Considering becoming a landlord? As a landlord, deciding whether or not to rent a property already furnished can make for a difficult dilemma. Potential tenants will be more likely to desire this aspect, as it takes away the worry of decorating the home on their own. It's also a win for you, as advertising a rental unit as furnished allows you to set a higher rent price. However, this requires you to put in more costs initially, as you're setting up an empty property to be immediately functional to the tenant.
There are many aspects of this decision to consider. Depending on what you include in your property and how you furnish it will determine your success in attracting interest and avoiding vacancy. There are pros and cons to both sides of the coin to compare. Before we get to those, however, understanding what it means to have a furnished rental property will help you tremendously in making the choice.
What is included in a furnished unit?
When a rental property is listed as 'furnished', there's the expectation that the place is move-in ready for tenants. Generally, the standard of livability is the same everywhere. Here are some amenities a potential tenant would expect to be included:
- Bedroom – Bed frame and mattress, desk, dresser table, comforter and sheets
- Kitchen – Refrigerator, cabinets, cleaning materials, appliances such as a microwave, coffee maker and toaster, utensils and cookware
- Living room – Couch, coffee table, lamp, perhaps a television, dining table and seating
- Bathroom – Rugs, shower curtain, toothbrush holder and wastebasket
- Additional items – Washer and dryer, water heater, air conditioner and heating system.
Now, let's take a look at the pros and cons of including these features, as well as leaving them out altogether.
The Pros of a Furnished Property
1. Higher Rent Rate
A furnished property takes away a tenant's worry of purchasing furniture for their new home, temporary or not. With the added costs of buying and maintaining these furnishings, a higher rent is rightfully expected. Rent covers some costs that come with appliances that may need repair, so you are within reason in setting a higher rent price.
2. Fewer Vacancies
Anyone who wants to avoid the aggravating process of moving in their own furniture or finding new items to purchase will enjoy the ease of moving into a completely furnished unit. Those especially who are looking for a temporary place to live in or have little to bring with them, to begin with, will be looking for this kind of residence. With a move-in ready property, potential tenants will take advantage of the opportunity to rent from you.
3. Tax Benefits
Furnished properties grant you certain tax breaks. Costs from purchasing and replacing furniture can be partly claimed back. When completing your tax forms, furnishings can be accounted for as a deductible expense.
The Cons of a Furnished Property
1. Shorter Tenancies
Typically, furnished properties tend to attract temporary renters, such as those simply visiting the area or students looking to reside near their university for the school year.
With constant tenant turnovers, as a landlord, you will have to conduct frequent tenant screenings, property inspections and lease agreement signings. These responsibilities weigh heavier when they must be performed more often than would be for a long-term tenancy.
2. Risk of Damages
With the additional tenant screenings, you must conduct, normal wear and tear, or more significant damages, are still likely to occur. Anything damaged and not reported by the tenants will require you to replace them. You're also responsible for preventing these damages by inspecting furnishings and appliances often.
3. Less Affordable Rent
Because you offer an already-furnished unit, your rent is costlier than those of unfurnished units. Based on the market and demographics of the location in which you're renting, surrounding properties that don't offer furnishings may seem like a better option.
The Pros of an Unfurnished Property
1. More Long-Term Tenancies
Tenants who are required to purchase or bring their own furnishings will become more attached to the rental property. By decorating their new home according to their personal aesthetic, tenants will develop a sense of familiarity. When residing in the comfort of their belongings, they will be more likely to stay long-term.
2. No Responsibility for Added Furnishings
Because you weren't the donor of the home's furnishings, any appliances or items that require repair must be taken care of by the tenant. Your standard landlord inspections won't include any of the tenant's belongings.
The tenant is the one responsible to find a fix for this kind of issue.
The Cons of an Unfurnished Property
1. Lower Rent Price
Without the added costs of furnishing the property before any tenants have moved in, there's no reason in raising the rent. This provides you with fewer returns as a landlord. You may have to look for more ways to generate income from your rental property.
2. Less Control Over Tenants' Decorating Choices
With an empty property, tenants will be the ones deciding on the interior décor and appliances. Their items of choice may be less energy efficient or more prone to damage. Unfortunately, as a landlord, you don't have much control over their decorating decisions.
Both choices have their advantages and disadvantages. When deciding whether to rent your property furnished or unfurnished, consider the various factors discussed. Think ahead as to whether this decision will ultimately benefit you and your rental business.