Property managers looking out for the greatest return on investment for landlords (and a higher management fee) may ask themselves: is it better to rent out a furnished or unfurnished property?
Before you decide, let's break down the pros and cons of a furnished rental property.
Con: Upfront costs
Fully furnished rental properties come equipped with essential furnishings, including but not limited to a couch, bed, dresser, and table and chairs.
Furnishing a one-bedroom unit typically costs between $7,000 and $20,000, depending on the size of the rooms and the number and quality of the furniture.
The good news is that it’s possible to fully furnish a rental property without breaking the bank. Most major department stores and discount chains carry reasonably-priced furniture suitable for any budget.
Pro: Higher rent
That initial outlay can pay off when you consider the 10-20% more rent that could be charged per month for a furnished unit.
In June, furnished one-bedroom units in Downtown Toronto cost $402 more per month than unfurnished units. In Scarborough, they cost $238 more. In Oakville, furnished one-bedrooms are $94 more than unfurnished, and in Niagara Falls, they’re $54 more. That's a potential extra $648 to $4,824 a year.
By providing furniture and appliances, property managers can attract tenants who are willing to pay a premium for the convenience and cost savings of not having to buy their own.
Con: Increased risk of property damage
Furniture will inevitably get scratched up and need maintenance over time, and repairs and replacements can be costly. When offering a furnished property, work out the expected lifespan of the furniture and include the cost of replacement items in your long-term financial planning.
Not all maintenance is your responsibility, though. In Ontario, the Landlord and Tenant Board states that any damage to the rental property that is not the result of normal wear and tear must be repaired or paid for by the tenant.
Property managers can further reduce the risk of potential damage by carefully screening for qualified tenants who will take care of the property and the furnishings inside it.
Pro: Enhanced marketability
If you're still debating whether it's better to rent out furnished or unfurnished, a rental property listing will stand out more if it includes appealing photos of the furnished space.
Visual representation of a well-designed and furnished unit can attract more attention from prospective tenants, which could increase the number of applicants you get – and the rent you can sustainably charge.
Pro or con: Target market
Furnished rentals are particularly appealing to more mobile tenants such as students or individuals relocating for work. Since these tenants typically don’t stay in one place for too long, they often prefer the convenience of a ready-to-live-in space.
This type of renter may be in high supply in certain areas, such as university towns. And depending on the season, market demand could be high enough to minimize vacancy periods.
Still, furnished rentals may not be ideal if you’re looking for more long-term tenants – families tend to have their own furniture.
Making the choice: is it better to rent out furnished or unfurnished?
The answer to that question depends on the location, market demand, and preferences of the property manager and owner – but after reading this article, you’re hopefully a step closer to making the right choice for your business.
Or you could diversify your portfolio with both furnished and unfurnished rentals and have the best of both worlds!