Correctly Renting: The Best Tips for Landlords
How do you properly rent out your property? In this article, we provide you with clear and practical tips on how to successfully and legally rent out your property. You will learn how to set the optimal rent, create a watertight rental agreement, select the right tenants, and conduct a smooth handover of the apartment. Dive in and discover all the important steps and details to be successful as a landlord.
The most important points at a glance
Setting a realistic rent is crucial for the success of the rental and influences the long-term satisfaction of the tenants.
A clearly defined rental agreement is essential to avoid legal disputes and ensures transparency.
Careful selection of tenants minimizes the risk of payment defaults and promotes a positive rental relationship.
An appealing exposé and well-organized viewing appointments also significantly contribute to success.
Under certain conditions, you can rent above the rent index, such as in the case of new constructions or extensive renovations. Legal advice is recommended.
Determining the optimal rent
A crucial step in renting out an apartment is setting the rental price. A thorough analysis of the local market helps determine a realistic rent. Compare similar properties in your area to get a sense of the market-standard rental prices. The regional rent index can serve as a useful basis. Also, use some landlord tips to achieve the best rental price.
In many cities, the rent control law ensures that rents cannot rise above a set amount. This is particularly important in tense housing market situations to establish a fair and legally secure rental price. Setting an appropriate rental price is not only crucial for successfully concluding the rental agreement but also for the long-term satisfaction of your tenants.
Your rental yield can also be significantly affected. A rent that is too high could deter potential tenants, while a rent that is too low reduces your rental income. Therefore, use all available information and tools to determine the optimal rent for your property.
Designing the rental agreement
A clearly and comprehensively designed rental agreement is the backbone of a successful apartment rental. The rental agreement protects both the landlord and the tenant and forms the basis for a smooth rental relationship. A rental agreement should contain clear formulations to avoid misunderstandings. Complete regulations in the rental agreement are crucial to prevent legal problems and disputes. This includes provisions for rent payment and possible rent increases, which must be formulated clearly and unambiguously. Special attention should also be paid to the cosmetic repair clauses in the rental agreement, as these are often invalid and can protect tenants from unreasonable demands.
Renting above the rent index
In certain cases, it may be sensible to rent an apartment above the rent index. However, caution is advised, as the legal situation can change at any time. Legal advice is therefore advisable. In many tense housing market situations, landlords may charge a maximum of 10 percent above the local comparative rent.
However, there are exceptions that allow for higher rents to be charged:
Newly built apartments
Newly built apartments often offer modern amenities and are energy-efficient, making them particularly attractive to tenants. Since they are not subject to the rent control law, landlords can charge higher rents here. This can be especially advantageous in popular neighborhoods or emerging districts where the demand for modern apartments is high.
Comprehensive modernization
In cases of comprehensive modernization that significantly increase the residential value, landlords can also charge higher rents. This includes measures such as energy-efficient renovations, installation of new heating systems, or modernization of bathrooms and kitchens. These investments can not only increase rental yields but also enhance the attractiveness of the property on the market.
Previous rent
The previous rent refers to the rent that was agreed upon before the introduction of the rent control law. If this was higher than the current local comparative rent, it can still serve as a basis. This provides landlords with the opportunity to extend existing rental agreements without having to lower the rent.
Rent cap in areas without rent control
In regions without rent control, landlords have more flexibility in setting the rent. Here, they can adjust rents at their discretion, as long as they are in line with the market. However, a thorough market analysis is also crucial here to determine the optimal rent.
Furnished rentals and temporary housing
Furnished apartments are particularly popular among business travelers or individuals who only need accommodation for a limited time. This type of rental allows for a higher rent to be charged, as tenants benefit from the furnishings and flexibility.
Justification of rent with comparable apartments
Justifying the rent with comparable apartments is an effective means to clarify the appropriateness of the rent to potential tenants. By comparing with similar apartments in the area, landlords can substantiate their pricing expectations. This creates transparency and trust among prospective tenants, facilitating the rental process.
However, please note that the application of the rent control law varies from state to state and is not uniformly applied across Germany.
Carefully select tenants
The selection of the right tenant is another essential step in renting. Solvent tenants are preferred as they ensure timely rent payments. A credit check is usually conducted by SCHUFA or similar credit agencies to verify the payment capability of prospective tenants.
The credit assessment is carried out using the scoring method, which measures a person's financial reliability. Additionally, previous landlords can issue a rent debt clearance certificate, which proves that the tenant has no outstanding rent debts. A careful tenant selection minimizes the risk of payment defaults and disputes.
