Are you working as a landlord on evenings and weekends alongside your 9-5? Property is currently very popular as a lucrative investment or pension opportunity. However, in the jungle of forms and rental law you have to navigate, there are some traps to be aware of.
Tip 1: Is the tenant able to pay?
The majority of private tenants are on the hunt for long-term, fair leases. Depending on where your property is located, you might have the luxury of being able to select from a number of possible future tenants – but is the potential tenant willing and able to pay rent? It’s important to verify this to ensure you receive all rent payments. Be sure to request an extract from the Debt Enforcement Office and obtain references. You should also take into consideration whether the tenant will suit the property and fit into the neighbourhood.
Tip 2: Correctly concluding a lease
There’s no formal regulation on leases. This means that a lease can be concluded either verbally or in writing. Of course, it’s advisable to create a written lease for evidence purposes. Since “after-work landlords” aren’t likely to be familiar with tenancy law, it’s advisable to use a standard lease template. This will guarantee that all the essential points of property rental are regulated. If the tenant is looking for a shared flat, or looking to rent as a couple, this is an advantage to you as a landlord – the tenants will be jointly liable for the obligations set out in the lease.
Also note: In some cantons, you must submit the initial rent payment on an official form. This requirement is observed by the cantons BS, FR, GE, NE, VS, ZG, and ZH. Additional costs may only be charged separately if they are expressly stated in the lease.
Tip 3: The deposit
To guarantee payment of rent, additional costs or other necessary payments, you may demand a security deposit. This amount must be paid into a blocked account in the name of the tenant. You are required to settle the deposit in the lease; you may demand a maximum of three months’ rent.
Tip 4: Inventories for rentals
As a landlord, it’s in your interest to create a proper inventory which will be signed by the tenant. Failure to create an inventory can lead to increased risk for you – you can’t retrospectively prove that damage to the property was caused by the tenant or present before they moved in, for example. You can only hold the tenant liable if the condition of the property before and after their tenancy has been recorded.
Tip 5: Determining the rent
How much should rent cost? Working this out is anything but easy! As a landlord, you’ll need to consider actual costs (purchase price, construction costs, mortgages, investments over the years). To correctly calculate costs (net and gross yield), it’s generally necessary to consult a specialist. In practice, however, many people consider approximate comparative rents – how much is rent for similar properties (of a comparable size and year of construction) in the same area? The “prevailing rent” criteria is also regulated by law.
If the official reference rate for mortgages falls, rental rates in Switzerland will also fall. You don’t necessarily have to pass on these reductions, many private landlords will do this fairly anyway.
Tip 6: Increasing rent
When it comes to increasing rent, it’s important that “after-work landlords” make no formal mistakes. As a landlord, you are required to announce one-sided changes to the lease that are disadvantageous to the tenant on an official, cantonal form. This form also tells the tenant how and where they can contest this change. In other words, increases to rent are not valid if disclosed verbally or by mail with a non-official letter.
Strict rules also apply to any termination by the landlord (only valid on an official form, deadlines and dates, etc.).
Tip 7: Additional costs
If you outsource certain services during the rental period, such as house maintenance, service of technical equipment, heating, etc. large costs can quickly be incurred. Please note, however, that you are only permitted to charge separately for incidental costs if they are listed in the lease. All other costs are included in the net rent. In the case of payments on account, you, the landlord, must submit a settlement once per year. Depending on the balance, the tenant will have to make an additional payment or receive money back. In the case of lump-sum additional costs, on the other hand, the amount is fixed – regardless of which additional costs have actually been incurred.
Tip 8: Rectifying defects
According to lawyers, the property must have the characteristics agreed upon in the lease. It must be “fit for purpose” in this sense; however, this is always a matter of interpretation. You must ensure that the property is heated during winter and all connections for electricity, water etc. are working properly. Defective appliances – refrigerators, washing machines, ovens – must be fixed by you. Other defects such as peeling wallpaper must also be fixed by you. If you do not maintain the property, this shall affect the rights of the tenant. This includes damages as well as rent reduction until you have rectified the defect.
Tip 9: Renovations
As a property owner and landlord, you are free to renovate the property as necessary inside and out. However, you are obligated to consider your tenants and inform them about upcoming work and renovation dates. Tenants may request a rent reduction during renovation work depending on the extent of the work.
Tip 10: Money
Many property owners and investors have benefited in recent years from the property boom, in particular from rising rents and market values. Nevertheless, you should calculate all expenses and revenues very carefully. Also consider risks, such as vacancies and rent losses, rising interest rates and market risks with property. If there are major investments in the next few years, these will have to be taken into account.
It’s also important to consider taxes – income from rent is subject to income tax. Conversely, you can deduct mortgage interest, maintenance and utilities (insofar as these costs are not covered by the tenants). Depending on this, you can also claim a maintenance flat rate of 20 percent of the rental income.