We take a look at some of the pros and cons of renting out your property as an unfurnished vs a furnished apartment.
When it comes to deciding whether or not to rent your property unfurnished or as a furnished apartment you have to consider the various merits of each strategy. There are many benefits to offering a furnished or semi-furnished rental property, such as being able to charge higher rates of rent. However, there are downsides too, such as appealing to a smaller pool of renters.
In this article, we take a look at some of the pros and cons of furnished vs unfurnished rental apartments, as well as how you can decide which is appropriate for your property, and your investment strategy.
As the name suggests a furnished apartment comes with all of the furnishings that a person would reasonably need when living. This includes the big items such as the bed, dresser, cupboards, sofa, etc. as well as the more minor things, such as cutlery and appliances. Generally speaking, a furnished apartment will command a higher rent rate, compared to a comparable rental that is unfinished.
As a rule of thumb the following rooms should have, at a minimum, these items:
A fully furnished apartment means that a person would be able to move into the apartment immediately and live without any need to purchase additional items for the apartment other than items such as food.
The renter should be able to walk in with just a suitcase and live comfortably for their duration. Items such as toiletries and cleaning supplies may be supplied as part of the welcome package when the tenant moves in. However, they are generally the renter’s responsibility.
Semi-furnished is a term used to describe a range of rental properties.
This range includes anything from almost bare to almost fully furnished, essentially anything that comes with some furnishings but not all.
As a rule of thumb, a semi-furnished apartment will usually include the basic big pieces of furniture, such as a sofa, bed, a dresser, tables, and chairs. However, you’re less likely to include smaller pieces, such as small appliances, kitchen utensils, cutlery, and lamps.
As we’ve already mentioned, generally speaking, you can command a higher rent with a furnished apartment. This is because the assets in the property depreciate and need to be replaced routinely meaning a higher cost of maintenance for landlords.
Additionally, by supplying a semi-furnished or furnished apartment you are reducing the effort and moving costs for tenants who don’t have to worry about purchasing furniture and don’t have to worry about renting a moving van.
However, if the furnishings that you do supply are of low quality or overly warn this could reduce the desirability of the rental and may result in longer vacancies and not being able to charge a premium.
Typically, the higher the rent amount is to offset any cost of increased vacancies and maintenance created by more assets at risk and shorter lease lengths. You may be able to command as much as 20 to 40% more rent for a furnished apartment, and for short stays that are under a month-long, this could be even higher.
It’s common practice to charge a slightly higher deposit amount for a fully furnished apartment to cover the risk of damage to the furnishing as well as the property itself.
Before setting a higher deposit amount, Make sure to check your local and state legislation, and see if there is a limit on the amount of security deposit that you can charge so that you stay on the right side of the law.
Furnished apartments attract a particular type of tenant. Generally, these tenants are younger and haven’t yet collected all the furnishings that they will need and can’t afford to furnish an apartment at this time. This group includes young professionals, young families, and students. A second specific niche to target with a furnished apartment would be professionals on business trips. This is a particularly good niche, as they are generally responsible and able to pay a premium. However, they will be looking at short at least length.
It’s a good idea to get a nuanced understanding of the market in your property’s location to see if there’s demand for furnished apartments.
Furnishing will need to be routinely replaced to keep the apartment looking fresh and appealing. Additionally, furnishings may get damaged during a tenancy increasing the overall maintenance costs of the property.
Landlords should watch out for damages with routine inspections and try and stay ahead of normal wear and tear. Furnishings which old, beaten up, or damaged are unappealing and may make it harder to find new tenants in the future.
One of the drawbacks, which we’ve already mentioned, is that many of the people that look for a furnished apartment are actually looking for shorter leases. This means you will need to find new tenants more regularly and risk a higher vacancy rate and higher marketing costs.
Landlords will need to arrange for storage for furniture should a tenant decide they don’t want a particular item in the apartment. For example, a tenant might have their own bed frame and mattress. Not being willing to put items in storage will reduce your pool of potential tenants significantly.
Additionally, if significant maintenance needs to be undertaken between tenancies, such as replacing the carpets, or even just repainting, storage may need to be arranged so that the work crews can get in and get the job done without causing any damage to the current furnishings.
Whether you choose furnished or unfurnished rentals are dependent on the market, and the location of the property, and what tenants in that area are looking for. For example, if the property is in an area with a high number of students it would make sense to offer a furnished apartment to appeal to that demographic.
However, if you’re targeting, couples, and families they will generally prefer unfinished units as they are likely to already have the furniture that they need. As such, deciding whether or not to offer furnished or unfurnished really comes down to which you think would generate more inquiry, and which will allow you to increase the overall profitability of your rentals.
It’s also worth noting that a furnished rental may require more work overall to maintain and keep full. However, if it’s done tastefully, it could double up as an Airbnb during peak seasons allowing you to maximize your profits. All of these things should be taken into account when considering which strategy is right for your property.