To furnish or not to furnish? This may be the question you are asking yourself as a property owner.
Here are some questions you should begin to consider:
Do you want to make more money, or reduce the risk of tenant damage? Would you prefer offering your tenants convenience, or offering them flexibility?
More importantly, based on your needs, your experience and your rental units’ target demographic, you must consider which path is best for your rental business.
In this article, Pinnacle Property Management will lay out the advantages and disadvantages of furnishing a rental unit. You will then be able to be make the best decision for your business.
Pros of Renting a Furnished Property
1. You can charge a higher rent
Renters who are interested in furnished units are willing to pay higher rent. This is because they understand that they are not only paying for the space, but also for the furnishings and appliances that are included. Typically, the rent for a furnished property can be up to 40% higher than an unfurnished one. This difference can be as much as $400 a month in some locations.
2. You will have more prospective tenants
Furnished properties are in greater demand than unfurnished ones because renters want to keep their options open. Furnished units often attract young tenants and business workers who are constantly moving around. So, if an unfurnished property is vacant, it will likely stay on the market for longer than a furnished one.
3. You can charge a higher security deposit
Since the unit is filled with furnishings and appliances, you can charge a higher security deposit. This means that if the tenant causes damage to the property, or anything in it, you will have more money to spend on repairs.
4. It is more convenient for the tenant
For a renter, it is easier to move into a furnished property as all the furnishing and appliances are included. It saves the tenant the burden of having to find, purchase, transport and set up furniture.
Cons of Renting a Furnished Property
1. It is expensive and risky
Furnishing a unit, depending on its size, can cost up to $10,000. In addition to the money, time and effort invested, every dollar spent represents an additional risk that the owner takes on. The possibility of damage is vastly increased when you furnish a unit. You must ensure that you are sufficiently covered by the rent, the security deposit and the lease agreement.
2. Renters are often short-term
Furnished units often attract short-term renters. So, there will be a higher turnover rate. Here are some of the downsides that come with this:
- There's a greater chance that your unit will be vacant, and a vacant unit means a loss in rental income.
- You must spend more money on maintaining, preparing and cleaning the unit between tenants.
- More money is spent on marketing the property after each tenant moves-out.
3. You need to spend additional money on storage
Sometimes, you won’t be able to keep the furniture in your rental unit. As a result, you’ll have to rent warehouse spaces and storage rooms to store the furnishings. This can be quite costly. Not to mention, moving furniture is not an easy task.
4. Greater possibility for tenant damage
If your rental property is furnished, the tenant doesn’t own the furnishings that are in it. And, as humans, we often take better care of our own possessions. So, tenants may be less careful with the belongings in the property. This means that there is a greater likelihood for severe wear and tear or tenant-caused damages.
The Rule of Thumb
Here is a general guideline that you can use to help you decide whether or not you should furnish your rental unit:
Rent unfurnished if the properties are large:
- Large properties target families and older renters who are usually established. These kinds of renters have typically accumulated many personal belongings over the years. People become attached to their possessions and are unlikely to give them up.
- Also, families want the privilege of being able to design the space they live in. It gives them a sense of ownership and makes them feel more comfortable.
Rent furnished if the properties are small:
- Tenants who rent small spaces are usually at a transitory stage of life, such as younger individuals. They are likely to make life-changing decisions that will force them to move out. As a result, they don’t want to invest in furnishings that they can’t take with them.
- So, if your business model is to target short-term leases of 6 to 12 months, and your units are small, you should furnish them.
Another option is to partly-furnish your unit:
- This option offers the pros of both furnished and unfurnished units.
- It offers the greatest flexibility because it allows you and the tenant to decide what furnishing should be included with the property.
- Finally, with this option, the renters also get some freedom to customize the space as they want.