Renting out as a side job – Is it worthwhile?

Anyone who rents out a property is hoping for additional income. However, letting is associated with administrative work, which can be accompanied by legal problems. Because whoever takes on the role of landlord has rights and obligations – towards the tenants.

Find out in this article whether the part-time job of “landlord” is worthwhile for you and what obligations you should fulfill if you want a relaxed relationship with your tenant.

The obligations of the landlord

The tenants’ monthly rent payments are credited to the landlord’s account. Some people are rubbing their hands – rental income seems to be easy money. But beware, the amount, which may seem large at first glance, shrinks relatively quickly with the landlord’s obligations. This is because a considerable proportion of the income often flows into the property itself before the owner benefits from the rental. Loan repayments for the property and maintenance costs can weigh heavily on the landlord’s wallet.
In addition, renting also entails responsibilities and obligations that the owner automatically assumes when renting.

All too often, people underestimate the effort and expense involved in letting a property. If you want to let your apartment on a long-term basis, you should be aware of three key points:

  • Know how to set a reasonable rent.
  • Know the rights of tenants.
  • Keep an eye on the financial situation.

How do I set a reasonable rent?

Even setting an appropriate and fair rent can be challenging.
Owners who are involved in letting for the first time usually consider their property to be of particularly high quality and expect others – especially tenants – to see it the same way.

The problem with self-assessments is that they often diverge from the actual rental value. A lack of objectivity and a lack of the necessary knowledge lead to unrealistic assessments. Two parameters can be used to determine a good
Determine rent
.

The location of a property is an important point of reference for estimating the price. There is no standardized rental price in Switzerland. In practical terms, this means that a property in Lenzburg is valued differently from one in Zurich, despite the same conditions. Landlords and those who would like to become landlords should therefore take a look at the local rent index.

In addition to the location, the equipment of the property significantly to price formation. Top renovated apartments can be rented out for a much higher rent than solid but somewhat outdated ones.

Despite the two points of reference mentioned above, it is not at all easy for laypersons to set a reasonable rent. It is therefore worth comparing similar properties and their respective prices on real estate portals. If you are unsure, you should make an appointment with a real estate agent and get advice. In most cases, it helps to have the calculation carried out by a professional.

What obligations do landlords have?

Switzerland is a tenant-friendly country with very strong tenant protection. Although the landlord owns the property, he no longer owns the rented apartment. By renting the property, the tenant transfers certain rights to the landlord, but as the owner is responsible for fulfilling certain obligations.

These duties include:

  • Principal obligations
  • Secondary obligations

 

The main obligation of the landlord (Art. 256 para. 1 OR) is to ensure that the property is in a contractually agreed and suitable condition when it is handed over and to maintain this condition during the tenancy. Necessary repairs and maintenance work that are due during the tenancy must be carried out professionally and in good time. Put simply, the primary obligation can be divided into the following duties:

  • Maintenance obligation
  • Provision of heating
  • Traffic safety obligation

 

Properties specifically warranted in the contract must be fulfilled. The primary requirement for letting is that the apartment is empty and that the necessary furnishings such as kitchen and sanitary facilities are available. In the kitchen, the equipment nowadays includes the option of installing a cooking appliance, water supply and drainage, a refrigerator or even a dishwasher. In addition to the maintenance obligation, which also includes the elimination of defects and damage, the owner must also guarantee the tenant heated living spaces during the cold season. Living rooms must be between 20 and 22 degrees. In addition, the tenant has the right to demand that the owner fulfills a duty of care. This means that the surroundings of the property must be suitable for the use of the apartment. The banister must not be missing in the stairwell, and in winter the access or driveway to the house must be secured.

The secondary obligations also comprise several individual obligations, which can be divided into the following four points:

 

The obligation to provide information covers the tenant’s right to know what rent the previous tenant had to pay. If the tenant requests to inspect the property, the owner is obliged to present the previous rent and the return protocol, if one was recorded, for inspection.

In addition, the landlord is obliged to inspect the rented property, i.e. the apartment, on return and to report any damage to the tenant. The Duty to inspect is not prescribed by law; rather, this obligation serves the landlord if he does not want to lose the right to claim for defects.

At the tenant’s request, the landlord must fulfill his duty to provide information and grant access to the receipts relating to operating costs and public expenditure.

Finally, the owner has the obligation to bear the burdens and charges. This means that the landlord must bear the burdens and public charges associated with the property, such as property taxes, building insurance premiums, connection fees, etc. However, there may be exceptions to this rule, namely if the owner and tenant have made a contractual agreement in this regard.

What other tasks does “being a landlord” entail?

Handing over or accepting the apartment are tasks that do not usually have to be carried out frequently in a short period of time. It is important to know the landlord’s obligation and the tenant’s respective right. This is because non-compliance with such rules in particular leads to disagreements, which in some cases first end up before the arbitration authority and in some cases are taken to court. It is therefore highly recommended that you familiarize yourself with the legal basics or look for a competent partner who can advise you.

Do you have any questions about managing or letting your property? Our competent experts will be happy to help you!

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Maintaining a financial overview: What can the landlord do with the rental income?

In addition to the administrative and legal tasks and duties, there are also the finances. Expenditure and income must be carefully calculated by the owner. It is advisable to protect yourself with a financial buffer against risks such as vacancies or loss of rent, but also to keep an eye on larger investments.

 

The chart above illustrates the average percentage of costs that a landlord has to cover with the rent. The largest share is accounted for by the interest on the mortgage that the owner took out with banks or insurance companies to finance the purchase of the property. Once this amount has been deducted from the rent, the operating and maintenance costs are the second largest item. These costs include all renewal and repair costs as well as fees and charges, such as taxes or insurance. Finally, the rent received is used to pay interest on the equity that the owner invested in the construction or purchase of the building. The return on equity therefore corresponds to the income that the landlord earns from the rental.

Caution: It is of course possible to save on maintenance or to set the rent so high that a higher net yield is generated from the rental. However, the net yield should not be too high. If the landlord earns too much, this is referred to as an abusive rent.

In Switzerland, landlords are allowed by the courts to charge interest on invested assets at a rate that is 0.5 percent above the reference interest rate.

Is renting out as a sideline worthwhile?

There are usually two reasons for renting out apartments privately. Either the property serves as an investment or it is to be used by the owner in the future. In the latter case, the rental income is usually used to repay the loan.

If the aim of letting is to generate a return, the chances of success with individual apartments are not so good. The following reasons speak against the success of the investment:

  • With only one apartment, the risk of loss of rent is relatively high.
  • A lack of specialist knowledge leads to a misjudgment of risks on the real estate market and the potential for rent increases.
  • Private landlords mainly invest close to home, but miss the opportunity to invest in a lucrative location.

Investors who only have small sums at their disposal and can therefore only rent out an apartment, for example, have little chance of achieving a significant return. Instead, care must be taken here not to make any losses – because as described above, the landlord has to incur expenses: Repairs and tax to pay.

The situation is somewhat different for owners who have more financial resources and therefore more properties at their disposal. Risks such as loss of rent are spread across several rental units, although this involves greater administrative effort. Owners of apartment buildings or multiple properties therefore like to rely on external property managers who not only provide advice and technical expertise, but also take on administrative tasks and thus relieve the owners of a lot of work.

You want to let your property but don’t have the necessary expertise. Contact us today and let our experienced and regional property managers advise you.

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All data are without guarantee. The information on these Internet pages has been carefully researched. Nevertheless, no liability can be accepted for the accuracy of the information provided.

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