Will A Furnished Property Earn You More Money?

Location/Audience

Location is the most important factor to consider when furnishing a property. Consider the people coming to the area and their purpose for being there. Having a furnished apartment limits your appeal to tenants who don’t have furniture already. Because of this, furnished apartments succeed in areas where people are typically staying for shorter periods of time (up to one or two years). Properties located near universities or medical precincts, close to the CBD, around coastal areas and holiday destinations or even mining towns can have great appeal if furnished.

Considerations:

• -Is the market in your properties location searching for furnished apartments?
• -Do lots of apartments in the area offer short stay accommodation?
• -Are there attractions in the area that would encourage short stay clientele?

Type of furniture

The type of furniture you choose for your property will have an effect on both the amount of rental return you can achieve and how many people you will attract to your apartment. When choosing which sort of furniture for your investment property, you need to consider your audience. There is no point spending $3000 on a leather couch if you are aiming at a student market, likewise, people looking for luxury holiday accommodation may not be attracted by IKEA furniture.

Considerations:

• -Using cookie cutter furniture can reduce the uniqueness of the apartment and therefore it’s marketability to potential tenants.
• -Over time your furniture can date and weather, and will have less appeal against more modern apartments on the market so consider the cost to routinely refresh or replace items along with the durability of materials.
• -Consider flexible furniture such as double beds that can be split into two singles – groups of people renting your apartment may not always be the same.

Upfront/ongoing costs

The biggest reason investors furnish their property is the attraction of a higher rental return. People are willing to pay more for the convenience of renting an apartment that is already furnished, and year on year this can amount to significant profits over and above a standard rental property

Considerations:

• -Furnished properties have a larger outlay. Do you have enough capital to wear the cost of this initial furniture purchase?
• -Will the extra rental return cover the furniture cost and make you a profit over time?
• -Have you factored in the cost to replace broken or damaged furniture?
• -Can you afford to have longer periods without tenants while you find a suitable candidate?

Short term leases

As most furnished properties thrive in the short-term rental market, investors need to consider if they want the added work of managing such a property. Short lease terms mean you have the added flexibility of using the space yourself during periods of the year, or even keeping the property vacant if the need arises, but this also means periods of no rental income.

Considerations:

• -Do you need the flexibility to use the space yourself during the year, or do you want tenants in the property year-round?
• -If you are in an apartment complex, some owners corporations don’t allow short term stays less than 1 year, so check your OC rules before advertising on sites like Airbnb.
• -You will have more opportunities to inspect the apartment for damage and general wear and tear, but there are more frequent costs associated with marketing the property and cleaning it after each tenant leaves.

Damage
Damage to your property is an important consideration, whenever you have tenants in your property, you run the risk of housing someone who has less respect for your things as they do their own.

Considerations:

• -Providing furniture can stop damage to key infrastructure such as walls, doors and cabinetry during move in /out.
• -Pre-furnished apartments mean tenants are less likely to add their own personal touches, such as fixing things to walls, adding temporary shelves etc.
• -While furniture protects key infrastructure such as walls, the furniture itself may need to be replaced more often – a broken kettle or bed leg etc.
• -Some tenants may smoke with doors open, use incense or cook using strong spices, which over time can soak into furniture and give apartments an unwanted smell.

Tax

Another appeal to furnished apartments is the ability to depreciate items purchased for the apartment over time, with some items able to be claimed straight away.

Considerations:

• -Additional contents insurance needs to be purchased over and above standard home insurance to cover your furniture.
• -In some locations, offering furniture can be considered a public liability and you may incur additional fees to protect you against liability.

Before making a final decision, we recommend you get in contact with a local real estate agent who knows the area your property is located within. They should have a strong knowledge of past performances of furnished apartments and whether your particular apartment will succeed in this area.

With a four-office network in the Melbourne CBD, Melcorp Real Estate specialise in inner city apartment living. If you have an investment in Melbourne and are considering renting it out, contact us first to determine the best course of action.