Moscow was in last place in terms of income from apartment rentals among cities with a population of over a million
Photo: ITAR-TASS/ Stanislav Krasilnikov
In almost all major cities of Russia, since 2013, there has been a decrease in the profitability of apartments for rent. The yield of rental apartments in Moscow is the lowest among Russian cities with a population of over a million (4.6%). Chelyabinsk turned out to be the most profitable (8.6%). Such data are presented in a study prepared by the Internet portal for apartment rentals Domofond.ru.
The top three in terms of profitability also included Krasnoyarsk (7.1%) and Perm (7.1%). In addition to the capital, Kazan (5.7%) and St. Petersburg (5.7%) were included in the conditional rating of outsiders. Chelyabinsk tops the table of cities with a population of over a million, and it recorded the strongest decline in apartment rental yield: from December 2013 to May 2015, it fell by 1.3 percentage points.
According to the portal, Chelyabinsk has low average prices per square meter compared to other million-dollar cities. m - only 46,309 rubles. At the same time, the average cost of renting a square meter of an apartment is higher than in some other cities - 310 rubles. per month, notes General Director of the Domofond.ru portal Eric Segerborg. “As for Moscow, it would seem that renting out housing should be very profitable, but in fact the opposite is true. This is due to the large number of offers and high competition, which contributes to lower rates, which means a decrease in the income of landlords,” comments Erik Segerborg.
The average yield among the largest cities in Russia, according to the study, has fallen since the beginning of 2013 from 7% to 6.3% by May 2015. Thus, purchasing real estate for the purpose of renting it out is becoming an increasingly less reliable investment. Realtors interviewed by the editors of RBC Real Estate note that when renting out, the average payback period for an economy class apartment is about 18 years. The yield in the same segment in the urban rental market in Moscow fluctuates in the range of 4-7% per annum.
The crisis has made adjustments to the city apartment rental market: purchasing power is declining and demand is falling. “This situation was influenced by several factors: the economic crisis, fluctuations in exchange rates, a decrease in income and purchasing power of the population, the outflow of a certain part of tenants coming to Moscow to work, certain changes in migration policy, etc.,” says the first deputy director Miel-Arenda agency Maria Zhukova.
Source: Domofond.ru
The most profitable areas of Moscow
The highest profitability for owners, according to a study by Domofond.ru, in May 2015 was shown by rental apartments at the Myakinino station (6%), and the lowest - at Kurskaya (3%). “If you look at the distribution of profitability across Moscow districts, then cheap housing on the outskirts has the highest, since this category is the most in demand,” says Eric Segerborg.
Last year, significant changes occurred in the apartment rental market in Moscow and the Moscow region. “The supply significantly exceeded the demand, as a result there were 2-2.5 apartments for each tenant. This year, the predominance of supply over demand continues,” notes Maria Zhukova.
The rental market is somewhat inert and does not immediately respond to the changed economic situation. Now realtors are already noticing changes: owners are reducing prices. According to the estimates of the Miel-Arenda agency, from January to June 1, 2015, prices for apartments in economy class decreased: for one-room apartments - by 8% (34 thousand rubles in January - 31 thousand rubles as of June 1), two-room apartments - by 9.5%, three-room apartments - by 4.2%. “One-room apartments were the most overpriced and did not correspond to current demand and average salaries,” says Maria Zhukova. “The downward trend in prices is likely to continue.”
Rental yield in Moscow depending on metro station
All property owners must pay rental tax. If the apartment is rented out to tenants, but you do not pay the state, then you are considered a fraudster. What taxes must be paid, how to properly prepare documents when renting out an apartment? Answers to these and many other questions can be found by reading the article.
Tax deductions depend directly on who the owner is - a legal entity or an individual. But regardless of citizen status, rent is considered a source of additional income, so taxes must be paid on it.
The size depends on the citizen renting the apartment:
- For tenants with citizenship of the Russian Federation, payments in the amount of 13 percent (income tax) of the rental price are provided.
- For non-residents of the Russian Federation, personal income tax is 30 percent.
If the tenant is a legal entity
If the tenant is a legal entity, the state has provided several payment options:
- "Simplified" scheme. An enterprise (legal entity) classifies rent as income. In this case, deductions are paid depending on the characteristics and tax base.
- General scheme. When the general tax scheme is applied, the enterprise also classifies rent as additional income. But they are increasing personal income tax payments.
Tenant – individual
If the tenant of the property is an individual, then the owner must pay a tax, which is levied on the rent paid by the tenant. To simplify the taxation procedure, you can register as an individual entrepreneur. You can also pay according to a simplified scheme or buy a patent that provides for renting out an apartment you own.
