When you purchase a new investment property, it’s tempting to over-renovate and buy new furniture to attract the best tenants. But is having a furnished property the best investment plan?
Does furnishing your property make you more money?
Only our first investment rental property was furnished to attract higher paying tenants. This worked for the first two years – we increased the rent by almost 50%.
As the property was located in Australia, we could claim part of the furnishing costs as a tax deduction. But note, this deduction does not exist in many countries.
Though I did make more rent money by furnishing my apartment, I still believe it’s better to rent your investment property unfurnished if you are not targeting a niche market, such as the AirBnb, short-term, executive or luxury rental markets. Let me explain.
The downside of furnishing your investment property
A newly furnished property looks attractive and marketable for about the first two years, or less if your tenants are careless. Once new furniture starts showing signs of wear and tear, your property will look outdated no matter how clean it is.
Thereafter, it’s your responsibility to repair or upgrade your furniture when your tenant or real estate agent complains.
Additionally, you should get content insurance, but the insurance company will only pay you a fraction of the furniture price if the cause of damage is listed in their terms and conditions – and you pay their excess fee.
Below are some key lessons I’ve learnt on why you should not furnish your investment property, as well as point for careful consideration if you do choose to furnish your property.
Why you should NOT furnish your investment property: Lessons learnt
- Keep your property unfurnished if you own multiple properties. Your time should be spent on growing your portfolio and sourcing new investment opportunities, not inventory control.
- Keep your property unfurnished if you don’t want to pay content insurance.
- By not furnishing your property, more money can be invested in upgrading high usage features, such as flooring, the heating system, the boiler, bathroom tiles and the cooktop.
- An empty property with no furniture looks larger, and tenants can imagine how their furniture will fit in the space.
- Buying expensive furniture is likely to make you more emotionally attached to the property. You need to be objective and focused on the long-term gains.
- You can attract more long-terms tenants who already have their own furniture.
- Furniture with wear and tear markings make a property look outdated no matter how clean the property is.
- New furniture depreciates in value as soon as it has been used.
Furnishing your property: Lessons learnt
- Furnish your property if you want to attract the AirBnb, short-term, executive and luxury rental markets. Agents may charge higher management fees.
- Tenants will often store unwanted furniture negligently, without considering if the storage room may be damp, humid and over-heated. So remove all of your furniture the tenant does not need at the start of the tenancy.
- Furniture should be of neutral colors as this will appeal to more prospective tenants, and will make the property look timeless for a longer period.
- Only buy large practical furniture that are easy to maintain, such as beds, dining tables and a sofas. Large furniture also make the property look less cluttered.
- Don’t buy leather furniture; it cracks after repeated usage and is very high maintenance.
- Don’t buy wooden bed frames if you expect a high tenant turnover; bed bugs thrive in wood.
- Invest in a good quality bench top as tenants will place hot pots anywhere convenient; thus, causing burn marks.
So would you rent out your property furnished or unfurnished?
Please note, though I own a few properties, I am not a legal, financial or professional property expert. I’ve written this post to share my personal experiences and would love to hear your opinions and views.
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