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Rental Tips: Everything a Landlord Needs to Know – Practical Advice and Legal Guidelines for First-Time Landlords

Tips for First-Time Landlords: What Every Landlord Should Know

Renting out a property can be a great way to generate passive income, but there are many legal and practical aspects to consider before finding a tenant. This guide will help you navigate the process of renting out your property for the first time, including legal requirements, choosing the right tenant, and tax obligations.

Lakáskiadás tippek

1. Choosing the Right Tenant

One of the most important steps is finding a reliable tenant. It is crucial to assess the financial stability and trustworthiness of potential tenants. Consider the following factors:

  • Request proof of employment or income to ensure they can afford the rent.
  • Meet them in person to get a better sense of their character.
  • Ask for references from previous landlords if possible.

2. Signing a Rental Agreement

The rental agreement is the most important document that outlines the rights and obligations of both the landlord and the tenant. In Hungary, the contract must include:

  • The names and details of both parties.
  • A precise description of the rental property.
  • The rental price and payment terms.
  • The rental period (fixed-term or indefinite).
  • The allocation of utility and maintenance costs.
  • The amount of the security deposit and the conditions for its return.

Importance of a Notarized Rental Agreement

It is highly recommended to have the rental agreement notarized by a public notary. The key advantage of this is that if the tenant fails to pay rent or refuses to leave the property, you can initiate eviction proceedings without going to court.

The cost of notarization depends on the rental price, but typically ranges between 30,000 – 100,000 HUF. Although this is a one-time expense, it can save significant legal trouble in the long run.

3. Legal and Tax Considerations

Rental income is subject to taxation, and landlords in Hungary can choose between different taxation methods. As of 2024, the available options include:

  • Itemized expense deduction: You can deduct eligible expenses (such as property maintenance and renovations) from your rental income and pay tax only on the net profit.
  • 10% expense deduction method: If you do not track detailed expenses, you can assume 10% of your income as costs and pay tax on the remaining 90%.

The personal income tax (PIT) rate is 15%, which must be paid on rental profits. Additionally, if your annual rental income exceeds 1.2 million HUF, you are also required to pay an additional 13% social contribution tax (SZOCHO).

If renting out a property becomes a regular business activity, it may be necessary to register as a sole proprietor or business entity, which would involve different tax regulations.

4. Assessing and Maintaining the Property

Before renting out your property, it is important to assess its condition and carry out necessary maintenance work. A well-maintained property is more attractive to tenants and can command a higher rental price.

  • Prepare a condition report listing the state of furnishings and appliances.
  • Take photos before the tenant moves in to avoid disputes later.
  • Consider landlord insurance to cover potential damages.

5. What to Do If Problems Arise?

Unfortunately, issues such as non-payment, property damage, or an unwillingness to vacate the premises can occur. In such cases, follow these steps:

  • Communicate with the tenant and try to resolve the issue amicably.
  • Send a formal written notice if the problem persists.
  • Seek legal assistance – in extreme cases, contract termination or even legal proceedings may be necessary.

6. How to Make Your Property More Attractive to Tenants?

To rent out your property more quickly and secure a higher rental price, focus on both aesthetic and functional improvements:

  • Fresh paint: A clean, freshly painted property is much more appealing.
  • Quality furnishings: If renting furnished, provide modern and practical furniture.
  • High-quality photos and detailed ads: Use professional photos and provide a thorough description in listings.
  • Energy efficiency: A well-insulated property with energy-saving appliances can reduce utility costs, making it more attractive to tenants.

Conclusion

Renting out a property for the first time can be an exciting yet challenging process. It is essential to carefully select tenants, draft a legally sound rental agreement, and understand your tax obligations. By following these steps, you can minimize risks and become a successful landlord.

If you are unsure about any legal or tax-related matters, it is always advisable to seek professional advice to avoid potential issues in the future.