Should I Rent My House Furnished

The question about whether you should rent your home furnished or unfurnished is one that you will have to ask at some point in your real estate investment journey.

For many owners, this question usually arises when they notice the significant difference in rental income between these two options. Depending on many factors, a furnished rental may command a rent premium of 20% to 50% over comparable unfurnished properties.

But this should not be your sole basis for making this decision. Because even though they generate more revenue, furnished homes also have higher costs and more risks than unfurnished ones.

In reality, neither option is perfect. Each comes with a combination of benefits and drawbacks. And the right choice for you ultimately depends on your investment goals and target market.

In this article, TRI Property Pros explores the ‘whys’ and the ‘why nots’ of both approaches to help you determine which one is better for you in the long-run.

Pros and Cons of a Furnished Rental

What does it mean to furnish a rental? The answer is not straightforward.

Some furnished rentals come with all white goods (cooker, refrigerator, washing machine, dishwasher and dryer) and essential furniture (sofa, bed, wardrobe and dining table). Others go a step further by also providing necessities - cutlery, crockery, and electronic items.

By and large, even if the level of furnishing differs, the primary reason for furnishing a rental property is still the same - to make it as move-in ready as possible. There are several reasons why many investment property owners prefer this approach.

It’s More Lucrative

A furnished rental can rent for up to 50% higher than a comparable rental property that is unfurnished. How much the owner actually charges depends on the location, the type of furnishing in the property, and the kind of renters it attracts.

Offers Renters Convenience

Lots of renters don’t want to deal with the hassle of hiring a moving company. They also want to avoid the cost of buying their own furnishings. A furnished home meets these needs, and renters are willing to pay more for that convenience.

A Larger Tenant Pool

There are a lot more people looking to rent a furnished property than an unfurnished one. The tenant pool is also very diverse: expats, tourists, students, professionals, vacationers, and recently relocated individuals.

Unlike unfurnished homes, furnished rentals attract both short-term and long-term tenants.

It’s Easier to Market

Because there is a larger, more diverse tenant base for furnished homes, it is easier to market the property. Also, potential renters looking at the photos and videos of the rental can easily visualize themselves living in it, because it already looks and feels like home.

That being said, what are the disadvantages of furnishing your rental property?

Demands a Bigger Initial Investment

Purchasing beds, sofas, a refrigerator, a washing machine, a dishwasher, and decor requires a significant amount of upfront capital. This also extends the time it takes for the owner to recoup their investment.

Lack of Personalization

Since the tenants in a furnished rental do not bring their own furnishings, they must accept the owner's design decisions. Because they are denied the opportunity to personalize the home, they don’t feel any attachment to it. This makes it easier for them to move out.

Attracts More Short-Term Renters

The very thing that makes a furnished rental attractive to renters is also the source of one of its biggest challenges. Furnished rentals tend to attract transient tenants who do not want to put down roots. As a result, they suffer from high tenant churn rates.

Has Considerably Higher Costs

A furnished rental has significantly higher operational costs than an unfurnished one. It must be inspected regularly for furnishings that need to be repaired or replaced.

Because their property attracts mostly short-term renters, owners spend a lot of their time (and money) screening new tenants. These rentals often have a higher risk of vacancies, and therefore, higher turnover costs.

Pros and Cons of an Unfurnished Rental

The traditional way to rent out a property is to leave it unfurnished. There are many reasons why some landlords still prefer this approach.

Lower Upfront Cost

For both landlords and tenants, an unfurnished rental means lower upfront costs. The landlord doesn’t have to come up with the capital to furnish the home. For tenants, the cost of renting an unfurnished home can be 20$-50% lower than the rent for a comparable furnished property.

Freedom to Personalize

With an unfurnished rental, tenants can style and furnish the home exactly as they want. Tenants who personalize their home are more satisfied and have a deeper attachment to their home. This influences how the tenant cares for the property and how long they stay in the rental.

Relatively Stable Tenants

Because it requires significant investment in furniture and essential items, an unfurnished rental will attract families and people who plan to stay for the long-term. This results in a more stable income stream for the owner.

Reduced Risk of Damage

In an unfurnished rental, the risk of damage is limited to the essential systems and components of the home. A furnished rental will have all of those risks in addition to the risk of damage to the furnishings.

But there are drawbacks to renting your property unfurnished:

Lower Revenue

Unfurnished rentals command a lower rent, and the lease terms are usually medium to long. This places a major constraint on the owner's ability to scale fast, and because the rental rate is locked for longer periods, they can't take advantage of trends to raise the rent.

Smaller Tenant Pool

Owners of unfurnished rentals miss out on the massive pool of short-term renters looking for decent accommodations.

They are also constrained by the kinds of locations where their property can thrive: suburbs and family neighborhoods versus city centers, universities, and business districts.

Final Verdict

Should you rent your house furnished or not?

If your property is in a premium location (business district, tourist area, or near a university), your typical renter wants a “move-in-ready experience,” and you can charge a 20% to 50% premium over the rate for unfurnished homes.

If your property attracts more long-term tenants, you want lower turnover rates/reduced marketing costs, you want to avoid the hassle of repairing/replacing broken furnishings, and your location does not support charging a higher rent.

If you have more questions about furnishing your rental or any other property management needs contact TRI Property Pros today!