When you purchase a new investment property, it’s tempting to excessively renovate and furnish to attract the best tenants. But is having a furnished rental property the best investment plan?
My first rental property was furnished, with the aim of attracting higher paying tenants. This plan worked. The rent increased by almost 50% in two years. I also claimed part of the furnishing costs as a tax deduction. This is legal in Australia.
Though I made more rental income by furnishing my apartment, I still believe it’s better to let your rental property unfurnished if you targeting long-term tenants. Let me explain.
Think twice about furnishing your rental property
A newly furnished property looks attractive and marketable for the first two years if your tenants are not careless. Once new furniture show signs of wear and tear, your property will look out-dated no matter how clean it is. It also becomes your responsibility to repair or upgrade the furniture if there is a complaint from your tenant or letting agent.
Also, content insurance is essential for a furnished property. However, the insurance company will only pay you a fraction of the furniture cost. But, that’s if the cause of damage is listed in their terms and conditions. It’s likely you’ll also have to pay an excess fee to lodge a claim.
Below are some key lessons I’ve learnt on why you should not furnish your rental property. However, not every investor agrees that rental properties should be unfurnished. And so, I’ve also included a list of points for you to think about if you do decide to furnish your rental property.
Why you should not furnish your rental property
- Keep your property unfurnished if you own multiple properties. Spend more time growing your portfolio and sourcing new investment opportunities, instead of inventory control.
- Keep your property unfurnished if you don’t want to pay content insurance.
- More money can be invested in upgrading high usage features, such as flooring, the heating system, the boiler, the shower 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 will make you more emotionally attached to the property. Think with your head, and not with your heart.
- You can attract more long-terms tenants who already own furniture.
- Furniture with wear and tear markings make a property look out-dated no matter how clean the property is.
- New furniture decreases in value as soon as it has been used.
Key points to think about if you do decide to furnish your rental property
- 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 could be damp, humid and over-heated. So, remove the furniture the tenant does not need at the start of the tenancy.
- Furniture should be of neutral colours as this will appeal to more prospective tenants, and it will make the property look more timeless.
- Only purchase large practical furniture that is easy to maintain, such as beds, dining tables and sofas. Large furniture also makes the property look less cluttered.
- Don’t purchase leather furniture. Leather cracks after repeated usage and is very high maintenance.
- Don’t purchase wooden bed frames if you expect a high tenancy turnover. Bed bugs thrive in wood.
- Invest in a good quality bench top, as tenants will place hot pots and pans anywhere convenient, without thinking about burn marks.
So, should a rental property be furnished or unfurnished? And, why?
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