The new landlord's guide to subletting your flat

Subletting your apartment (be it a single room, or the entire apartment) is a great way to make passive income. But before you become a landlord, be sure you understand all the rules and regulations with regard to subletting your flat. Read on to find out more!

Rules regarding your eligibility to sublet

If you wish to sublet your entire flat, you need to be a Singapore Citizen who has fulfilled your Minimum Occupancy Period (MOP).

Regardless of whether your flat is a BTO flat or a resale flat, the MOP is five years. However, if you own a resale flat purchased before Aug 30 2010, you're looking at a shorter MOP of three years.

Rules regarding your tenants

Firstly, be sure to keep to the maximum number of tenants for the type of flat that you own.

• One- and two-room flats: Maximum of four tenants
• Three-room and bigger flats: Maximum of six tenants, respectively

Secondly, all sublets need to fall between the minimum lease period of six months and with a maximum lease period of 24 months (if your tenant is Malaysian, the maximum lease period is increased to 36 months instead).

Before subletting your apartment, you'll need to ensure that your tenants are legally residing in Singapore and that they meet the non-citizen quota.

The non-citizen quota states that only 8 per cent of a neighbourhood's residents can be non-citizens, and only 11 per cent of the occupants in a block can be non-citizens (with Malaysians being exempt from this rule).

Check the current quota for your block or neighbourhood here.

Last but not least, tenants are not allowed to be tenants or owners of other HDB flats unless they are divorced or legally separated (in this case only one party can rent an HDB flat from another flat owner), or owners who are eligible to sublet their whole flat.

In addition to this, tenants are also not allowed to be owners of Executive Condominium (EC) units, unless their five-year MOP has been met.

Additional taxes are borne by landlords

Where property tax is concerned, you'll be taxed at lower owner-occupier tax rates if you're sub-letting out your rooms whilst still staying in the same apartment. Make sure that you get your tenant or agent to stamp the rental agreement as "partially let" instead of "wholly let" so that your owner-occupier tax rate will not be withdrawn.

However, if you're sub-letting out the entire apartment, you'll be taxed at a higher rate (10 per cent of your home's Annual Value, or AV). AVs are calculated according to IRAS's assessment of the recent rental rates for various HDB flats.

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Should you wish to estimate the amount of property tax you'll have to pay upon renting out your apartment, you can do so using IRAS's online calculator.

In addition to property tax, landlords are also liable to pay additional income tax based on the amount of rental income they earn.

To learn more about the income tax imposed upon rental income, as well as what kind of expenses are deductible, check out IRAS's guide.

Things to take note of when looking for tenants

Ideally, your tenant should have a stable job and be willing to commit to a long-term lease. Make sure you also check up on his/her references and ask to speak to his/her previous landlords to get a better picture of what you can expect.

You'll want to lay down the ground rules clearly and explicitly in order to avoid any miscommunications and unpleasant surprises further down the road.

This article was first published in 99.co.