Property wealth management: Is furnishing your property worth the hassle?
In Australia, most properties are rented unfurnished, but that’s not to say that furnished properties don’t have their place. Furnished properties are most successful in the short-term holiday accommodation, student accommodation and executive apartment markets. These are very specialised markets and can be quite lucrative, but they are notoriously hard to crack.
Furnishing your property can certainly help you to achieve higher rents, particularly if it’s appropriate for your property to have furnishing of a very high standard to complement the property and the area. There is a willingness of tenants to pay a premium because of the convenience of having furniture already provided, which saves them time and money. It can also be a good option if you happen to have furniture in excess, as it is actually a convenient way to store them. Furnishing a property also provides you with additional depreciation benefits as furniture can be depreciated over a few years in most cases.
Before you rush off to Freedom or clear out your garage of old furniture to fit out your property, there are some important downsides you need to be aware of.Firstly, there are the upfront costs involved if you need to purchase new items to get started. To recoup your investment in furniture you may need to allow anywhere from 2-5 years. This means it’s more expensive to exit this investment compared to a standard unfurnished rental. Additionally, you need to consider additional insurance to cover these furnishings.
To keep up your rent, you need to constantly maintain the furniture or even replace it because once it starts to deteriorate and look tired it will have a negative effect on your rent as well as your ability to secure future tenants. Furniture is also very personal, so you may in fact be turning off good tenants who aren’t keen on your style (particularly if the furniture is shabby).
There is also a likelihood of attracting transient tenants as without a property full of their own furniture, it is easier for them to move around on a whim. You need to ask yourself the question “if they can’t afford their own belongings, are they going to pay rent long-term?” Every time there is a turnover in your tenants, it will cost you in lost rent and extra letting fees.
Although there are certainly benefits to furnishing your property, it is not suited to every property.