Shaykh Saalih ibn Uthaymeen
Question: If a man owns a house which he rents out, it is not the house he currently lives in, does he pay zakaah from the value of that house or from what the rent money he earns from it?
Answer: The house that is rented out, if it is intended for renting or utilizing only, then there is no zakaah to be paid from its (current) value, but rather zakaah should be paid from the rent money he receives from it when a year passes from the date of the rental contract (with the tenant).
But if the rent money he receives does not complete a full year from the date of the contract, then there is no zakaah to be paid from it. For example: if he rents it for 10000 per year, and he received 5000 at the signing of the contract and he spent it, then he received the other 5000 half way through the year and he spent it before that year was completed (i.e. from the date of the rental contract), then there is no zakaah to be paid from it here because this money has not completed a year.
Whereas if that house has been prepared for renting, but originally he bought it to sell it and now he is waiting to profit from it but he says: I will rent it until it is sold. In this instance zakaah is due from the value of the house and also from the rental money if it completes a year as we have mentioned just before. In this situation zakaah is also due from the value of the house because he has intended to sell it and he doesn’t want to keep it.
Therefore everything that you intend to sell and profit from there is zakaah to be paid from it due to the Saying of the Prophet (SallaaAllaahu alayhi wa sallam): “Actions are by their intentions, and for every person is what they intended”. So a person who has money and he wants to profit from it has intended its value not its physical presence, so its value is the worth of money. Therefore zakaah is due from the value of money. So upon this, this person who has intended to sell the house, it is upon him to pay zakaah from the value of the house and from the rental money if it completes a year from the date of the contract.
Fataawaa Noor alaa ad-darb, volume 7