Are you a real estate investor? Or are you considering the option of becoming one? What is it in real estate investing that attracts you? While there are so many great things about real estate investments, such as the opportunity to make money, the option to work mostly from home, and others, the greatest feature of the real estate investing business must be the endless opportunities. Real estate investing is as limitless and diverse as your mind and imagination. You can invest in different types of properties, in different locations, through different strategies… One option that has been gaining popularity in the busy lifestyle of the recent decades is furnished apartments for rent. Have you thought about this type of rental property as your next real estate investment? Maybe you should. In order to help you decide whether furnished apartments for rent are the best real estate investment strategy for you, let’s look at them in some more detail.
What Are Furnished Apartments for Rent?
Furnished apartments for rent are one specific type of rental properties. As the name suggests, these are housing units in an apartment building which are provided with all the furniture necessary to provide a comfortable stay for the tenant on short-term or long-term basis. This means that the bedroom should have a bed with side tables, a closet, a hanger, and lights in addition to pillows and potentially sheets and blankets. The living room should be supplied with a couch, a small table, a TV set, lamps, and maybe a carpet and some shelves. The kitchen needs to be provided with everything which allows for the preparation and consumption of meals in addition to storing food. Of course, you can go as lavish and extravagant with the furniture of your furnished apartments for rent as you wish, but you don’t have to. Unlike corporate rentals, furnished apartments for rent are not expected to be supplied with the highest quality of furniture.
How Do You Furnish Furnished Apartments for Rent?
As said above, there is no limit as to how to furnish your furnished apartments for rent. There is a minimum which your tenants would expect, but other than that, the sky is your limit. Generally speaking, the more and the higher quality furniture that you provide, the higher rent you can ask for. However, that’s not exactly the case all the time. As a smart real estate investing looking for ways to increase his/her rental income and profitability (cap rate and cash on cash return), you should learn how to be tricky with your furnished apartments for rent. Tricky does not have a negative connotation here, no worries. All it means is that you should be able to choose furniture items which look more expensive and better quality than they are and which are easy to clean and maintain. There is nothing more repelling for tenants than a furnished rental which looks dirty and disgusting to live in.
How Much Do You Charge for Furnished Apartments for Rent?
There is no set formula to calculate how much rent you can and should charge for your furnished apartments for rent. Of course, the rate should be higher than for unfurnished rentals because of the extra commodity that you offer. When you do your investment property analysis, make sure to factor in the price of the furniture as well as the cost of maintaining it and changing it when needed. Your rental rate should be enough to cover your expenses, providing you with rental income which assures positive cash flow and good cap rate and cash on cash return, while not being high enough to drive away tenants. After all, your furnished apartments for rent need to be rentable.
What Is the Best Rental Strategy for Furnished Apartments for Rent?
Furnished apartments for rent are actually good for both traditional and Airbnb rental strategy, which is one of the great things about them. Which strategy is the better one for you depends on your specific case. For example, if your rental property is located in a college town, it might be better to try out traditional rental strategy which would attract students as well as professors and administration staff. If, on the other hand, your investment property is located in a busy tourist or business destination, you should turn your furnished apartment into an Airbnb rental. As a real estate investor and a landlord, keep in mind that if you opt for Airbnb rentals, your furnished apartments for rent will be expected to be completely furnished because your guests for a night or two will not bring any furniture or towels or linen with them. The upside is that in most cases landlords are able to charge higher rent for short-term rentals than for long-term rentals.
What Are the Pros of Furnished Apartments for Rent?
Following is a list of the most important advantages of furnished apartments for rent:
- Higher rental income
- Possibly higher cap rate and cash on cash return (if furnished smartly)
- Good for traditional and Airbnb rental strategy
- Readily available pool of tenants (tourists, business people, students, teachers, professors, etc.)
- Excellent for college towns as well as business and tourist destinations
- Good for professional property management
What Are the Cons of Furnished Apartments for Rent?
Below are the main disadvantages of furnished apartments for rent:
- Higher initial cash investment
- More maintenance needed
- More risk of damage
- More turnover (if short-term rentals)
So, after going through the most important features and aspects of furnished apartments for rent, there remains the question: Is this the right real estate investment strategy for you? This question – like many other real estate questions – has no right or wrong answer. It all depends on your personal situation as a real estate investor, and what you are looking for. Once you are ready to choose your next investment property – whether a furnished apartment or not – head to Mashvisor for the best investment properties available across the US and the most important numbers related to them (rental income, cap rate, cash on cash return, occupancy rate, etc.).