To furnish or not to furnish?
If you own an investment property, it’s an important decision to weigh before putting your rental on the market.
Should you aim for the higher monthly rent that furnished units command, but deal with the risk of more frequent turnover?
This blog aims to help you make an informed decision by weighing the benefits and challenges of renting furnished vs unfurnished in your local market.
We’ll also discuss how to make a strategic decision, and how to tailor your tenancy agreement if you decide to go the furnished route.
What is a Furnished Rental?
A furnished rental refers to a property equipped with essential pieces of furniture, offering tenants the convenience of a ready-to-move-in living space.
Furnished apartments come with crucial pieces such as beds, dressers, dining tables, chairs, couches, and coffee tables, allowing individuals to forgo the hassle of furnishing the space themselves.
Furnished properties are particularly appealing to those seeking short-term housing, such as students, young professionals, and individuals relocating to a new city.
Furnished rentals contribute to a hassle-free living experience, saving tenants both time and effort in setting up their new home.
Furnished vs Semi-furnished Rentals
A furnished apartment is stocked with essential furniture and appliances, such as beds, dressers, tables, chairs, couches, coffee tables, and kitchen appliances, offering a comprehensive living solution.
In contrast, a semi-furnished apartment generally includes larger pieces like a sofa, bed, dresser, tables, and chairs but may omit smaller items like kitchen utensils, cutlery, and lamps.
The distinction lies in the extent of provided amenities, with a furnished unit delivering a complete package, while a semi-furnished one offers only basic furniture.
Benefits of Renting Furnished
Renting out furnished properties offers substantial financial benefits.
You can potentially increase your monthly rent prices by 25% to 50%. For a rental unit normally fetching $2,000 per month, a furnished unit could translate to an extra $6,000 to $12,000 annually.
According to January 2024 price data from liv.rent in Vancouver, BC, an unfurnished 2 bedroom rental asks an average of $3,450, while a furnished 2 bedroom rental asks $4,450. This difference of $1,000 per month translates into a 29% increase, and an additional $12K per year.
Investment vs Expense
Consider your furniture as an invesment rather than as an expense. You can repurpose furnishings for personal use or other rental properties, or sell them when the time comes.
Furnished rentals in BC and Canada can be considered an asset, which offers potential tax deductions against your income through the Capital Cost Allowance (CCA).
Find Tenants Faster
Furnished properties often attract potential tenants faster than unfurnished properties, as they eliminate the time and cost associated with furnishing a home.
Furnished units are highly appealing for executive level tenants, people with high net worth who have recently moved to your city, or those seeking shorter leases.
If you’re renting a home on short-term rental platforms like Airbnb or VRBO, furnishings are a requirement. Keep in mind that the lucrative vacation rental market was recently outlawed in most parts of BC, Canada with Bill 35, which takes effect in May 2024.
Positive Tenant Experiences
A well-furnished property enhances the overall aesthetics and wow factor of your rental unit, which contributes to positive tenant experiences and the potential for great reviews.
Benefits of Unfurnished Rentals
Longer Tenancy & Shorter Turnover
In most markets, unfurnished units experience less frequent turnover and lower vacancies than furnished properties.
Since the majority of renters own their own furniture, unfirnished rentals tend to attract a larger pool of prospective tenants, which gives you a better chance of finding occupants.
More Stable Income
Because unfurnished rentals tend to experience lower vacancy rates and turnover reates, you’re likely to get a more stable and predictable income stream from your investment property than you would with a furnished rental.
You’ll also spend less time and resources vetting new tenants than you would with a furnished rental that attracts short-term tenants.
Lower Initial Investment
Furnishing a rental property can be a significant upfront expense. Opting for an unfurnished rental reduces this initial cost, making it a more financially feasible option for property owners – especially if you have multiple units.
Lower Insurance & Maintenance Costs
By letting your tenants sort out their own furniture, you’ll eliminate the operating costs and hassles related related to maintenance, wear & tear, furniture insurance, and additional rules in your lease agreement.
Strategic Considerations: Furnished or Unfurnished?
Know Your Target Market
Location matters. In downtown areas, student-friendly neighborhoods, or popular vacation areas, you may earn a higher overall rental income with a furnished unit.
When you determine your pricing, it’s important to consider the demographics of potential renters in your area, and provide a solution that meets their needs.
Families, older tenants, and those with low or moderate income will almost always prefer unfurnished properties. On the other hand, executives, young professionals, and wealthy students tend to prefer furnished.
Monitor Market Trends
To make a strategic decision, it’s important to stay informed about market trends and shifts in tenant preferences so you can adapt your offering to meet the needs of tenant preferences in your area.
Analyzing competitors in your local rental market can provide insights into prevailing trends on demand for furnished and unfurnished rental properties, and how much income you can command from your property.
Working with an experienced property management company can help you stay informed, and give you back the time and money associated with operating your rental properties.
If you live in Kelowna, have a look through our rental property listings to get an idea of how much rent your unit commands in today’s market.
Tailoring Tenancy Agreements for Furnished Units
Renting out a furnished suite requires some adjustments to the standard lease agreement.
For furnished properties, the security deposit extends to damages or excessive wear on your furniture.
Include a comprehensive list of all furnishings within your furnished unit, specifying each item’s condition. Clearly state restrictions on altering or moving the furniture within the unit without prior written consent. With a furnished rental, it’s wise to perform more frequent routine inspections to assess the condition of your assets.
Making specific rules on the use of your furniture can prevent potential damages. For example, you can state that tenants must keep furniture away from heating systems, only using certain pieces of furniture outdoors, and only use furniture for their intended purposes.
You can also specify expectations for the tenant to maintain the furniture in good condition, beyond normal wear and tear, and to prompty report any damages.
Furnished or Unfurnished – Which Rental Option Suits You Best?
Deciding between furnished and unfurnished rentals is a nuanced decision for every rental property owner.
Be sure to consider the market dynamics of your location, and keep in mind the unique advantages and challenges of both options.
If your goals are higher rent, longer tenancy, or a broader tenant pool, your strategic decisions can significantly impact your overall rental property profitability.
Whether you’re renting furnished or unfurnished, Vantage West Property Management can help you increase your profitability and win back your time.
We’re a team of experienced homeowners, real estate investors and rental property managers in the Okanagan Valley, British Columbia.
If you’d like any advice on renting furnished or unfurnished, or you’re interested in turning your property into a passive investment, contact our team today.