Investment Property Basics – Furnished Or Unfurnished?

The only case for furnished rentals 

Unless you’re going to rent out vacation property, furnishing your rental investment property unit makes no financial sense whatsoever.  Whereas tenants expect vacation rentals to come fully furnished, for obvious reasons of ease and comfort in the vacation process, stay away from furnishing your rental units for any other type of residential rental. The reasons are legion.  And most importantly, logical.  Here are some of the major ones: 

Wear and tear  

If you’re providing a furnished rental unit (whether an apartment or single family house), the amount of wear and tear on your furnishings will be tremendous.  The abuse alone on a living room set of furniture by tenants will be great.  The fact that tenants looking for furnished units that are not vacation-goers means they a) have no furnishings themselves and b) probably can’t afford them and c) most assuredly will treat your furnishings with something less than great care, normally reserved for one’s own furniture.  You’ll find yourself replacing your furniture in your investment property on a very regular basis – most probably every one to two years.  Bad tenants can really do your furniture harm – and you won’t find out until after they’ve moved out.  And their security deposit will probably only cover a small fraction of the wear and tear they will have on your furnishings. 

Short termers 

Most rentals for furnished apartments are traditionally short term.  That is, 3 to 12 months at best.  Sometimes, less.  And, these tenancies tend to come with no written leases, and are month to month (if not week to week.  Again, you can be assured this will attract a steady type of tenant that will not be “A-rated.”  Expect poor or no pay, problems with the tenants (including noise, unwanted attention by law enforcement, as well as shoddy treatment of your unit – both furnishings and fixed equipment as well.    So too, with short term rentals, while you may be able to charge a higher going-rate for your unit than an unfurnished unit, the costs involved in depreciation and turnover and vacancy will more than make up for any increase in rental revenue.  In the long run, you’ll come out way behind. 

Keep your unit unfurnished and long term 

 So you really should steer clear of short term, furnished rentals.  Stick with longer term (that is, one to two year lease minimums), and stay unfurnished.  This will naturally attract a better type of tenant.  You’ll also have a much lower turnover and vacancy rate in so doing.  And that will translate into a higher cash flow, and better overall bottom line for your property investment.

 

photos courtesy of absolutelofts.com, trexglobal.com, readharding.com.au, tenantchecker.com