There is no right answer as to whether to let a property with or without furniture. Different properties will be better suited to each approach and there are a range of considerations.
Furnished properties are ideal for short term tenants and can be a great option for overseas visitors. However, going this route means your property’s occupancy levels can fluctuate dependent on the strength of the currency, changing seasons, holidays, and major events.
The long term appeal of unfurnished houses is impacted less by these external factors. The flipside is that during any vacant periods you can use your house as a holiday home and take advantage of the perks of having a second property without having to move furniture in and out regularly.
In this article we will explore:
The type of tenants you wish to attract
The long term appeal of unfurnished houses is impacted less by these external factors. The flipside is that during any vacant periods you can use your house as a holiday home and take advantage of the perks of having a second property without having to move furniture in and out regularly.
An unfurnished property is more likely to appeal to tenants looking for a home over the long-term.
Typically, this means that leases will be for twelve months and tenants will bring a house worth of furniture with them. Some tenants prefer the opportunity to furnish the property as they see fit and will be put off by a landlord’s furniture as this may mean they will feel required to store the items at a cost.
As people who are looking to create a home rather than just having a place to stay, long term lessees are often thought to take better care of the property as a whole.
Furnished properties are aimed at travellers and young tenants who haven’t accrued large amounts of furniture yet. The leases reflect the instability of such tenants and are usually between three and twelve months long. With this type of property, the renter is able to move in quickly and makes them the ideal option for people arriving from overseas and need a place in a hurry.
Property size and location
Larger properties with more than two rooms are more suitable for long term, unfurnished letting.
They tend to be occupied by older people and those with families, who will generally have their own furniture. A big home will be expensive to furnish, which is why the smaller one and two bedroom houses offer the best value for landlords wishing to pursue the furnished route.
When a property is furnished, there is a whole spectrum of options for the landlord. They may simply choose to include a washing machine and a refrigerator, or alternatively fully equip the property with everything from linen in the closest to cutlery in the drawers.
Central and inner suburb properties are more suited to the letting of furnished properties. Their location makes them ideal for people arriving for a short term stay, or to use as a stop-gap while they settle and find a permanent place. The proximity to public transport and the city makes them perfect for international travellers, and as such, can be let at a premium rate.
Time available and financial situation
Due to the short term, high turnover nature of furnished properties, they tend to require the investment of more time than an unfurnished home. The length of the lease on the latter means that the landlord can essentially set it and forget it, leaving the property manager to take care of any issues that arise.
When a property is let through a series of short term leases and an ever-changing set of tenants, the owner is required to sign off of each new occupier, ensure the furnishings are still in good condition and replace what isn’t. This is in addition to the host of other tasks that long term letters only need to do once a year at most. This can make furnished, short term letting a time consuming process for their owner.
While not a rule, the short term nature of a furnished property means that it may go through periods of vacancy. A long term lease offers the security of a constant stream of revenue for at least twelve months, while a furnished property could only guarantee income for a matter of weeks, or even days.
If an owner is unable to absorb the cost of a property sitting vacant for any period of time, it is advisable to make the property’s furnishing options flexible. Letting agents prefer being able to offer a prospective tenant the option of full, partial or no furnishings as it opens the house up to a wider market of renters.
How much do you want to spend setting it up?
Perhaps the main consideration for most people, is how much they want to spend in the initial set up of the house. Buying furniture for an entire house is an expensive process and once appliances like a microwave, kettle and fridge as well as other sundries such as cutlery, crockery, cookware, utensils are added to the cost of insuring these contents, it can start to seem prohibitive. All of these expenses need to be factored into the cost of rent and then compared to the market rates for the property size and location.
An unfurnished property may command a significantly smaller weekly rent, but the maintenance and insurance is limited to the house itself, not the replacement of the tenant’s contents.
Depreciation advantages of a furnished property
Letting a furnished property has an added advantage of increased depreciation deductions. Plant and equipment assets each allow the owner to claim depreciation deductions based on an individual effective life. The depreciation rates for these items are often much higher than those for construction or capital works. So while furnishing a property is an initial expense there are financial benefits they will receive at the end of each tax year.
Plant and equipment assets are defined as any easily removed fixtures and fittings and include items such as air conditioners, carpets, ovens, rangehoods dishwashers and smoke alarms
Do your homework
The most important thing is to research the area your property is in and find out what else is available and at what price. Ultimately, the decision should be based on your investment goals and your individual financial situation. Providing a ready solution for short term tenants at a premium price is attractive, but your house and suburb might be more suited to unfurnished rentals with long term tenancy appeal.