Regardless of why you choose to rent out, you will have to face the biggest question of them all: how high should the rent be? In this article, we collect all you need to know about setting your rent.
There are different rules for setting rent for privately owned homes compared to sublets of rented apartments. This was since a new Tenancy Law (2012:978) came into effect that gave people who were renting out owned homes more freedom to negotiate rent, whereas those who were subletting continued to follow the old stricter rules.
This article is about long-term rentals. For information on vacation homes look here!
If you sublet your rented apartment
If you sublet your rental apartment, the Tenancy Law ("Hyreslagen") applies, and the rent level is determined based on the "bruksvärdesprincipen" (principle of utility value). This means that you cannot freely set the rent based on how much the tenant is willing to pay. In short, you can sublet for the same rent that you pay yourself, with additional charges for fixed costs and 15 percent if you sublet the apartment furnished. You can read more about this on the website of the Swedish Courts.
A little more about utility value
An apartment's utility value ("bruksvärde") is defined as the practical value it has from the tenant's perspective. This means that the rent should correspond to the rent level of similar apartments, taking into account factors such as the apartment's standard, size, location, layout, and construction year. The "bruksvärde" corresponds to how tenants in general value the characteristics of the apartment and is independent of who is currently living in the apartment. It is determined by comparing apartments with each other and through negotiations between property owners and tenants.
The rent you are paying to your property owner is already set based on those same principles. This means that when you sublet, you will only be allowed to charge the same rent you are paying yourself with some additional charges.
Are you renting out furnished?
If you sublet a furnished apartment, you can add 15 percent to your own rent. To be considered furnished, it is not enough to have a worn-out bed, a broken sofa, and some stools; the apartment must be fully furnished so that the subtenant can live there without having to bring their own furniture.
Other additional charges
You also have the right to make additional charges for other costs related to the apartment (e.g., electricity, gas, TV license, parking space, internet, etc.).
If you rent out a property you own
If you are renting out your condominium ("bostadsrätt"), house, summer cottage, or just a room, you should not adhere to the "bruksvärde" principle. In this case, the law (2012:978) on renting out your own property applies, and the rental rules allow for a significantly higher rent.
In short, a reasonable rent must not exceed your capital cost (the interest expenses you would have had if the property was fully mortgaged) and the operating cost (e.g., fees to the association, electricity, broadband, etc.). You can read more about this on the website of the Swedish Courts.
A bit more about capital cost
The capital cost refers to the interest expenses you would have had if the property was fully mortgaged. The capital cost is calculated as a reasonable return on the market value of the property, which is considered to be a couple of percentage points above the reference rate set by the central bank (Riksbank). You can find Riksbank's reference rate here.
Note that the calculation is not related to your actual loan costs: whether the property is mortgaged or not is therefore irrelevant.
A bit more about operating cost
The operating cost refers to the expenses you have for maintaining the property in the condition it is rented out. Examples include fees to the association, wear and tear of furniture, electricity, broadband, etc.
A condominium apartment worth 3 million SEK is being sublet. The fee to the association is 1900 SEK/month, and other costs for electricity and broadband are 800 SEK/month. With a reasonable return of 4 percent, the calculation is:
(3,000,000 * 0.04) / 12 + 1,900 + 800 = 12,700 SEK
This is the amount you can charge for rent. However, it is important to remember that the law only applies to the first sublet. If you want to rent out multiple properties, the same rules as for rental apartments apply to the other sublets.
Do not charge too high rent
Rented apartment (hyresrätt) - If you have charged too high rent, you may receive an unpleasant letter in the mail, quite sometime after the subletting period has ended. Your tenant can appeal to the Rent Tribunal (Hyresnämnden) and request a review if the rent has been unreasonably high. In that case, you may be liable to repay up to two years' difference between the rent your tenant paid and the rent that the Rent Tribunal finds to be the "bruksvärdeshyra" (reasonable rent).
Owned property - If you have charged an unreasonable rent for your property, the tenant can also turn to the Rent Tribunal to have their rent reduced, but the tenant must first contact you. Regarding the subletting of condominiums, the Rent Tribunal can only request that you lower the rent going forward. In other words, you cannot be held liable for reimbursement even if the rent has been too high.