Many property owners weigh the advantages and disadvantages of furnished and unfurnished rentals, which is a smart way to start a rental business. There are a lot of factors to consider when determining whether investing in furnishings can be beneficial to your units or not. Aside from analyzing the demand for furnished properties in the local market, you should also know the pros and cons.
Advantages of Furnished Rentals
Higher Rental Income
A furnished rental property can demand a higher rent price because of the convenience that comes with it. You can charge 10-20% more than an unfurnished rental, depending on furnishing costs, repairs, and depreciation.
Attracting Specific Tenants
Certain tenant groups like students or traveling business professionals might not have their own furniture, which means they will automatically dismiss unfurnished properties. Identify your target market and determine whether furnished or unfurnished rentals are more profitable.
Simpler Move-In Process
Furnished units, especially fully furnished rentals will have no need for moving in furniture and appliances, which makes for a quicker move-in process. Furnished rentals provide landlords more time to focus on other matters instead of assisting with the additional move-in process.
Less Wear and Tear
Moving furniture comes with the risk of potential damage to the floors and walls of your rental property. Moving around large objects like couches and refrigerators can scuff the floors, and moving cabinets as well as wall decorations can lead to damages on the wall. This wear and tear falls under the landlord's responsibility for repairs.
Higher Security Deposit
Furnished long-term rentals tend to require higher security deposits to cover damages to the furniture and appliances provided. This deposit helps cover repair and replacement costs, offering financial security.
Disadvantages of Furnished Rentals
Higher Initial Investment
A furnished rental, even a semi-furnished apartment with basic furniture and appliances will require a larger initial investment to complete. While a fully furnished property can benefit your rental income in the long run, leaving a property unfurnished can still be profitable if you market it to the right audience.
No Room for Tenant Belongings
Long-term tenants tend to have their personal belongings and might prefer to use them as opposed to paying higher rent for furnished properties. Even if they do agree to use your furnishings instead, they might need a storage unit for keeping their own belongings. This is more common among prospective tenants looking for single-family homes.
Increased Maintenance Costs
There can be a significant difference in maintenance costs between furnished and unfurnished rentals since you'll have more to tend to. The upkeep of the rental property itself is already a handful, much more if you add furniture and appliances to the list. With unfurnished rental properties, tenants will have to cover costs for their own furnishings.
Complex Insurance
When property owners furnish rentals themselves, landlord insurance could be sufficient to cover costs for property damage. Depending on the policy, the coverage can extend to furnishings as well. Unfurnished property might require your tenants to purchase renters insurance to protect their belongings.
Higher Tenant Turnover Costs
Furnished rentals can attract long-term tenants, but they also increase turnover costs. However, a furnished apartment could also leave more for you to clean up than unfurnished units during turnovers. Cleaning costs will be higher since there are more items to tend to.
Furnished vs Semi-Furnished Properties
Having a property furnished doesn't mean you have to provide everything a tenant could possibly need. While a short-term rental might need more since short-term renters aren't expected to bring their own furniture and appliances, long-term rentals can be more flexible.
Fully furnished apartments are essential for properties with frequent tenant turnover. That means you'll need to get the unit ready for immediate occupancy. Of course, many landlords with long-term rentals still offer this option. It often includes:
- Living Room Amenities (Sofa, Chairs, Coffee Table, Lamps, Entertainment Center)
- Bedroom Amenities (Bedframe, Mattress, Dressers, Nightstands, Lamps)
- Kitchen Amenities (Refrigerator, Oven, Microwave Dishwasher, Toaster, Coffee Maker, Cookware, Dishes, Utensils, and more)
- Dining Area Amenities (Dining Room Table, Chairs)
- Reusable Amenities (Linens, Towels)
Semi-furnished rentals tend to only have the basic sets that a rental home needs. This leaves more room within the living space, but the tenants won't have to start with nothing as they would with unfurnished apartments. It can include:
- Major Appliances (Refrigerator, Oven, Dishwasher, In-Unit Laundry)
- Bedroom Amenities (Bed Frame, Dresser)
- Dining Area Amenities (Dining Table, Chairs)
Is a Furnished Rental My Best Option?
Before deciding, it's imperative for you to conduct research first. Consider factors like who your prospective renters are, how much your budget is, and the rental pricing of your competitors for furnished homes. With your target audience being students, for instance, they would prefer a fully furnished unit so they wouldn't have to worry about buying what they need.
Families who likely have their own furniture and appliances from a former residence would prefer unfurnished options since they wouldn't want to let their assets go to waste, or leave them in a storage space to gather dust.
Benefiting From the Expertise of a Property Manager
Whether you're set on furnishing a rental or not, there are a lot of things left to handle after you rent out your units. Between maintaining the property's condition and its furnishings, you also have many renters to tend to.
Hiring a property management company like Precision Realty can help you overcome the immense task of being a landlord. You'll find several advantages such as lower vacancy rates, reduced landlord stress, expert consultation, and higher return on investment.
All you have to do is contact us, and we can discuss how your Houston rental property, furnished or unfurnished, can thrive among competitors.
