For some Singaporeans, renting out their HDB flat is one good way to generate passive income.
From an investment point of view, HDB flats provide good returns as rental yields are typically higher than private properties since foreigners are not allowed to buy an HDB flat. The inability of foreigners to buy an HDB flat pushes up demand for HDB rental and thus yield.
Also, because every Singapore household is only allowed to own one HDB flat and most families would, presumably stay in their flat, the rental supply of HDB flats tends to be lower as well, leading to higher yield.
For example, the median resale price for 4-room flats at Punggol and Jurong East is $590,000 and $492,000 respectively as of 2Q2023. During the same period, the rental amounts for the two locations are $3,380 and $3,200 respectively. These translate to a gross annual yield of 6.8% and 7.8% respectively.
Moreover, if you have an existing housing loan, the monthly instalment for your HDB flat can be paid using your CPF OA savings, while you receive rental income in cash.
To ensure that HDB flats are not abused by homeowners for monetary gains, HDB has regulations that must be adhered to for those looking to rent out their HDB flats.
In this article, we will share 4 things you should not be doing when renting out your HDB flat.
# 1 Short-Term Lease Of Less Than 6 Months Are Not Allowed
HDB flats are meant for long-term stays and are not supposed to be short-term accommodation solutions.
As such, a minimum 6-month rental period is required for landlords looking to rent out their HDB flats/bedrooms. In comparison, the minimum rental period for private residential properties is 3 months.
This means you should not be renting out your HDB flat or individual bedrooms to tourists or foreigners who are only staying in Singapore temporarily. Neither should you rent out your flats to Singaporeans or PRs who only require short-term housing solutions of less than 6 months.
# 2 Abusing The HDB Minimum Occupation Period (MOP)
The HDB Minimum Occupation Period (MOP) is set in place to ensure that buyers of HDB flats are purchasing these flats for their own stay, and not to monetise them. Typically, the MOP for most flats is 5 years.
During the MOP, HDB owners are not allowed to rent out the entire flat though they can still rent out individual rooms (unless they are living in a 3Gen flat). Locking a room and renting out the rest of the flat without physically staying in it is not allowed.
If you are overseas, you can get special approval from HDB to rent out your entire flat. However, your MOP will also be extended by the duration you are away from the country and renting out the flat.
# 3 Maximum Number Of Individuals Staying In An HDB Flat
If you were to rent out your HDB flat or individual bedroom, there is a maximum number of occupants that is allowed to live in each flat. Currently, the maximum number of occupants allowed in each HDB flat that is rented out is 4 people for 1-room and 2-room flats, and 6 people for 3-room and bigger flats.
If you rent out individual bedrooms, the idea is that you would still need a bedroom for yourself. As such, you can only rent one bedroom for 3-room flats, and two bedrooms for 4-room and bigger flats. Only bedrooms originally constructed by HDB can be rented out and all other parts of the flat (including partitioned rooms) cannot be used as bedrooms for tenants. You are also limited to the maximum number of people that can live in each HDB flat.
If you own a 1-room or 2-room flat, you cannot rent out the bedroom since these flats only come with one bedroom.
Do note that the maximum number of occupants allowed to live in each HDB flat does not apply to family members who are living together. If you are not renting your HDB flats or bedrooms, it doesn’t matter how many people live in the flat. The rule only applies if you rent out the flat or bedrooms to unrelated persons.
If you are renting out a bedroom or your entire flat, you should provide HDB with the particulars of your tenants.
# 4 Certain Groups Of Individuals Cannot Rent An HDB Flat/Bedrooms
As a landlord, It’s important to know that not everyone is eligible to rent an HDB flat or bedroom from you.
To rent an HDB flat or a bedroom, tenants must meet the following eligibility requirements. They must be a:
- Singapore Citizen
- Singapore Permanent Resident
- Non-citizen legally residing in Singapore who holds an Employment Pass, S Pass, Work Permit, Student Pass, Dependant Pass, or Long-Term Social Visit Pass. The pass must have a validity period of at least 6 months as at the date of application by the flat owners:
- Work Permit holders from the construction, marine, and process sectors must be Malaysians. Work Permit holders from the manufacturing sector must also be Malaysians if they are renting a whole HDB flat
For example, Work Permit holders from the construction, marine, and process sectors who are not Malaysians cannot rent an HDB flat/bedroom. Neither are tourists allowed to rent any HDB flat/bedroom
If you are an existing tenant of a public rental HDB flat or owner of other HDB flats, you cannot rent an HDB flat/bedroom as well. The exception here is unless you are divorced/legally separated. In this case, 1 party can rent an HDB flat from another owner.
If you own an HDB flat, you can’t rent another HDB flat unless you rent out your own flat, or rent it out within a month of renting another HDB flat.
Read Also: What Landlords Need To Know Before Renting Out Their HDB Flat or Bedroom In Singapore
The post 4 Things You Should NOT Be Doing Went Renting Out An HDB Flat appeared first on DollarsAndSense.sg.
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