Can I rent an apartment to a company? Do it this way
Read our advice on choosing business tenants, rental types, taxes and contract issues to make your property rental profitable and stable.
Tips for landlords
24.10.2024
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How to get reliable, solvent and manageable tenants?
Businesses are typically the most stable tenants of all, as they are more compliant than private tenants, which lowers the risk. Businesses prefer fixed-term leases, usually from a few months to less than a year. This gives you the flexibility to rent your home to businesses, individuals or use it for your own housing needs in between.
Companies need housing for project accommodation, for foreign workers or as temporary accommodation. Renting to businesses can give you a higher return, especially if you are prepared to furnish the property. A furnished rental apartment offers companies a move-in-friendly solution that directly meets the accommodation needs of their employees.
When renting to businesses, some tenants are better for your interests than others. In this article, we will discuss the specific features of renting to businesses, which, if taken into account, will help you to achieve the highest possible stable and high returns.
Short-term leases allow you to use your home for your own needs between contracts.
It is very likely that your property will be classed as a residential property, i.e. the Residential Tenancies Act (1995/481) will apply. The premises are designed and intended for permanent occupation. It usually includes a bedroom, kitchen, bathroom and other facilities typical of various types of dwellings.
Less frequently, a dwelling is classified as a commercial building, in which case the Commercial Building Tenancy Act (1995/482) applies. This law gives the parties more freedom of contract, but also less protection than the Residential Tenancy Act. The characteristics of a commercial building include efficient electrical and telecommunications infrastructure, stricter fire safety and accessibility requirements, and an open plan layout and sanitary facilities. Any change of use requires a permit from the building control authority.
The Act on the Tenancy of Dwellings (1995/481) also applies to employee housing. Even if the tenant is a company that continues to let the accommodation to the employee, the space is still a residential dwelling.
Typically, businesses are more interested in short-term rentals. Thus, companies' projects and accommodation needs for employees do not usually extend over a year, but last for a few months. By comparing the differences between short-term and long-term rentals, you can make a decision on the most appropriate way to rent.
Compared to private tenants, short-term rentals for businesses require less management and fewer home inspections, even if the rental is recurring. Businesses are more likely to follow agreed procedures and schedules, and generally use the property more consistently, reducing the risk of unexpected situations and damage.
For businesses, the lease tends to have a clearer contractual structure, which means that the lease is usually more structured and less time-consuming for the landlord. Even if tenants change more frequently, businesses tend to take care of the rental property compared to private tenants. In addition, short-term accommodation for businesses reduces the need to communicate with the tenant.
Renting for business is made easier when you use a specialised service. If you want to do it yourself, there are both similarities and differences compared to renting to individuals.
The basic structure of the lease includes the rental period, the amount of rent, payment terms, security deposits, rent increase policies, termination policies and any special conditions.
The rental period is agreed for a fixed or indefinite term. An open-ended contract is more flexible and normally follows the notice periods set out in the Tenancy Act (653/1987). The tenant's notice period is one month and the landlord's notice period is 3-6 months, depending on the duration of the tenancy.
The landlord's responsibilities include maintaining the property, setting security deposits and monitoring rent payments.
The property guarantee covers the building's structures and fixed fittings. It is also advisable to consider liability insurance to cover any damage caused by the tenant.
Solvency: it is worth checking the solvency of smaller companies or subsidiaries in particular. In addition to credit information, it is a good idea to check the company's financial reports. For example, you can check tax liabilities and financial statements in Woorat's business directory.
Security deposit: the security deposit acts as a safeguard for the landlord against any damage or unpaid rent, and can be up to three months' rent. In addition, the company can arrange a bank guarantee as security for the landlord. In the case of a subsidiary, the parent company may act as guarantor.
Payment in advance: often companies can afford and are willing to do this, especially in the case of short-term or fixed-term contracts. The terms of payment may specify that the rent is to be paid in advance, for example monthly, thus reducing the risk for the landlord.
For the landlord, rental income is capital income, on which capital income tax is paid.
Renting a residential property is usually exempt from VAT.
Tax deductions can be claimed for expenses related to rental activities. These include brokerage fees and the costs of maintaining the home, such as maintenance and repair costs.
Renting a furnished dwelling, on the other hand, has the effect that the purchase and maintenance costs of the furniture are tax deductible. The landlord must also inform the tax authorities that the dwelling has been rented furnished in order to get the tax right.
VAT applies to commercial premises, or if you expand your rental business to the extent that it would be considered a business activity. The definition of a business takes into account factors such as the scale, continuity and purpose of the activity.
+ From a tax point of view, companies can deduct rent payments as a business expense, which gives them tax advantages.
Furnished and equipped rental accommodation is attractive to businesses, offering them an easy and flexible solution, especially for short-term accommodation needs such as project workers or foreign experts. A furnished apartment can command a higher rent than an unfurnished one.
So it's good to invest in furniture, but by paying attention to certain things, you can make it as profitable as possible. For example, you should choose stylish, durable and easy-to-maintain furniture, such as leatherette and stainless steel options. Here are some more tips on buying furniture that works for your business.
When renting to businesses, you should focus on practical solutions, such as:
It's important for workers to be able to relax after a day's work, so comfort is a priority:
Modular furniture is useful for businesses because it increases the flexibility of the space:
Yes, an individual can rent their home to a company. It is important to draw up a clear rental contract and to take tax issues into account.
Residential tenancies are governed by the Residential Tenancies Act, while commercial tenancies are governed by the Commercial Tenancies Act. The laws differ, inter alia, in terms of termination and dissolution conditions. The Residential Tenancies Act is almost always used for renting a private dwelling.
Rental income is capital income for you, on which capital income tax is payable. You can deduct expenses related to rental activities, such as furnishings, repairs and maintenance costs.
It pays to furnish your apartment, as companies prefer furnished apartments. They don't have to worry about extra costs, and this solution also makes it easier to accommodate employees quickly.
It can be challenging to find suitable companies on your own, so hire easily through Immodan.
