How to rent out a mortgage flat in Cyprus: a step-by-step guide

Letting a mortgage apartment in Cyprus can be a profitable investment decision. However, it is important to consider a number of key points and to comply with certain legal requirements.

In this article we will explain how to prepare your property for letting and what you need to know about the tax and legal aspects.

Limitations of the VAT exemption

The first thing to remember is that if you have taken advantage of the 5% VAT exemption on the purchase of a new property in Cyprus, you can only rent it out after 10 years without losing the exemption. This is due to the fact that the VAT concession is granted for dwellings used exclusively for personal use and breaching this rule can result in severe penalties. After this period, you can start renting out your home without fear of breaking the law. If you decide to rent it out, you must notify the tax authorities and adjust your tax payments accordingly.

Registration and authorisation

The first step is to register with the local tax authority and obtain a rental licence. It is important to comply with this requirement as, without the proper authorisation, it is illegal to let the property, which can lead to legal consequences and fines. By registering with the tax authorities, you can legally rent out your home and pay tax on the rental income. A mortgage is not an obstacle, you are the full owner of the property.

Who can rent a property in Cyprus?

Cypriot and European Union citizens have the full right to let their property without any additional restrictions. However, the situation is more complicated for non-EU third country nationals. If a third country national wishes to rent out their property, they will usually need to obtain an additional commercial permit or register a business related to the rental of property. Without this permission it may be illegal to let the property. Consultation with a solicitor is recommended.

Preparing the property for renting

The property must be fully prepared for renting. This includes

1. Renovation and modernisation. Renovate the interior and remove any defects, especially if it is a second home with a history. This will make your property more attractive to potential tenants. Make sure that all utilities are working properly and that there are no hidden problems in the property that could affect the quality of the accommodation.
2. Provide furniture and appliances. The property should be furnished with everything you need for a comfortable stay. This includes furniture, appliances, air conditioning and kitchen equipment. The better equipped your property is, the higher the demand for it and therefore the higher the rent.
3. Insurance. Get home insurance to protect you from unforeseen situations. Insurance protects you from possible losses in the event of property damage or other incidents. Insurance is compulsory when you take out a policy, but it may be worth widening the scope of your cover.

Identify your target audience

Decide whether you will be renting to tourists, expats or locals. Each segment has its own characteristics and requirements:

1. Tourists. Typically rent for short periods. The rental price may be higher in high season. To attract tourists, it is important that the property is located in a convenient and attractive area, close to beaches, attractions and entertainment.
2. Expats. Looking for medium to long term accommodation. May require a higher standard of accommodation. Expats often work for international companies and expect a high level of comfort and facilities.
3. Locals. Typically looking for long-term leases that provide a stable income. Locals value access to infrastructure, schools, universities and jobs.

Advertising and finding tenants

Effective advertising is key to finding tenants quickly. Use specialist platforms, estate agents and social media to promote your property. Create an attractive advertisement with high quality photos and a detailed description of all the benefits of the property. Include all amenities, location and proximity to key infrastructure.

Sign a lease

A legally sound lease will protect your interests and those of your tenants. The contract should clearly state the rights and obligations of the parties, the payment terms and the terms of the lease. Be sure to specify the amount of rent, the term of the agreement, the terms of termination and the liability of the parties. Consultation with a solicitor will help you to draft an agreement that takes into account all the nuances and protects you from possible disputes.

Tax aspects

Don't forget taxes: rental income must be declared and taxed in accordance with local legislation. Consultation with a tax advisor can help you avoid mistakes and minimise your tax liability. It is important to comply with all tax requirements to avoid penalties and problems with the tax authorities.

Letting a mortgage property in Cyprus can provide a stable income if all legal requirements are met and the property is properly prepared. By taking all of the above steps into consideration, you will be able to successfully manage your rental business and get the maximum benefit from your property. Preparing the property, advertising it properly and legalising the lease will help you attract reliable tenants and ensure a stable income for many years to come.

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