If you will be leaving your condominium vacant for an extended period due to a job transfer or a similar reason, renting it out instead of selling it allows you to retain the asset while generating income. However, success depends on understanding the proper process and the key points that require attention.
What are the advantages and disadvantages of renting out your condominium instead of selling it?
Three advantages of renting it out
- You can earn rental income while retaining the asset
- You may move back in later, or choose to sell it at a future stage
- If you entrust management to a real estate company, you can receive income with minimal effort
When selling may be the better option
If the location is poor, the property is old enough to require renovation, or you need a substantial amount of cash immediately, these are cases where selling should take priority. Properties for which it is difficult to set a high rent are generally not well suited for leasing.
Five steps to renting out your condominium
1. Choose a trustworthy real estate company
Working with a company that handles rentals and has strong name recognition and tenant acquisition capabilities is the quickest path to securing occupants.
2. Choose the rental method (contract type)
- Standard lease agreement: Renewed every two years. If the tenant wishes to renew, the landlord generally cannot terminate it unilaterally
- Sublease: The real estate company re-rents the property. Management is easier, but around 10% of the rent is deducted as a fee
- Fixed-term lease agreement: You can set the rental period yourself. This is ideal if you want to rent it out only during a transfer period
3. Decide between a brokerage agreement and an agency agreement
Under a brokerage agreement, the landlord selects the tenant, while under an agency agreement, the real estate company handles that process on the landlord’s behalf.
4. Start recruiting tenants
Set conditions such as rent, whether pets are allowed, smoking rules, and the number of occupants. Because the more conditions you impose, the fewer prospective tenants you will attract, it is best to focus only on your priorities and discuss them with the real estate company.
5. Sign the lease agreement
Once viewings and screening are complete, rental income begins after the formal contract is signed.
Three important points to keep in mind when renting out your condominium
If you still have an outstanding home loan, be sure to consult your financial institution
A home loan is intended for a property that you live in yourself. Renting it out without notice may be treated as a breach of contract and could create the risk of immediate full repayment being demanded. Depending on the bank, temporary leasing during a transfer may be permitted, or switching to a second-home loan may be possible.
You need a financial plan that accounts for vacancy risk
Even during vacancy periods, taxes, maintenance costs, and repair reserve payments continue. You should make the decision only after confirming that you have sufficient savings on hand.
Shared facilities such as parking spaces cannot be sublet
A parking space that came with your purchase may not be sublet. If you advertise the property on your own as "with parking," it can lead to disputes. Confirmation with the condominium association is essential.
Related reading
Frequently Asked Questions (FAQ)
Q. If I want to rent out my condominium only during a job transfer, which contract is appropriate?
A fixed-term lease agreement is the most suitable option. You can set the rental period yourself, and you may move back in after your transfer ends. Once the term expires, a new contract can also be signed if both parties agree.
Q. Can I rent it out if I still have a home loan outstanding?
As a general rule, you need to consult your financial institution in advance. Renting it out without permission constitutes a breach of contract, but approval may be granted if the reason is a job transfer.
Q. Do I need to file a tax return if I rent it out?
Rental income must be declared as real estate income. Management fees, repair costs, and loan interest may be recorded as expenses.
Q. How much does it cost to entrust rental management to a real estate company?
In general, 5% to 10% of the rent is a common benchmark for the management fee. With a sublease, guaranteed rent is paid, but the fee tends to be higher at around 10%.
Q. What should I do if the property becomes vacant?
Consider reviewing the rent, easing the conditions, and revising the advertising strategy with your real estate company. Accepting foreign tenants is also one effective measure against vacancy.
