There are many things to consider when investing in a real estate property. Aside from the location, home inspections, and the closing costs, one very important factor to take into account when investing in a real estate property is if the apartment is furnished or unfurnished. Whether you decide to go for furnished apartments for rent versus unfurnished apartments can make a huge difference in the value of a rental property. It may also be a deal breaker for renters.
When deciding whether to go for furniture or not furniture, first you must study the location of your investment property. If your property is located in a prime location for vacationers, then your best option would be to opt for furnished apartments for rent. Because of the location, tenants there will look for short-term rentals and most tenants will prefer a furnished property. When on vacation, the last thing a renter wants to worry about is furnishing an apartment. This may also lead you to decide if you want to invest in an Airbnb property. Airbnb properties are usually furnished properties, used for short-term rentals.
Considering the positive aspects of furnished apartments for rent
1. Higher rental income
Without doubt, investing in furnished apartments for rent will allow the buyer to increase the rental price which means more rental income. According to Damian Collins, managing director of Momentum Wealth, “The main benefit of furnishing your investment property can provide additional returns above the standard rent on a property.” An apartment that would typically be rented out at 1,000 USD unfurnished can be rented out at a few hundred dollars more if it is furnished.
2. More short-term tenants
The most suitable tenants for furnished apartments for rent would be those looking for something short-term, including students, young professionals, and small families. For example, if a family decided to move to Chicago for one year in order to complete their education, they would specifically look for a furnished property. Buying a whole set of furniture for a one-year stay would not seem like such a good idea in this case.
Owning furnished apartments for rent in the appropriate location would mean a very desirable investment. If you are looking to rent out an unfurnished property with no amenities near a prime destination such as Miami Beach, you are looking at less tenants than you would versus if you rented out a furnished property.
3. Tax breaks
Deciding to have furnished apartments for rent can give you a tax break. Furnishing your rental property is considered tax deductible which means that related purchases can be deducted from the business costs. Considering all the various taxes landlords are paying, this may be a much needed break for them.
Considering the negative aspects of furnished apartments for rent
1. Dealing with more tenants
Catering to those on vacation and to students – they typical tenants of furnished rental properties – will mean your market may be limited. You won’t have the flexibility of long-term rentals. Renting a furnished property also means expecting to have many tenants. More tenants means more short-term lease agreements, which means dealing with a lot more people. The more tenants you have, the more problems you may face. In addition, naturally, the more people who use the furniture, the more wear and tear on the furnishing in the apartment.
2. Cost of buying and maintaining the furniture
Purchasing durable furniture is not cheap. You will need to dish out the money needed for basic furniture. Although buyers will receive additional returns on their property, managing furnished apartments for rent can be a hassle. You must remember that furniture can get ruined ( eventually will get ruined) and that it must be maintained often. Considering the high number of renters you may be getting, cleaning and replacing of the furniture will need to be done on a regular basis. Yes, you are getting additional returns on your property, but now those returns must go towards maintaining the furniture in your property.
3. Personal taste
In addition, you have to take into consideration that tenants won’t always have the same taste as you. You know that bright red couch you were longing to put in the living room of your rental property? Or that Picasso painting you wanted to hang up in the bedroom? Some renters won’t appreciate your love of the arts or your love of colors the way you do. Sometimes, it may be easier – and less costly – to let them choose their own furnishings. When you invest in an unfurnished rental property, you do not need to worry about replacing or maintaining furniture. The tenant is free to bring their own furniture, and in turn, they will be responsible for their belongings.
However, you should keep in mind that allowing tenants to bring in their own furniture has its disadvantages. For example, tenants will be moving their furniture into the property. This can scratch up the walls and ruin the paint. Moreover, tenants may be more inclined to decorate the property, by making holes on the walls to hang up paintings.
Ultimately, as a real estate investor, you have to decide whether to go for furnished apartments for rent or unfurnished apartments. Although there are some disadvantages of investing in a furnished apartments for rent, there are many more advantages. Studying the location of your future investment property is a must. If you do decide to furnish your property, try to choose neutral furniture and basic amenities that can help provide additional value to your rental property instead of appearing as annoying to future tenants. You may want to steer clear of those bright colors for your rental property. You can put the bright red couch that you were eyeing in your own living room. Remember to keep it as neutral as possible in order to cater to the vast majority of tenants. Once you are ready for your next real estate property purchase, don’t forget to check out Mashvisor for thousands of property listings for sale.