Furnished vs unfurnished rentals
Should I rent out my property furnished or unfurnished? Investors will often ask their property managers this question. However, unfortunately there is no ultimate answer to this question, it depends on who you target tenants are, how long you want to let the property, the location, and the current demand for rentals in the area.
What does furnished mean?
Furnished means the property owner has supplied specific furniture which is to be left at the property and used by the tenants. Before we can get into the pros and cons of a furnished apartment, we should first look at the different options available for a furnished property.
1. Fully Furnished - This is common within the short term rental and holiday rental market. Fully furnished means that the apartment comes with everything you need to live at the property, eg. pots, pans, plates, cutlery kitchen appliances, linen, couches, beds, washing machine, and dining table.
2. Partly Furnished - This is common for university student rentals, or professionals who are seeking a short-term rental. Generally the major furnished items are supplied, such as; couches, dining tables, beds, and white goods.
3. White goods only - Some owners may offer to supply the tenant with white good appliances, such as; a fridge, microwave, washing machine, and a dryer.
4. Unfurnished - No furniture supplied except the common inclusions; an oven, and dishwasher.
What are the pros of a furnished property?
There are a number of benefits to having a fully or partly furnished property. The common benefits are:
1. You can generally charge more rent (5-10% more).
2. Letting a furnished property allows you to increase depreciation deductions.
3. It saves tenants money in the initial outlay for renting a property, and offers a tenant more convenience of moving into the property without having to worry about moving in their larger belongings.
4. If the property is situated in the CBD or close to major Universities you could attract a professional who is fly in/fly out, or an overseas student.
What are the cons of a furnished property?
Whilst you may attract a higher rent for a fully furnished property, sometimes this comes with increased costs associated with the furniture. Other common cons are:
1. You may have a higher turn over of tenants only staying for short periods of time, which is totally fine if you consider your property a short term rental, however, a long term tenant may not consider your property because of the furniture.
2. The costs of setting up the property will be more expensive.
3. You will need to update the furniture every 2-4 years to ensure it stays modern and well maintained.
4. The advertising costs associated with re-advertising the property every couple of months will be higher.
5. The re-let/leasing fee will be charged more often. If your property is managed by an agency who charges a re-let fee every time a new tenant moves into the apartment.
6. An updated and thorough inventory will need to be supplied and checked off every time a new tenant moves into and out of the property. This can take a lot of time to complete and check. The inventory is an additional requirement, and an entry condition report will also need to be completed.
7. It is the owners responsibility to fix any broken, or faulty items within an adequate time frame and supply an alternative if the item is required to be sent away for warranty assessment, or completely replaced.
8.Contents insurance should be considered, which is an additional expense to your general building and landlord insurance you would normally incur.
What are the pros of an unfurnished property?
Unfurnished rental properties are more common in the outer suburbs of the CBD, generally the common pros of an unfurnished property are:
1. You will achieve a longer lease term.
2. Your target market will be attracted to the majority of tenants looking to rent.
3. Your investment will be more likely to attract working families with two secure incomes, over a student with a casual income, or no income.
4. You don’t have the additional expense of buying furniture to set up the property.
5. You don’t need to prepare or manage a thorough inventory of all the furniture included at the property, however an entry condition report based on the overall condition of the property will need to be included.
6. Your maintenance costs may be slightly less, as you will not need to replace an array of furniture or white goods. Except for the common fixtures like an oven, and dishwasher.
What are the cons of an unfurnished property?
There are little cons of an unfurnished property, especially when we are referring to an unfurnished property situated within the suburbs outside of the immediate CBD. The common cons of an unfurnished property may include:
1. Unlikely to achieve a higher rent price. This being said, it depends on the area of the property, and the market demand at the time the property is being adversitied for let.
2. Some tenants prefer the convenience of a furnished property as it saves them time and money moving their own larger belongings into a property.
There are an array of things to consider when you are determining whether or not to furnish a property. The common question you should ask yourself is; is my property in a high demand area for short-term leases? If the answer is yes, look at the other short-term rental properties on the market, and determine how many of them are furnished. This should give you a good indication of what the market demand is in your area for a furnished property.
As mentioned above, it is still recommended that certain fixtures to the property, like ovens, and dishwashers remain even thought the property is considered to be unfurnished these items are generally referred to as fixtures to the property, as they are generally plumbed in, and secured to the floor or walls of the property.
Speak with your local property manager about your individual property. Your property manager will be able to offer advice on whether a furnished property, or unfurnished property is better suited to your properties target market.