Features of taxation
To ensure payment guarantees and to avoid problems with the law, you should conclude a rental agreement for residential premises. If the owner does not conclude an agreement, then he is considered a fraudster, since he does not pay taxes.
It is worth noting that the tax and law enforcement authorities have not established a system for tracking non-payers. Very often they are not discovered at all, and those who are found are usually “turned in” by neighbors or ill-wishers. Of course, the system for identifying “evaders” is being improved every year, but so far cases of illegal rental of apartments are not uncommon.
Rental tax is paid once a year (until April 30). To pay, you must submit a declaration to the tax authorities.
Income tax
Most believe that an individual has the right to pay only income tax, but this is not entirely true. There are several taxation methods for paying deductions from renting out an apartment.
- The percentage charged by tax authorities from residents of the Russian Federation is thirteen percent.
- For non-residents or persons who live in the state for less than 183 days a year, the interest rate is much higher - thirty percent of the total amount.
When a property owner fails to pay taxes on time, a fee is assessed. If the reasons do not depend on the owner, then the fine is 20 percent of the amount of the base that is unpaid. And if the owner does not pay the tax intentionally (provided that this is proven), then the fine is already 40 percent of the unpaid tax amount. If you do not pay taxes for a long time, the amount of debt can become impressive. Better not be late on payments.
Does simplified taxation save money?
In order to pay a lower percentage of taxes, you can register as an individual entrepreneur. This is not as difficult to do as many people think. And in this case, it will be possible to pay much less to the budget.
In a particular case, only rent paid for living in an apartment will be considered income of an individual entrepreneur. According to the law, the tax rate when renting out an apartment will be only 6 percent of the total income, that is, the rental amount. This is much less than thirteen or even thirty percent.
Important! There is also one “underwater” stone here. The tax must be paid not only once a year, it must be done in advance once a quarter. The declaration must be submitted annually by April 30.
If the tax payment procedure is correct, the amount that has already been paid must be submitted in the declaration by April 30. For tax accounting purposes, an individual entrepreneur, that is, the owner, is recommended to keep a special book of income and expenses - then there will be no problems.
Patent for tax on rental of apartments and residential premises
You can pay to the budget using the patent tax system. To do this, a citizen needs to register an individual entrepreneur.
The tax in the case of a patent system will be 6 percent, but it is paid immediately. That is, the estimated rental amount is taken and 6 percent is subtracted from it. A patent is purchased once a year (you can buy it for a year, six months or another period), and money can be paid to the tax authorities in one or two stages:
- A patent is purchased for a period of less than six months - in this case, the entire amount is paid immediately.
- A patent is purchased for a year. The first payment is made within 25 days from the date of purchase, the second - at the very end of the purchase period.
For example, the minimum amount for a patent in Moscow is 60,000 rubles (the amount may vary), as it is 6 percent of 1 million rubles (the minimum estimated rental amount). A patent can be taken out not for a year, but for any period (in months). Then the amount will be calculated differently. So, for one month of a patent you need to pay 5,000 rubles (60,000 rubles: 12 months). It is worth noting that this is the minimum amount that is generally accepted. If you rent an apartment at a higher price, the amount will increase.
The main advantage of the patent system is that you do not need to submit a declaration to the tax authorities.
Legal entity - owner of the apartment
When a legal entity on the OSN wants to rent out an apartment, it is mandatory to draw up an agreement. It should indicate not only standard data, but also the method of payment (once a month, once every three months (quarter), once every six months or according to another system). Read about it in our article.
The declaration will have to be submitted earlier - before March 31. If the general taxation scheme is applied, then the legal entity must pay income tax.
The standard tax rate for legal entities is 20% plus VAT, which is 18%. Total 38 percent of the profit. Of the 20%, 2% is allocated to the general federal budget, and 18% to the budget of the constituent entity of the Russian Federation in which the taxpayer lives.
Rental tax must be paid to each owner of an apartment that is rented out. There is no point in avoiding payments, as big problems may arise later.
There are two ways to earn income from residential real estate - through profitable sales and by renting out housing. Moreover, if in the first case we are talking about a one-time receipt of funds, then in the second, the owner of the property can count on long-term passive income, which makes this strategy similar to placing savings on a bank deposit.
However, Russians consider renting out housing a more effective way to earn money than a bank deposit. According to surveys by the analytical center of the National Agency for Financial Research, citizens named the purchase of real estate as the most reliable investment (49%). “Buyers who choose the rentier route receive a certain amount from month to month, but the downside is the payback period is 15-18 years long,” notes Natalia Kuznetsova, general director of the Bon Ton real estate agency.
