Furnishing a rental property can be a difficult decision for landlords. While furnishing may attract more tenants and allow you to charge higher rents, it also comes with financial risks and additional responsibilities as a landlord. Before taking the decision to furnish your rental, it is worth looking at the pros and cons linked with the decision. Keep reading, and let's explore them in detail.
What Does Furnishing a Rental Mean?
A furnished rental property comes with furniture and household goods already installed and ready for tenants to move in. Furnishings may include:
• Beds
• Sofas and armchairs
• Tables and chairs
• Appliances like fridges, stoves, microwaves etc.
• Kitchen utensils
• Bed linens and towels
• TVs and entertainment systems
• Outdoor furniture
As a landlord, you can choose to fully or partially furnish the property. The level of furnishing can affect the type of tenants you attract and the rental rates you can charge.
The Pros of Furnishing Your Rental
Furnishing your rental comes with quite a few potential advantages:
• Attract More Tenants
Furnished units tend to see higher demand as they cater well to certain tenants, such as corporate renters and travelers who prefer turnkey housing. Having an already equipped home can be especially desirable for people relocating or in temporary living situations.
• Charge Premium Rents
A reliable property manager in Northern Virginia suggests landlords who furnish their rentals can attract both long-term and short-term tenants and command higher rental prices. Studies have shown that furnished units can earn 10-30% higher rents than empty units. The convenience factor allows landlords to charge a monthly premium.
• Lower Vacancy Rates
Given their popularity among tenants, furnished rentals tend to have fewer and shorter vacancies during lease turnover. As the property can readily be moved into, it stays occupied more easily.
• Offer Flexible Lease Terms
Landlords renting out furnished units can take advantage of shorter and more flexible leases, as short as 30 days. This is especially beneficial for transients.
• Potential for Extra Income
Providing additional amenities like linens, kitchenware, internet etc., allows landlords to make extra money by charging usage and cleaning fees.
• Lower Maintenance Costs
Tenants are generally more careful when using furnished items that don't belong personally to them, making furnished units see slightly less wear and tear.
• Higher Resale Value
A furnished rental property tends to command a higher resale value compared to an empty rental. Quality furnishings that are maintained well over time can significantly boost property value when selling. This makes your rental property asset more lucrative in the long term.
The Cons of Furnishing Your Rental
At the same time, there are also some notable downsides for landlords to consider:
• Large Upfront Investment
Outfitting an entire home with quality furniture and appliances requires major upfront capital, which can be prohibitive. This cost needs to be recouped from rental income. You may not be able to get a higher security deposit from the tenants to cover this cost due to landlord-tenant laws.
• Ongoing Replacement Costs
Constant use inevitably leads to wear and tear, meaning furnishings need to be repaired and replaced more often. Landlords must account for this added cost.
• Responsibility for Maintenance
Day-to-day cleaning and repairs become the landlord’s responsibility, rather than the tenant’s, with furnished rentals.
• Increased Risk of Damage
Furnished properties tend to see a higher incidence of stains, breakage and damage during occupancy compared to empty units. Tenants may also lose or inappropriately remove items.
• Higher Insurance Costs
Landlords need added coverage for the replacement value of furnishings, which increases yearly insurance expenses.
• Staging When Vacant
Furnishings must be presentably arranged and restaged to rental-ready standards during vacancies for incoming tenants.
What are Unfurnished Rentals?
On the other end of the spectrum, an unfurnished or empty rental property does not come equipped with any furniture, appliances or household goods. These bare-bones units only include default fixtures like lighting, sinks etc.
Unfurnished rentals place the onus of installing furnishings entirely on tenants. This frees landlords from major upfront costs and ongoing furnishing-related responsibilities. However, unfurnished units also tend to attract longer-term tenants only, alongside slightly lower rental rates.
Factors to Consider Before Furnishing Your Rental
Landlords should carefully evaluate several factors when choosing furnished or unfurnished rentals to ensure the decision aligns with their financial goals and tenant preferences. Let’s take a look at the most important factors to consider out of them.
• Local tenant preferences in your area
Consider what most tenants in your locale expect and prefer in a rental unit based on local living standards and conventions.
• Expected tenant turnover rates
Based on the average tenant tenure, estimate how frequently you may have to prepare and stage the furnished rental between occupancies.
• Your target tenant demographic and their needs.
Align furnishings with the lifestyle needs and expectations of your ideal tenant profile, whether students, couples, families, etc.
• Average duration of leases
Typical lease length for furnished vs unfurnished units can vary. Evaluate if shorter furnished leases make sense.
• How hands-on you want to be as a landlord
Assess your capacity to handle furnishing-related maintenance as a landlord if you manage the property directly.
• If flexible lease terms make sense
Determine if providing flexible 1-6 month furnished leases works for your rental income model and occupancy goals.
• Your budget for furnishings and expected rent to cover costs
Factor in furnishing costs and projected rental rates to confirm if returns would justify upfront furnishings investment.
Carefully project costs and evaluate your capacity to take on furnishing-related obligations before opting for a packaged furnished unit. See if unfurnished or partially furnished models may work better instead.
Final Words
Furnishing rentals attracts more tenants but also requires major financial and time commitments from landlords. Evaluate your resources and risk appetite to decide if taking on these added responsibilities is feasible. The type of property, location, target tenants and local market should also dictate whether and how much to furnish your rental. Carefully comparing pros against cons will help you make the most well-informed furnishing decision.