The credit assessment is carried out using a scoring method that measures a person's financial reliability. Additionally, previous landlords can issue a rent debt clearance certificate, which confirms that the tenant has no outstanding rent debts. A careful tenant selection minimizes the risk of payment defaults and disputes.
An appealing exposé is often the first impression that potential tenants have of your property.
Creating an exposé
A successful exposé should clearly present the most important information, such as:
An appealing exposé is often the first impression potential tenants have of your property.
Type of property
An exposé is a comprehensive description of a property that includes both photos and key details regarding location, condition, and amenities.
Number of rooms
A successful exposé should clearly present the most important information, such as:
Besichtigungstermine organisieren
Offer price
Keep the apartment clean, tidy, and free of personal items to leave a positive impression on potential buyers. Consider doing a trial run with someone before the viewing to test the duration and key points.
Type of property
Securing the rental deposit and first month's rent
Securing the rental deposit and the first month's rent is an important step before the handover of the apartment. The rental deposit should be secured prior to the handover to cover any claims from the landlord. Landlords can refuse to refund the deposit if there are rental arrears or outstanding repairs.
A handover protocol upon moving in and out can help secure claims on the rental deposit. Jurisprudence provides for a consideration period of up to six months for the return of the rental deposit. This gives the landlord sufficient time to check for any damages or outstanding payments.
Conducting the apartment handover optimally
A careful apartment handover is important to avoid future conflicts. A handover protocol documents damages and defects, which is relevant for the refund of the rental deposit. The protocol should include photos or videos to document the identified defects.
There is no legally mandated format for a handover protocol; however, it should contain all relevant information. The signed copy of the protocol serves as evidence in case of disputes. Meter readings for water, electricity, and gas must be jointly recorded during the handover.
Tax aspects of renting
Renting out an apartment also has tax implications that must be considered. Rental income from leasing must be taxed, even for short-term rentals through platforms like Airbnb. If rental income is outstanding in a year, it does not need to be taxed until the payment is actually received.
Landlords can deduct various expenses for the rented property as operating expenses, such as renovation costs and interest on financing. Losses from renting can be offset against other income, which can reduce the tax burden. The maintenance reserve can also be claimed as operating expenses as soon as the payments are made.
When renting to relatives, at least 50 percent of the local market rent must be charged to be able to deduct all operating expenses. For new buildings, there has been a special depreciation since 2023 that allows landlords to deduct up to 5 percent of the building costs additionally in the first four years. The declining balance depreciation allows for the annual deduction of 5 percent of the acquisition costs over six years, but only for newly constructed residential buildings.
There are also options for higher depreciation for existing properties. For example, landlords can benefit from the so-called linear depreciation, which allows for the annual deduction of 2 percent of the acquisition costs over a period of up to 50 years. Additionally, there is the possibility to deduct modernization measures for tax purposes if they significantly increase the residential value of the property. This includes energy-efficient renovations, the renewal of heating systems, or comprehensive renovations of kitchens and bathrooms. An expert opinion on the remaining useful life also offers the possibility of even higher depreciation. These tax advantages can make a significant contribution to the profitability of renting and help reduce the financial burden of necessary investments.
Considering property management
A property management company can relieve landlords of a lot of work and take over the daily management of the property. This includes handling tenant inquiries and scheduling appointments. A professional property management company has the expertise necessary to optimize renting and maintain the property's value.
By hiring a property management company, a professional tenant search is also enabled, increasing the likelihood of finding suitable tenants. However, the costs for property management can be high and may negatively impact the profitability of renting.
Additionally, landlords lose some control over their property, which can lead to conflicts if the property management does not act in the best interest of the landlord.
Terminating the tenancy
Terminating a tenancy may become necessary for various reasons. A landlord can terminate the tenancy with notice if they require the property for themselves or their relatives. The notice period for a regular termination is usually three months, but it can vary depending on the duration of the tenancy.
An immediate termination is possible if the tenant is in arrears of more than two months' rent. A tenant can also be terminated without notice if they repeatedly disturb the peace of the house. In the case of personal use, the landlord must provide understandable reasons to justify the termination.
How we can help
We offer comprehensive consulting services on the topic of renting and support you with all questions and issues. If you purchase a property from us, we also take care of everything after the purchase: from renting to management to maintenance.
Our goal is to make the rental process as simple and stress-free as possible for you.