Are furnished properties a good option for landlords?
Offering a furnished property to tenants can demand higher rental yields, but is it worth the extra effort?
In Australia, there are generally five ways a landlord can make their property available for lease.
- Unfurnished – the landlord doesn’t provide any furniture
- White goods – some or all white goods are supplied
- Partly furnished – some lounges or tables and chairs are provided
- Fully furnished – the landlord provides all furniture
- Fully furnished and equipped – all household items are included, from cutlery and kitchen utensils to beds and desks.
The majority of landlords lease properties as unfurnished, or with some white goods included.
This is because if any white goods, furnishings or other included equipment break during the tenancy it is the responsibility of the landlord to replace the item, in most cases.
This can prove to be highly costly, particularly when larger pieces of furniture break, such as washing machines or lounges.
Additionally, landlords are generally required to replace smaller items, such as cutlery and kitchen utensils, in the event that they are broken. For landlords, this can become an ongoing hassle that they have to deal with.
The upside to providing furnishings is that, in most cases, landlords can claim depreciation on the items they have supplied.
Although landlords can demand higher rent with furnished options, this can be offset by tenant turnover, which may lead to longer vacancy periods.
Furnished houses usually attract more transient tenants who need accommodation for short periods (6-12 months), such as students or business people.
Given this, if you are fully furnishing, it’s best that the properties are located close to employment hubs, such as city CBDs or universities.
Equally, the quality of the furniture a landlord provides will also determine the quality of the tenant.
Students might be content with worn couches or furniture from IKEA, but it’s less likely to suit a corporate businessperson.
While providing a furnished option might sound like too much effort, there are instances when it can be beneficial.
For example, take an international business person that needs a fully furnished apartment in the city. Wear and tear on the furnishings is likely to be minimal if the tenant only stays at the apartment every other week when they are in town for business. Furthermore, a tenant such as this is likely to spend more of their time in their office rather than the apartment.
In any event, it’s always best to consult with your property manager when considering a furnished option for your investment property.