According to the INCOM-Real Estate company, currently 44,644 residential real estate properties are rented out within the old borders of Moscow alone, of which 88% are apartments and 12% are rooms. Over the year, total supply increased by 27.5%. That is, the number of Muscovites renting housing increased by a little more than a quarter during this period.
“The growth in rental supply is evidence of the social vulnerability of a significant segment of the population. Indeed, for many, renting out housing is becoming the main source of income,” comments Oksana Polyakova, deputy director of the apartment rental department at INCOM-Real Estate.
As the Miel-Arenda company notes, today one-room apartments are the most in demand on the rental market. More than 30% of all tenants are looking for this particular type of housing, although during the crisis the share of rooms in the rental market also increased.
Rentier with a mortgage
The main reasons for the popularity of the rentier strategy are currency volatility and mortgages. In the context of a weakening ruble, many sellers are refusing to sell the property in favor of renting it out. Moreover, the majority of apartments purchased for subsequent rental were recently purchased using a mortgage loan, says Oksana Polyakova.
For rental, buyers most often consider options in Moscow with a convenient location and proximity to the metro; preference is given to apartments that are ready for finishing.
Nevertheless, investors' fervor gradually faded as the housing market in modern Russia developed. Today, according to Natalia Kuznetsova, the share of investment transactions in the primary market is up to 4-5%. For comparison: according to CIAN, a year ago the share of investment transactions in new buildings was 9%, and in the early 2000s it reached 35%.
“The problem with this strategy is the long payback period. The yield is up to 7% per annum (for comfort-class projects), which does not cover the real level of inflation,” says Kuznetsova.
At the same time, according to her, deposits cannot be called a more profitable alternative - their average market profitability is quite comparable to the profitability from renting out housing.
Deposit or apartment
The BEST-Novostroy company compared the profitability from leasing with the profitability from placing funds on deposit.
“Taking into account fluctuations in rates on ruble deposits and changes in average budgets for purchasing an object (for comparison, we took a 2-room apartment in a new building), the rental yield remains almost comparable to the profitability from placing a deposit,” commented the chairman of the company’s board of directors “ BEST-Novostroy" Irina Dobrokhotova.
But don't forget about the details. The investor receives the highest interest if he does not withdraw it and does not replenish the deposit before the expiration of the term, while the funds from rental can be spent monthly for his own needs, or can be sent to a replenishable deposit. Thus, the owner of the apartment can receive double benefits, Dobrokhotova notes.
But renting out an apartment also has its downsides, she noted. This is the need to pay personal income tax (it can be reduced from 13% to 6% by purchasing a patent or acting as an individual entrepreneur), the need to pay property tax, as well as depreciation expenses (current repairs). Also among the disadvantages is the risk of loss of income if the contract with tenants is terminated early. There may be agent commission costs if the apartment is rented with the help of a broker.
In order to avoid paying a broker's commission, some landlords look for tenants by posting advertisements on Internet sites, notifying friends and acquaintances, etc. But this is becoming less and less popular: landlords are learning that they can be serviced for free by real estate agencies with their own database of properties.
Thus, according to INCOM-Real Estate, over three years the share of independent renters decreased by 25 percentage points to 20%. In the fall of 2015 it was 45%, a year later - 32%, and in 2017 - only 27% of homeowners tried to act on their own.
Don’t forget about the disadvantages of placing funds on deposit. If the license is revoked or the bank goes bankrupt, there remains the risk of non-return of the deposit when placing an amount in excess of 1.4 million rubles. Another significant drawback is the impossibility of withdrawal or loss of interest in case of early withdrawal of funds from the deposit.
While experts argue and compare the profitability of a deposit in a bank and renting out an apartment, the rental housing market has begun a gradual recovery after the crisis - in August it showed an increase in prices. “The average cost of renting 1-room economy class apartments in August 2018 was 31,670 rubles, which is 5.96% higher than the average cost of similar apartments in August 2017,” commented Maria Zhukova, director of the MIEL-Arenda company.
|
Rate on ruble deposits for up to 1 year (without demand deposits)* |
7.04% per annum |
6.69% per annum |
6.56% per annum |
|
Average budget for purchasing a 2-bedroom comfort-class apartment in a new building in Moscow** |
8.1 million rubles |
8.6 million rubles |
9.4 million rubles |
|
Profitability from depositing the same amount per month |
47,520 rubles |
47,945 rubles |
51,386 rubles |
|
Average rental rate for a 2-room apartment in Moscow (new stock, comfort class) |
46,000 rubles |
48,000 rubles |
51,500 rubles |
*For the 30 largest banks, data from the Central Bank of the Russian Federation **Data from bnMAP.pro
Real estate is one of the most popular ways to invest money. According to a study by a consulting company, dollar millionaires in 24% of cases prefer to invest in luxury residential real estate. This type of investment is second in popularity only to investments in stocks and bonds.
