Both furnished and unfurnished rentals have their ups and downs. While a unit with basic furniture and appliances may seem more attractive to potential tenants, you might have to worry about damage down the road. Here are the pros and cons to help you make an informed decision.
Advantages of a Furnished Rental
Higher Rent Price
Furnishing a rental property allows you to increase your rent price due to the added appeal of the unit, as well as the convenience. Just make sure that you still price fairly so prospective tenants won't choose other cheaper furnished rentals over yours.
Reduced Vacancy and Faster Tenant Turnover
Furnished rentals attract a wider range of tenants, especially for people who don't have their own furniture and appliances. You'll mostly find more tenants during peak seasons, but having a furnished property will only help your chances even when it's not. Once furnished units become vacant, you can fill them more quickly as well.
Tax Benefits
One of the perks of renting out a furnished rental is the tax deductions you can get. The money you spend on appliances or furniture can be claimed as tax deductions since they are technically used for business, which reduces upfront costs.
Disadvantages of a Furnished Rental
Higher Upfront Costs
One of the furnished rental pros is that they can be claimed as tax deductions, but it doesn't change the fact that you will have to spend more to spruce your rental unit up. A fully furnished property will cost you significantly more initially as opposed to a bare or unfurnished rental.
Replacement and Maintenance Costs
Property owners are responsible for maintaining the furnishings in their rental and repairing appliances when needed. This adds to the costs they have to shoulder. With unfurnished rental properties, tenants have to maintain and repair their own belongings. You can always hire a professional property manager to ensure that your investment property is maintained diligently.
Potential Damage or Theft
One of the biggest downsides to furnished rentals is the possibility of having your furniture and appliances damaged, or worse, stolen. Apart from normal wear and tear, reckless tenants might damage objects in the rental home, and you'll have to either charge them or deduct the costs from their security deposit.
Depreciation
Furnished rental properties tend to be more expensive when you sell them, but furniture will reduce in value over time. That's especially true for appliances, wherein new models come out often and old ones become outdated quickly.
Things to Consider When Furnishing Your Rental
Initial Investment
As mentioned before, property owners have to be ready for the higher cost of a fully furnished rental property. You can budget your costs by looking into the price of the appliances and furniture you might want to add, so you don't spend more than you can quickly earn back.
What to Include
Think about what you might want to include in your unit. You can and should look at what other furnished rentals in your area provide. Most include the basics like a couch, a dining room table, and a bed. You can opt for a semi-furnished rental for now and add more things later on as opposed to keeping the property unfurnished.
Rental Type
Consider whether it's a long-term or short-term rental. Long-term furnished rentals offer different things like laundry facilities. You should avoid adding objects that are easy to steal with short-term rentals. While it doesn't happen often, it can still be a problem. Especially with renters who don't have a long-term commitment.
Maintenance Responsibilities
One of your jobs as the property owner is ensuring all furnishings are in good condition. This can become tedious quickly, especially if you have multiple properties. If that’s the case, property management is a must for your rental business to succeed.
Charging Higher Security Deposit Amounts
Depending on whether you have semi or fully-furnished rental properties, you should increase your required security deposit amount. Just be sure to still abide by local laws. For instance, you can charge up to two months' rent for a furnished apartment.
Rental Market
Check the demand for fully furnished rentals in your area before you commit to the idea. There are locations where tenants would prefer to have the property furnished themselves, while others would prefer renting a furnished unit to avoid having to purchase furniture themselves.
Communication Channels
You need to be prepared to respond to maintenance requests from your tenants when needed. Unlike unfurnished properties, you are also responsible not just for the unit itself but for the appliances and furniture inside. Some hire property managers so tenants can reach out 24/7 for emergencies without you needing to be on call.
Furnished Rentals FAQs
What costs should I expect?
Other than the costs of the appliances and furniture itself, you have to be prepared for ongoing costs like maintenance, cleaning, and replacement of items.
How often should I replace appliances and furniture?
That will depend on the quality of the items you purchase for your rental properties. You'll have less trouble will fully furnished apartments when you invest in high-quality, dependable brands.
What's in a semi-furnished apartment?
You can add major appliances like a refrigerator, a stove, and a microwave. As for furniture, the basics include a couch, a bed, light fixtures, a table, chairs, and a few decorations.
Will unfurnished rentals still attract tenants?
Yes, unfurnished rentals will still attract tenants. If you market your unfurnished property right, you can reach a target audience looking for a place they can fill with their preferred appliances and furniture. If you're unsure how to do that, you can hire a property management company like Performance Asset Management to market your property for you.
Hiring a Performance Asset Management For Your Rental Business
Whether you have furnished or unfurnished units, you might benefit from professional property management, especially with the added element of maintaining rental furnishings. Even the smallest aspect like fast responses to maintenance requests can contribute to increasing your rental income.
With better rental management, you'll also gain a better reputation for prospective renters and attract long-term tenants. Unsure if it's the right move? You can consult us for free, and we'll tell you about the services we have to offer to maximize your property's value.
