As a landlord, managing your rental property includes making strategic decisions about the property and prospective renters. The right decision can maximize your potential rental income and return on investment. Similarly, a single wrong move or decision can ultimately deal with severe damage to your rental income and reputation. One such important decision you need to take as a landlord is whether to furnish an apartment or not. Making this crucial decision requires considerations of several key factors. So, should you consider furnishing a rental apartment? Does furnishing an apartment increase rental value? Let us find out
- Difference Between Furnished, Fully Furnished, and Semi-Furnished Apartments:
- Essential Furniture for Furnishing a Rental Property
- Pros of Furnishing a Rental Property
- Cons of Furnishing a Rental Property
- So, Does Furnishing an Apartment Really Increase the Rental Value?
Difference Between Furnished, Fully Furnished, and Semi-Furnished Apartments:
A fully furnished apartment is one that is equipped with all the required items of a household. It will contain all the furniture that a person or family would need to live comfortably. From sofa to cupboards to kitchen appliances, everything you require in your day-to-day life will be set and ready.
Fully Furnished Apartment
A fully furnished apartment is a more sophisticated apartment setting in which you have all the furniture and facilities like a furnished apartment including air-conditioning and water heater facilities. You can just pack your luggage, land in an apartment, and start living there.
A semi-furnished apartment, as the name sounds, will be furnished partially. It will be furnished with minimum basic amenities such as lights and fans. If you’re lucky, your landlord may even equip your apartment with sofas and some other furniture.
Also Read: Stamp duty reduction in Maharashtra: What does it mean for homebuyers?
Essential Furniture for Furnishing a Rental Property
- The living room of your apartment should have chairs or a sofa for resting, a table, and a lamp. You can also equip it with a coffee table and bookshelf.
- The bedroom of your apartment should have a single or double bed, a cupboard, a nightstand with a lamp, and perhaps a table or desk.
- The dining room of your apartment should have a dining table and chairs.
- The bathroom of your apartment should have a wastebasket, floor mat along with the necessary plumbing.
- The kitchen of your apartment should have all the necessary utensils along with the appliances such as a stove, gas cylinder, and perhaps a refrigerator and a chimney.
Pros of Furnishing a Rental Property
1. It Makes an Apartment Look More Finished
Furnishing an apartment makes it look more finished and adds more value without necessarily costing a lot. This also adds more to the selling factor as your potential tenants who are looking for an apartment for rent might be more convinced if it has the necessary furnishing. This might seal the deal for you.
2. Ideal for Short Term Rentals
One of the main advantages of furnishing an apartment is that you can attract tenants who are looking for short-term leases. A short-term lease is a rental agreement that lasts fewer months than the standard 12-month period. Students, people who are moving for jobs, and people who are looking to temporarily living in the area will look for a furnished apartment. Because a furnished apartment would have all the basic things they need in an apartment and they don’t have to spend more money on purchasing furniture. So, if you’re planning to rent out your apartment on a short-term basis, furnishing it would be to your advantage.
Also Read: Property Management Tools for COVID-19 Readiness
Cons of Furnishing a Rental Property
1. Tenants May not Want to Pay Extra
As a landlord, you would want to charge a higher security deposit and higher rent for a furnished apartment. Since you provide the furniture and other essentials to the tenants, you will be in a position to charge your tenants a higher amount for covering the cost of replacing or repairing the damaged furniture. But not all tenants would be willing to pay extra for the furnishings that you did. In most cases, tenants would prefer an unfurnished apartment to a furnished one because, at the end of the day, the rent amount is what matters for your tenants.
2. Constant Worry of Damages
Furnishing an apartment means that there is more potential for damage. This in turn means that there is a greater financial burden for you as a landlord if your tenant does not take care of the property and furnishings inside it. Moreover, you need to spend on repair and replacement on a timely basis due to normal wear and tear. Because furnishings eventually wear out, and as a landlord, you would be put in a position to replace it so that rental stays attractive. This puts an additional burden on you as a landlord.
3. Finding Tenants Might be Difficult
This is one of the important things you need to consider if you’re planning to furnish your apartment. As we mentioned before the furnished apartment attracts only a small pool of potential tenants- people who are looking for short stays. They are usually students and professionals who just moved to the city. They would only stay for shorter periods and you need to get back to the tedious process of finding your new tenant again. There might be tenants who are looking for furnished apartments with the normal rental lease, but this pool is very limited. Thus, with furnished apartments, finding tenants might be difficult.
4. Storage Costs
This is another basic issue that you might have to deal with if you furnish your apartment. You would have furnished your apartment in the hope of getting higher rents, but if the tenants wish to use their own furniture, you would have to remove your furniture from the apartment. This means you would have to spend on moving and storing the furniture. In some cases, the tenant might not like the furnishings that you did and the tenant would want to furnish it as per his taste. This not just costs you money but also makes the whole point of furnishing pointless in the first place.
Also Read: Important real estate Terms and definitions that every property investor should know
So, Does Furnishing an Apartment Really Increase the Rental Value?
For a two-bedroom, hall, kitchen apartment, the average cost of furnishing would come around INR 50,000 to INR 1,00,000. However, the cost of furnishing a rental property entirely depends upon the size of your apartment and how well you wish to furnish it. So, yes, furnishing an apartment will definitely allow you to raise your rent above the standard rent prices on a property. In most cities, the rent of furnished apartments is 20% – 30% more than un-furnished apartments. But the real question here is whether the tenants are willing to pay extra money for the furnishing that you did. In most cases, a potential tenant would choose between high rent and low rent instead of a furnished apartment and unfurnished apartment. Even though furnishing does increase the rental value, it would necessarily shorten the tenant pool.
Weighing the pros and cons, furnishing an apartment is not really advised unless you are planning to attract a specific type of audience. However, ultimately, choosing to rent out a furnished apartment or unfurnished apartment really depends on the target market. If your potential tenant is students and young professionals, furnishing your rental apartment might be good and if your potential tenant is couples and families who are looking to settle down, the unfurnished unit is advised.
Connect with Housewise team for Online Rental Agreement services