How much can you earn?
“There is such a pattern: the higher the investment, the lower the profitability. According to Miel-Arenda, the average payback period for an economy class apartment is about 18 years. Profitability in the same segment in the urban rental market in Moscow fluctuates in the range of 4-7% per annum,” says Maria Zhukova, director of the Miel-Arenda company.
Calculations show that it is more expedient to purchase two inexpensive one- or two-room apartments in popular areas for rent, or in areas where supply is minimal. This investment will pay off faster than investing in one expensive apartment, says Zhukova.
Profitability from renting out apartments in Moscow and Krasnodar
* – approximate payback taking into account the increase in property values, ** – current profitability minus 13% tax (excluding the rise in price of the apartment). Source: Inkom-real estate, From hand to hand, Rosstat, Sravni.ru calculations.
How to choose an apartment?
According to the real estate company Metrium Group, large one-room apartments (about 45 sq. m) or, conversely, small two-room apartments (about 55 sq. m.) are in high demand among tenants - they make up 70-80% of offers on the market. “Small apartments are preferable - they are more in demand, cost less, are easier to maintain, and taxation is lower,” agrees Vadim Lamin, managing partner of the real estate agency Spencer Estate.
When choosing housing, you need to be guided by the same criteria as a potential tenant:
- Floor – the apartment should not be located on the first or last floor.
- Transport accessibility - if you walk several kilometers to the nearest bus stop, then the apartment will cost little; walking distance to the metro can increase the price.
- View from the window - it is logical that the view of the garbage dump is not as attractive as the view of the park. Many tenants prefer to have windows facing the courtyard.
- Proximity of shops – the presence of large shopping centers nearby can slightly increase the cost of an apartment; housing far from shops will cost less.
- Finishing - when buying any apartment, you need to renovate it, as well as buy / update furniture and appliances - this will make the rental offer more attractive.
If you don’t have enough money for housing in the capital, then you can think about buying an apartment in another city.
If you rent out your apartment to individuals and are not an individual entrepreneur for this type of activity, you must independently declare the income received. And pay personal income tax on it. The declaration is submitted no later than April 30, and the tax is paid no later than July 15.
Our readers’ questions about how to correctly fill out the 3-NDFL declaration are answered by specialists from the Moscow Department of the Federal Tax Service.
How do tax inspectors identify apartments for rent in practice?
T.I. Mazova: The Department of the Federal Tax Service of Russia for Moscow has entered into an agreement on interaction with the Government of Moscow and the Main Directorate of the Ministry of Internal Affairs of Russia for Moscow. Since September 2012, measures have been taken to identify citizens leasing real estate and to collect evidence of their receipt of income.
Primary information about apartments for rent is collected by the territorial bodies of the Moscow City Council of public law enforcement points.
How do inspectors act if they receive such information?
T.I. Mazova: If there is information that a citizen receives income from renting out housing, the Federal Tax Service sends him an information letter. The inspectorate informs the citizen that individuals who receive income from individuals under rental agreements or leases of any property have an obligation to independently calculate and pay tax on this income on the basis of a personal income tax return. And he invites the citizen to submit such a declaration to the tax authority. And if he does not receive income from renting out an apartment, provide appropriate explanations. You don't have to come to the inspectorate to do this. Explanations can be sent by regular mail or by email.
If a person has two apartments and he rents out one of them and lives in the other, which inspectorate should he submit the declaration to: at the place of residence or at the location of the rented apartment?
T.I. Mazova: To the inspectorate at your place of residence (registration).
Will the Federal Tax Service, upon receiving a declaration in form 3-NDFL from the landlord, “inform” the utility services that the apartment is being rented and that in fact a different number of people live there than are registered?
Chief State Tax Inspector of the Legal Department of the Federal Tax Service of Russia for Moscow
M.E. Golub: Such an obligation does not follow from the norms of the Tax Code. Articles 2, 32 of the Tax Code of the Russian Federation. Therefore, the Federal Tax Service will not “report” to the utility services that someone else lives in the landlord’s apartment.
