Key Takeaways
- Furnished rentals can attract specific tenant groups, including professionals, students, and corporate renters.
- Landlords may be able to charge higher rent for furnished properties, depending on local market demand.
- Furnished rentals typically require a larger upfront investment and ongoing maintenance costs.
- Tenant turnover is often higher in furnished rentals because they frequently attract short-term occupants.
- The best option depends on your market, target tenants, financial goals, and management preferences.
Whether or not you rent a property furnished or unfurnished is much more than just a question of preference; it is a more comprehensive plan that can affect the types of tenants that will occupy the unit, the potential rental amount, the potential maintenance responsibilities for the owner, and the overall performance of the investment.
Although there are many attractive reasons to furnish the property in order to increase its marketability, there are also additional things the owner has to think about and evaluate.
In this article, Bridge Haus Property Managers will review the major advantages and disadvantages of being able to determine if your rental home should be furnished. By understanding these issues, the owner can make a more informed choice that fits their financial outcomes and capabilities in the day-to-day operation of the business.
What “Furnished” Actually Means
To start with, before going through the pros and cons of furnishing a home, you should first define what constitutes a furnished rental property. The definition of a “furnished rental unit” varies greatly based on the local market.
Therefore, the expectations of your tenant for what they expect when looking for a furnished rental unit may differ from those of other tenants who are looking at the same property or using the same rental approach. Properties that come fully furnished will generally have:
- The essential pieces of furniture (e.g., beds, sofas, dining room tables, chairs, etc.)
- The major appliances (e.g., refrigerator, oven, washer, dryer, etc.)
- Decor items to help create a “home-like” environment
- Kitchen utensils and kitchenware
Partially furnished properties often contain only the large furnishings and/or major appliances. The tenants must also provide small items that are not included.
Furnishings must correspond with the target demographic for prospective tenants. If the furnishings do not approximately match in style or completeness, there could be confusion as to what is expected; tenants could find the property less appealing if they are unsure.
The Appeal of Furnished Rentals
For some tenant cohorts, furnished rentals have advantages that may be very appealing. Often, the only reason for a property owner to choose to offer a furnished rental is for the convenience of the tenant. Tenants who may benefit most from furnished properties include:
- Relocating professionals
- Corporate tenants who are on a short-term (temporary) assignment
- Students and/or faculty members
- Individuals living in a transitional housing situation
Factors to Consider
1. Potential for Higher Rents
Renting furnished properties provides landlords with the possibility of charging increased rent. By adding additional value through furnishing and amenities, owners are able to price their product at a premium. This price premium can be attributed to:
- The cost of furnishing
- The convenience offered
- The lease term flexibility is offered
While higher rents can be achieved by renting furnished properties, this is not a universal rule. Depending on the current local market conditions, location of the property, and tenant demand, it may be impossible to price a furnished property higher than an unfurnished comparable property.
Landlords should consider whether they will be able to successfully pass this additional cost onto their tenants in the form of higher rentals.
2. Increased Tenant Turnover Considerations
There are many instances where furnishing a rental unit will produce an increased danger of having more frequent tenant turnover.
Although renting furnished rentals can have a positive outcome in some instances, they also run the risk of creating an increased tenant turnover at other times. This can cause an owner:
- Longer periods of vacancy
- More frequent need for cleaning and maintenance
- An increased workload for administrative reporting and procedures.
Renting a home that is furnished typically results in shorter-term tenancies. Furnished rental properties tend to attract tenants who prefer to rent the same property for the entirety of their tenancy period. If a property owner wishes to provide a long-term rental opportunity, they should consider their desire for flexibility with shorter-term tenants vs. security with long-term tenants.
3. Maintenance Responsibilities and Wear and Tear Factors
Furnishing a property means a property owner has more maintenance responsibilities. Items such as furniture, appliances (which are all included in a rental price), will typically experience wear and tear, especially within a rental environment. The types of maintenance-related items that could be subject to wear and tear include:
- Damage or wear on upholstered furniture.
- Wear on mattresses & bedding.
- Breakage of household items.
- Higher cleaning requirements.
Each of these factors can contribute to the ongoing cost of a rental strategy.
4. Up-Front Investment Requirements
Owners who are furnishing a property will require an initial financial investment. Depending upon the type of furnishings they provide, the owner will incur varying expense levels for furniture items, e.g.,
- How much will the cost of furniture be?
- How much will appliances/electronics cost?
- How much will decorative items cost?
- What is the cost of delivery and installation?
Though it is possible to furnish a property economically, it can negatively impact your tenant’s view of your property if you cut corners.
5. Insurance and Liability Issues
There are some additional insurance considerations when furnishing a rental.
The addition of furniture and personal property to a rental unit increases the overall value of the unit, which can affect insurance coverage requirements. Owners of furnished rentals should ensure that:
- Their insurance policy covers the furnished content adequately
- Their insurance policy covers the liability risk associated with the furnished items
- Tenants understand what they are liable for if they damage any items
Providing clear communication and appropriate insurance coverage will help you avoid disputes and/or financial loss.
Final Thoughts
Answering the question of whether or not to rent out a house furnished is not an easy task. Renting out a house furnished or unfurnished will depend on market conditions, renter demographics, your financial objectives, and the way you like to operate.
Furnished rentals give you the chance to offer convenience for customers, potential income advantages, and access to certain renter demographic categories. However, in addition to the advantages of furnished rentals, you will also need to consider the increased initial costs, greater maintenance responsibilities, and the chances for increased turnover.
On the other hand, an unfurnished property will tend to have fewer management issues, will usually create a longer-term (less frequent) rental opportunity, and may provide more flexible and immediate income potential.
The best approach is one that supports the owner’s plan and the local market. Contact Bridge Haus Property Managers today for help regarding your rental property.
