Apartment sublease business: where to start, pros and cons, investments and profits

Subletting apartments as a business is an actual option for those who do not plan or cannot allocate a large amount of funds for investments. Having found a suitable object and having prepared the documents correctly, you can start making a profit without any investments at all.

What is sublease

As well as rent, sublease involves a paid transfer for temporary use of residential premises. As such, not only an apartment in a high-rise building can act, but also a room in a communal apartment, a private house or cottage, and even a cottage suitable for permanent residence.

The difference between the concepts of “rent” and “sublease” lies only in the fact that in the first case the landlord is the owner of the dwelling, and in the second its tenant. The essence of the business of subletting apartments is to transfer the premises rented from the owner to a third party for use. At the same time, the original landlord, who is also the owner, does not have the right to claim the income received by his tenant, and he, in turn, is obliged to request permission to sublet the property.

Important! The transfer of housing for rent without notifying the owner can turn into serious problems for all parties.

Advantages and disadvantages of a business on sublease of apartments

The advantages of this type of activity are as follows:

1. The opportunity to earn income with a small start-up capital, and in certain cases without it. An ideal option for those who do not have the funds for a large investment in real estate.
2. Subletting apartments as a business does not require special knowledge and skills, which means it will suit any investor.
3. Good prospects in terms of business expansion and capital increase. If you sublet not one, but several residential premises at the same time, you can significantly increase your income.
4. The ability to combine business with the main activity.

There are also disadvantages, and that’s what they consist of:

• the probability of damage to the property of the homeowner;
• problems with the Federal Tax Service if the business is not legalized;
• early termination of the lease agreement if the owner finds out about the rental of housing without his permission;

Let’s make a reservation right away that all these problems are completely solvable, and we’ll talk about proper business management below.

How much capital will be required and where to get it

The amount of start-up capital will vary depending on the region. Accordingly, in megacities, rent is always higher, but 50 thousand rubles is enough to start with.

You can save money for rent, or you can get it at a time if:

• apply for a microloan, a consumer loan or a credit card;
• borrow the required amount from relatives or friends;
• sell unused property, for example, an old car.

In addition to the amount required to repay the rent, you need to take into account another line of expenses – advertising costs. Of course, tenants can also be found among acquaintances, which will significantly reduce the risk of damage to someone else’s property, but if you intend to rent housing to third parties or daily rent, you will have to pay for the submission of advertisements. Thus, several thousand rubles will be added to the starting 50 thousand.

Pay attention! If the amount of rent does not include the cost of utility bills, more funds will be required.

How to choose a place to rent

It would seem that there is nothing easier than finding a suitable accommodation, however, there are nuances here. And that’s what it’s important to pay attention to when choosing an apartment for sublease:

• housing should be rented by the owner, not by an intermediary, for example, a realtor, a relative of the owner or another tenant. Otherwise, there is a risk of increased costs or problems with the real owner;
• the area where the apartment is located should have a developed infrastructure;
• it is more reasonable to rent an apartment in a new house, rather than an old house;
• it will be more profitable to find an apartment with renovated furniture and household appliances, fully ready for a comfortable stay;
• it is desirable that the owner is a busy person and does not live in the neighborhood. Otherwise, there is a high probability that the owner will regularly disturb the sub-tenants;
• it is important to immediately discuss with the owner the possibility of subletting the apartment.

Business registration

If this is a business, and not a shadow activity, special attention should be paid to the legalization procedure. And first of all, you need to think about how to report your income. The following tax systems are suitable for landlords, including those who are tenants:

• patent (IP status required);
• personal income tax payment (for individuals);
• USN – simplified system (for sole proprietors);
• NAP (for self-employed citizens).

The second and perhaps one of the most important points is the contract. The document can be a standard apartment rental agreement, but it must contain one important condition providing for the transfer of the apartment to sublease. In the absence of such, the owner has the right to terminate the contract ahead of time for non-compliance or violation of its terms.

In addition, in order to avoid problems with tax inspections, a lease agreement concluded for a period of more than 12 months must be registered with the Rosreestr. In the sublease agreement, it is important to include a reference to the original contract concluded with the owner.

Pay attention! When transferring an apartment to sublease, require copies of the passports of the persons settling in and a deposit.

Business process organization

Earning on subletting apartments at the initial stage requires maximum involvement. Passive income is out of the question at the very beginning. The newly minted businessman, in addition to finding the initial capital and a suitable real estate object, expects the solution of the following issues:

• to advertise and look for reliable clients, avoiding cooperation with noisy young people and illegal migrants;
• prepare housing for the entry of new tenants;
• personally check the condition of the apartment when tenants leave and pick up the keys;
• periodically transfer taxes and rent to the owner.

Over time, organizational issues can be delegated, especially if there are several objects. Thereby creating passive income from subletting apartments.

Potential profitability

A lot depends on the organization of the process, the demand and the cost of rent in a particular region. Nevertheless, with a full load of housing, the initial capital can be increased several times.

The subtenant has the right to rent an apartment for a fee exceeding the rent set by the owner of the dwelling. The apartment can be rented daily and in this case the amount of the fee will be reasonably higher due to the presence of certain risks. It is appropriate to talk about a really high income when several objects are rented for a fairly high fee.

When calculating the potential profitability of a business, costs should be taken into account, including:

• the cost of communal services;
• downtime days;
• taxes;
• the cost of cleaning and repair.

Possible risks

There is always a risk that expenses will exceed revenues and the business will be unprofitable. This is facilitated by many reasons, in particular, the likelihood of an unscrupulous tenant who will harm the owner’s property, or a sharp change in the situation in the real estate rental market, which will lead to a decrease in demand or a drop in prices.

At the same time, it is important to understand that illegal tenants risk more and may be at a much greater disadvantage than legal ones. That is why, before deciding on choosing such a way of earning, it is necessary to weigh all the pros and cons, as well as to enlist all available guarantees.

Published: 22 February, 2022