Everyone knows that traditionally, HDB flats offer the highest rental yields amongst all the different property classes.
However, do watch out that you are aware of these regulations.
Pitfall #1: Once you get your keys, you can lock one room and rent out the rest of your flat
All HDB owners are required to fulfil a 5-year Minimum Occupation Period (MOP). The MOP is the period of time that you are required to physically occupy your flat. The MOP is calculated from the date you collect the keys to your flat. It excludes any period where you do not occupy the flat, such as when the whole flat is rented out or when there has been an infringement of the flat lease.
Within the MOP of 5 years, you may only rent out your spare bedrooms whilst physically living in the flat, with prior approval from HDB. Some HDB owners lock one door and rent out the entire flat. This is against regulations and you will either be imposed with a heavy fine or the HDB can repossess your flat at cost under the Housing and Development Act.
HDB officers carry out random checks on suspicious rental activities or through tip-offs by neighbours. HDB officers have the right to enter your flat and interview your tenant.
Pitfall #2: After the MOP, you can rent out your flat to anyone
- After the MOP, Singapore Citizens are allowed to do so but Singapore Permanent Residents (PRs) are NOT allowed to sublet their flat. Do obtain prior approval from HDB before renting out the entire flat.
- Not all tenants are eligible to rent the entire flat as well. Non-Malaysian work permit holders from the manufacturing/process sector, construction and marine industries are in this list.
- The minimum rental period is 6 months.
Pitfall #3: You will get higher yield by renting out to more tenants
Firstly, if you own a 1-room or 2-room HDB flat, you are not allowed to sublet any rooms. However, you are allowed to rent out the entire flat.
Secondly, in line with URA guidelines, you must adhere to the occupancy cap for renting out of HDB flats. The maximum number of occupants permitted for 3-room and larger HDB flats is 6 unrelated individuals, while HDB flats smaller than 3-room are permitted up to 4 unrelated individuals.
Thirdly, the occupancy cap on the maximum number of occupants in a flat includes the flat owners and occupiers.
Pitfall #4: Friends and relatives are not tenants so they do not need to be registered
Anyone you collect rental from will be considered a tenant and hence you will need prior approval from HDB. Registering the tenant ensures that they are legally allowed to stay in Singapore. There is also a subletting quota that you can check before confirming the rental.
The current quota for foreigners and non-Malaysian PRs is 8% at the neighbourhood level and 11% at the block level.
If your tenant is Singaporean, they must not own any HDB properties unless they are divorced, or are renting out their property within one month of renting your flat/bedroom.
Pitfall #5: I can rent out the flat long-term to the same tenant
You may rent out your bedrooms or flat on a long-term basis to a different tenant each time.
The maximum subletting period is 3 years per application.
If at least one of the subtenants is a non-Malaysian or non-Singaporean, you can only rent to them for 2 years.
Pitfall #6: I can be casual about the profile of the tenant
Landlords need to screen their tenants carefully. They may be held liable for their tenant’s wrongdoings.
- The tenants are not allowed to further sublet the rooms in the flat they rent.
- If your flat is used as a brothel, the landlord will be criminally liable under the Women’s Charter.
We hope that the above has been useful. If you have questions about renting/selling/buying a property in Singapore, feel free to contact us HERE.
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