When you decide to rent out your property, one of the main decisions you'll have to make is if you'll rent it as a furnished or unfurnished unit. While the choice is yours, we're going to tell you some of the reasons why you should furnish your rental property.
1. You attract more renters because you'll make their move easier.
For many renters, the thought of moving is overwhelming. They're leaving behind the people and communities they know and heading into unfamiliar territory. Add in the idea of transporting a two-bedroom apartment's worth of furniture? Stick a fork in them—they're done.
By providing a furnished apartment, you're eliminating some of the hassle that comes with moving. With furnished units, there's no need to rent a big moving truck or fork out thousands of dollars while furniture shopping. Instead, tenants can move straight into their new home.
2. You appeal to a growing market of short-term and mid-term renters.
Renters looking for apartments with long-term leases may be looking for unfurnished apartments so they can select their own furniture. However, lots of people in today's rental market are looking for housing that comes with a shorter lease term. For example, students completing an internship may only need a place to stay for three months, and young professionals may want to sign a two-month lease while they check out a new city.
No matter who these people are, one thing's for certain: they don't want to move all their things into an unfurnished place for a stay of just a few months. When you furnish your property, you help it appeal to people looking for mid-term and short-term leases.
3. You'll have quicker turnaround and can fill vacancies easier.
If you're renting out your property as a mid-term or short-term rental, you'll have a higher turnover than you would if you were renting it as a long-term rental since your tenants are residing there for shorter terms. By furnishing your properties, you can fill vacant spaces faster than if they were unfurnished properties. As we've mentioned above, potential tenants looking for shorter leases are often looking for fully furnished spaces.
Also, old tenants can move out faster when they don't have to move a bunch of furniture. So, when you furnish your property, you'll increase the likelihood you'll be able to quickly fill your rental with a new tenant. And we all know the faster you fill a unit, the more rental income you receive.
4. You can charge a higher price.
When you're furnishing a space, costs can really add up. While you can save some money by shopping at discount stores such as HomeGoods and Marshalls, you're still going to end up paying a sizeable amount. Fortunately, you can account for these additional costs in your rental price.
When you're figuring out how much more to charge for a furnished unit, it's a good idea to think about the cost of replacing furnishings. Even if you have the best tenants imaginable, they're still going to cause wear and tear on everything from couches to pots and pans.
A good way to think about this is to determine how long an item will last and how much it costs. For example, if you bought your couch for $1,000 and you expect it will remain in your apartment for 5 years, you can expect to pay $200/year to have this couch in your unit.
In a perfect world, you would figure out how much it costs to furnish your entire unit for a year. However, it's okay to estimate.
Don't be shy about charging higher rent for a furnished home; renters expect this! Depending on the location and size of your unit, furnished rentals cost 5% to upwards of 50% more than comparable unfurnished rentals. It's a good idea to look at comparable furnished real estate in your area to get an idea of the average listing price. And remember, you should charge more than the price for similar unfurnished apartments.
5. You can charge a higher security deposit.
Along with charging a higher rent, you can also charge a higher security deposit. For example, in California, a security deposit can equal up to 2 times the monthly rent for an unfurnished space and up to 3 times the monthly rent for a furnished apartment. After all, this deposit covers your furnishings as well as your rental property. In case you need a refresher, here's a basic list of what you should include in a furnished property.
- Bedroom: bed, linens, dresser, nightstand, lamp
- Living room: couch/chairs, coffee table, TV
- Kitchen: kitchen utensils, cutlery, plates, bowls, glasses, cookware, appliances such as dishwasher, dining table, trash can
- Bathroom: shower curtain and liner, trash can, towels
It's also a good idea to include some basic cleaning supplies. This makes it easier for your tenants to keep your property clean.
6. You don't have to worry about tenants' furniture damaging your property.
When you furnish your rental property, this means the tenant doesn't have to bring in their own furniture. This removes the fear of someone bringing in furniture that smells like smoke or is infested with bedbugs. After all, that type of tenant is out there.
It also removes concerns about damages created during the moving process. For example, moving a large couch through a small building might result in some scratches or dents to your doorways.
Also, when the tenancy ends, you won't have to worry about your rental unit being filled with mismatched or dysfunctional furniture. Instead, it will be filled with your furnishings and ready for the next tenant.
7. You can save on taxes.
Since the furnishings you purchase for your rental units are part of the cost of doing business, you may be able to label them as a business asset or expense. By doing so, you can receive deductions on your taxes. Just make sure you save your receipts and consult a tax professional.
Some things to consider
While there are plenty of reasons why you should furnish your rental, you should make sure you do so in an organized and intelligent manner.
First, make sure you compose a clear lease agreement. It's important to state how you expect tenants to treat your furnishings. For example, if a tenant breaks a $30 serving bowl, who is responsible for replacing it—you or the tenant?
It's also important to clearly state the furnishings belong to you. If you want to be extra safe, you can create an inventory of your furnishings to check before your tenants move in and after they move out.