Let's assume the rental agreement is in writing. But the transfer of money itself occurs without any documents. If the lessor indicates in the declaration the amount determined by the contract, will this be enough?
M.E. Golub: The list of documents that confirm the amount of income from renting out property is not defined by the Tax Code. Therefore, income can be confirmed, for example, by a rental or rental agreement, a receipt for receipt of money, or bank statements. If there are no receipts, but the contract specifies the amount of payment for renting an apartment, you can limit yourself to the contract. However, if inspectors have doubts about the amount of income indicated in the declaration, they may request additional documents and explanations from both the taxpayer and other persons.
According to the agreement, the tenant monthly transfers to the landlord, in addition to the rent, the amount of reimbursement of utility bills (for electricity and water according to meters). Do I need to reflect these amounts in the declaration and pay personal income tax on them?
M.E. Golub: The burden of maintaining the property is borne by its owner. Art. 210 Civil Code of the Russian Federation. And the payment for utility services consists of two parts: for services, the cost of which does not depend on the use of the residential premises, and for services, the amount of expenses for which depends on the volume of their consumption. In your situation, the tenant reimburses the landlord for the amount of payments for electricity and water. Their cost depends on actual consumption and is fixed based on meter readings. The employer pays these expenses solely in his own interests. The landlord should not include these amounts in the personal income tax return.
If the tenant separately reimburses the landlord for the cost of utilities, which does not depend on their actual consumption, and the landlord must pay for these services even if he had not rented out the apartment, the amount of compensation must be included in the declaration. This position is shared by the Russian Ministry of Finance, and it is confirmed by judicial practice Letters of the Ministry of Finance dated 05/16/2013 No. 03-03-06/1/17011, dated 04/17/2013 No. 03-04-06/12985, dated 09/07/2012 No. 03-04-06/8-272, dated 05/03/2012 No. 03-04-05/3-587; Resolution of the Federal Antimonopoly Service No. F03-5812/2012 dated December 13, 2012.
What if the landlord takes advantage of benefits on utility bills and transfers less to utility services for water and electricity than he receives from the tenant?
M.E. Golub: In this case, he must include in the declaration the difference between the amount received from the employer and the amount actually paid. This difference is his income subject to taxation.
The citizen on whose behalf the lease agreement was concluded died. After his death, his relative received money from the tenants. Should he fill out two 3-NDFL returns and pay tax separately on behalf of the deceased for the months when he was alive, and on his own behalf for the remaining months?
M.E. Golub: With the death of an individual, his obligation to pay taxes ceases Art. 44 Tax Code of the Russian Federation. And income received by inheritance is not subject to personal income tax. clause 18 art. 217 Tax Code of the Russian Federation. Therefore, the heir does not have to declare rental income received by a deceased relative (spouse) before his death and pay personal income tax for it. But income from renting an apartment, which the heir receives from the date of death of his relative (spouse), must be declared in the usual manner.
It happens that a rental agreement is terminated earlier than provided for in the agreement. How to confirm to inspectors that, starting from a specific month, the apartment is no longer rented and there is no income from renting it out?
Chief State Tax Inspector of the Department of Personal Income Taxation of the Federal Tax Service of Russia for Moscow
Typically, the tenant pays a security deposit (a security deposit, which then, as a rule, goes towards paying the last month of rent). Upon termination of the contract, the deposit is returned. Do I have to declare this deposit in the income of the year in which it was received? How to reflect in the declaration the return of the deposit from the landlord upon termination of the tenancy agreement?
I.R. Mamonova: Such a deposit is considered an advance Articles 380, 381 of the Civil Code of the Russian Federation. If the tenant does not pay the rent for the next month on time, the landlord has the right to withhold it from the security deposit. This will be his taxable income. Letter of the Ministry of Finance dated June 26, 2013 No. 03-04-05/24290. It arises from the landlord precisely at the moment when the amount of rent is withheld from the security deposit.
If the tenant violates the terms of the contract (for example, causes damage to property) and the deposit remains with the landlord, at that moment he will also have taxable income clause 2 art. 381 Civil Code of the Russian Federation. In the meantime, the amount paid by the tenant remains a security deposit, it is not the landlord’s income and does not need to be included in the declaration. If, at the end of the contract, the landlord returns the deposit to the tenant, a copy of the receipt of the tenant's receipt of money or a bank statement will need to be attached to the declaration.
If a citizen does not work, but lives on income from renting out his apartment, can he receive social, child and property deductions?
I.R. Mamonova: Yes, of course, tax deductions can be obtained on all income taxed at a 13% rate, including from rental property.
