Should you furnish your residential rental property? There’s no one-size-fits-all answer, of course, and every landlord must weigh the pros and cons and come to the conclusion that’s right for them—or for each individual investment property.
Part of arriving at a smart decision involves digging into the local rental market by reviewing listings and talking to other landlords. If there’s a shortage of furnished homes available for rent, this could indicate a good opportunity to stand out. But it could also mean there’s no demand in the immediate area from short-term renters, college students and new graduates, and other demographics that most often seek furnished rental options. If you notice a number of lingering furnished listings, you can assume supply already surpasses demand.
Let’s take a look at some of the most important considerations when trying to decide whether you should furnish your residential rental property.
Deciding Between Furnished and Unfurnished Rentals
- First-time and younger renters are a significant part of the market for furnished residential rental properties, as they often don’t have furniture of their own—or extra money to buy it. Does the area have a large body of college students living off-campus, new graduates, and/or young professionals relocating there?
- Short-term renters (which includes many groups of people, such as extended-stay business travelers, people relocating to the area who haven’t bought a home yet, people who’ve sold a home but can’t move into their new one yet, etc.) are the other big part of the market for furnished residential rental properties. Consider the pros and cons of offering short-term leases and decide whether you’re willing to offer them. If you’re not, you’re probably better off sticking to unfurnished rental properties.
- You can charge higher rent for a furnished apartment. But keep in mind that the added profits can easily be offset by periods of vacancy if it’s difficult to rent a furnished place in the area.
- Are you willing to purchase or rent the furniture? Depending on the size of your property and the quality of the pieces you buy, furnishing a home can be quite costly. And while you might be tempted to choose cheaper furniture to save money, consider that it will likely need to be replaced more often than quality items.
- If you do opt to buy, talk to your tax professional about whether you can write off the furnishings or claim them as depreciable assets at tax time.
- You’ll need to make repairs and replace furnishings from time to time. You can require a higher deposit on a furnished home, and tenants may sometimes be liable for damage. However, there will undoubtedly be maintenance and replacement costs on your end associated with regular wear and tear.
- Would you put furnishings in storage to accept a tenant who has their own belongings and only wants an unfurnished rental property? This is an added expense, though it can be reasonable if you have quality pieces and intend to offer the property as a furnished listing again in the near future.
- Do you want to protect the property against potential damage resulting from tenants moving furniture in and out of the home?