who do not deal with the rental business on a daily basis, but want to earn extra money by renting out their home during major concerts, festivals or sports events. The need for homestays is felt especially in smaller towns and settlements when there is a big event once a year that cannot be covered by the regular accommodation market. In this way, American cars in Haapsalu, a music festival in Pärnu, a Sting concert in Tartu or Rally Estonia in South Estonia can create much higher demand than usual, which also increases the price of accommodation.
If the property was not bought specifically for renting out, but for your own home, there are several nuances that should be paid attention to.
Does the bank have to be informed regarding letting?
If the home has been acquired with a loan, any renting out usually also requires the consent of the mortgagee, i.e. the bank. To do this, you must submit an application to the bank, in which you are informed of the plan to rent out your home. Before giving an answer, the bank may ask for more information regarding the rental plans. Obtaining consent is necessary, because in the case of a rented home, it is collateral for the loan, which must be kept in good condition and for which the owner of the home is responsible.
It should be taken into account that in some cases, the bank may demand to change the terms of the loan agreement if greater risks are seen. For example, the interest rate may increase or the obligation to provide additional collateral may arise. The bank can also impose liquidated damages for letting out without consent, which is why it is important from the home owner’s point of view that the bank is aware of letting out.
You should also review your home insurance policy to see if renting out affects it in any way. Conventional home insurance does not cover the risks that may come with renting out a property. For example, water damage, fire hazard situations or damage caused by parties that get out of hand can occur due to the tenant’s negligence.
You do not need to create a separate company to rent
If consent has been received from the bank that the home can be rented out, then it is necessary to decide whether to rent out the home as a private person or as a company. If the home is rented out only a few times a year, then it does not make sense to create a separate company for this purpose, as both the establishment and running of the company involve costs and reporting obligations. However, it is possible to use a previously created company that operates in a different field for renting.
It is easiest to rent out your home as a private person, which means that the earned income must be declared to the tax office and income tax must be paid. The rental income must be reported by the private person on the declaration, but some portals that mediate the accommodation service also offer the option of automatic data transmission. Similar to salary and other additional income, this year’s income must be entered in the declaration submitted at the beginning of the next year.
The advantage of renting out a home as a private individual is that following deducting income tax, the money left in the account can be used immediately. For example, it can be used to pay off home loan payments, build up a travel fund or other savings.
Where to announce that the home is available for rent?
In order for a home to be rented out at all, people need to know regarding such an option. In most cases, accommodation is found through a couple of larger portals such as Airbnb or Booking. Of these two, Airbnb also offers the possibility to review guests – so you can see if a potential guest is polite and orderly. The advantage of using separate platforms is also thoughtful solutions and customer support, which is especially important for starting landlords.
If the goal is not a longer-term rental business, but to take advantage of individual popular events, then social media can be a good communication channel. You can let your friends know regarding renting out a home through your personal social media account, as well as, for example, through the event’s Facebook page, where participants search for information and keep an eye on accommodation options. Information can also be shared in regional social media groups – just enter the desired location and the keyword “accommodation” in the search.
If possible, put personal things away
If you are interested in renting, you should think regarding what to do with your personal belongings. If the guests are not good acquaintances, then it is not worth putting more valuable items as well as personal items and photos. You can use, for example, a lockable cabinet or storage space to store things.
In order to see when it is worth renting a home, you should check the local events calendar and take a look at the accommodation offers. If everything goes well, renting out a home is a good way to earn extra income.
2024-07-08 16:56:49
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