Thursday, January 8, 2009

A lodger could be the answer

But proper screening required, say landlords

WITH job losses expected to spike and bonuses becoming restrained, more homeowners may resort to renting out spare rooms to make ends meet, say analysts.

Although carving out a space in your home for strangers may mean a loss of privacy and inevitable adjustments to the way you live, it can also help with monthly mortgage payments and other bills.

“Basically, if we are going to see an increase in the amount of retrenchment and increased incidences of companies adopting pay cut policies, homeowners could be affected, which is why they would explore that as an option to ease their (financial) burden,” said Ms Tay Huey Ying, director of research and consultancy at Colliers International.

Renting out rooms in a home is an easy way for homeowners in financial difficulties to raise cash, said a property agent who declined to be named.

Unlike renting out an entire Housing Development Board (HDB) unit, prior approval from the authorities is not required when renting out HDB rooms, although there are certain subletting conditions to observe.

The agent estimated that a room in a four-room flat could fetch around $600, depending on the location and room condition. Those nearer MRT stations or which come with ensuite bathrooms usually fetch better rents, he said.

Ms Tay expects an increase in supply from both private and HDB flat owners.

However, she feels HDB rooms would see higher demand, as there is a bigger pool of potential tenants, including students and blue-collar workers.

“Students usually don’t have deep pockets and will look towards HDB flats … In the past, there may have been blue-collar workers who rented an apartment together,” Ms Tay told Today. “But they may find difficulties when flatmates are retrenched and cannot maintain a whole apartment, so there would be more demand for individual rooms.”

But before renting out rooms, owners should protect themselves by preparing :a tenancy agreement, which clearly states clauses for rent, length of stay, rules and regulations, and that no more than one person is allowed to stay in the room, say agents.

New landlords should also be prepared to make some investments to attract tenants, say analysts. For example, they may need to buy new furniture such as wardrobes, cabinets or beds, as well as service the air-conditioning units in the rooms.

Carefully screening potential tenants is another must, say people with experience.

One landlord, who preferred to be known as Mr Chng, has had bad run-ins with local tenants who turned a property he once owned into a gambling den.

Now, Mr Chng conducts background checks on prospective tenants by calling their companies to reaffirm their occupation and identity.

“They have to show you proof of where they work. You can’t just believe them offhand when there may be no such company at all,” said the owner of a four-room flat in Tanjong Pagar, who prefers to lease to foreigners who work in established companies.

For foreign tenants, landlords can also check the validity of their work permit or employment pass using tools available on the Manpower Ministry website, said another landlord in Toa Payoh, a logistics worker who only wanted to be known as Jason.

Some landlords say there is no foolproof method of screening tenants.

“We just have to learn their habits. Sometimes after doing light cooking, they don’t bother to wash up,” said Simon, a freelance teacher who usually looks for “well-mannered” semi-professionals as tenants.

“The first two months can be quite difficult, but generally, things smooth out after that. Subsequently, after we get to know each other better, we’ll explain what we expect of them,” said Simon.

Source : Today - 8 Jan 2009

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