I have gotten a lot of questions lately about renting furnished property. I will say it right up front that most of the time, I think it is a bad idea. My philosophy for renting property has always been that the secret to successful property management is to find great tenants.
Great tenants are more than just someone who will pay the rent and look after the house. They are someone that is suitable for the property and will stay for at least a year or two. Now, the problem with renting out a furnished property is that most tenants who don’t have their own furniture are only looking for a short term lease. So if you want tenants to stay long term yet your house is furnished you might be waiting a long time to find tenants as your cutting about 90% of your market out.
The One Possible Exception
Professionals who have come to town on behalf of their company to complete a job will typically be looking for a furnished property and usually their company will sign a 12 months lease for their employees. This can be a great opportunity to score tenants that are willing to pay the extra costs to move into a furnished property and sign a long term lease.
Having a large company on the lease can be a very good deal for the property owner. Big companies sometimes have big projects where they will need people living away from their home base for long periods of time. If your house is in an area where the company needs housing, you have a great opportunity.
The company will want to enforce pretty high standards for the property and furnishings. The tenants/employees living in the house will appreciate nicer looking furnishings, and will tend to take better care of the furniture and the house. A big company is generally willing to pay a premium for a nice house, and sign a long term lease for it.
One ‘Minor’ Problem
The sticky part is that for every company which wants a furnished house, there are probably nearly 100 young families or couples who need a place long term. Your $500/week house might get $600/week if rented as furnished to a big company, but if you have to wait 3 months to find the big company who is willing to pay the extra dollars, you’ve just lost about $2,500 in rent for the year.
Of course, you might get lucky. Personally, if I wanted to depend on luck, my investments would be in something besides real estate.
Companies looking for housing will have someone looking at realestate.com.au, just like a family looking for a new place. There is not a website or a network that all big companies go to, to find housing. (Maybe there’s a business idea for you!) Typically, a corporate search will be viewing “Furnished” properties, so if that is what you are offering, be sure to click that option when creating your ad.
Renting a Furnished Property - On Going Problems
Even if renting a furnished property in your area makes sense, there are other factors to keep in mind. If the lease states that your are renting out a furnished house with appliances, the property owner is not only responsible for keeping the building in good shape, but the furniture and appliances as well.
If the tenant owns the furniture and they break a stool, they go out and buy a new stool, no problem. But if the stool belongs to the property and it gets broken the tenant is still responsible, but what if they try to claim the breakage was due to normal wear and tear? That may be a hard case to make, but even if the tenant does acknowledge responsibility, will he be able to replace the stool with one that matches the rest of the set? If not, your house may be less attractive to future short term tenants who won't appreciate mismatched furnishings.
Appliances can be another source of trouble. Stoves and refrigerators are generally pretty durable, but they can go wrong and when they do it is up to you to replace or repair them. Televisions and Stereos will typically be part of the furniture package, and they can be notoriously fragile.
The Best of Both Worlds...
If you are thinking that offering your house furnished might make sense for you, consider aiming your ad not only for people who want a furnished property but also the other 90% of people who don’t want a furnished property. You can do this by placing in the ad description ″House can be furnished for an extra $### per week″ and be sure to check “Furnished” in the property features. This way, you do not cut out tenants who have their own furniture (tenants can’t search for ‘unfurnished’ properties). Be sure to have a list of furniture that is available with the house during inspections. This way tenants will know exactly what furniture can stay and won't stay with the house so they can make a good judgement on leasing out your property.
Whether you decide to rent your house as furnished or not, the secret to success is having the most effective advertising and marketing plan possible. Of course, that is where Cubbi comes in.
Start advertising your furnished or unfurnished property.