Should I rent my house furnished or unfurnished?

There are good reasons why the vast majority of rental properties are unfurnished. However, there may be times when it can it make sense to offer a furnished rental.

At Momentum Wealth, a common question we are asked is ‘should I rent my house furnished or unfurnished?’. We usually advise clients against renting out their investment property furnished.

That said, there are arguments for and against fully furnished versus unfurnished properties, and certain situations may call for an alternative approach.

Let’s look at what’s involved with both…

What’s the difference between furnished and unfurnished rentals?

First things first, it’s important to clarify exactly what we mean by ‘furnished’ versus ‘unfurnished’ rental properties.

Some rental properties come with appliances such as a dishwasher or washing machine already installed. However, this isn’t what we would classify as ‘fully furnished.’

What we are really talking about in a ‘furnished’ rental property is one where all the major furniture that a tenant is likely to need is in place. This generally includes items such as sofas, beds, dining settings and televisions.

In short, it’s a property that the tenant can walk into and live in right away.

Price difference between furnished and unfurnished rentals

Furnished rentals will usually achieve a higher rental price than unfurnished rental properties. However, the important thing to keep in mind is the cost of additional outlay associated with furnishing and replacing items in the property.

Our experience is that this rent gap can become negligible when you take these costs into account.

And as we’ll see, there are a number of drawbacks that can offset this price benefit altogether.

Is it better to rent out furnished or unfurnished?

While there are some unique instances that may call for a furnished approach, there can be considerable disadvantages to offering your investment property with furniture already included.

1 – A smaller pool of tenants

A lot of tenants already have their own furniture from previous rentals, many of whom don’t want to pay for the additional cost of storage.

As a result, offering a fully furnished property can leave you with a limited pool of tenants to choose from. This generally means there is less competition for your property and can increase your risk of longer vacancy periods.

When furnished properties do attract tenants, many tend to be seeking shorter-term rental accommodation; for instance, they may be temporarily relocating for work on a short-term contract.

This can lead to higher turnover and more frequent re-leasing fees, as well as increased wear and tear due to the movement of people in and out of the property

2 – Increased cost and ongoing expenses

While furnished rental properties do in some instances command higher rent, they can also come with a significant outlay for property owners when it comes to purchasing the furniture and appliances, as well as the ongoing maintenance and repairs.

As the landlord, it is your responsibility to replace any items that become faulty or worn out due to fair wear and tear. The upshot is that you could face higher repair and maintenance bills, which can more than outweigh any uplift in asking rent.

3 – Increased insurance premiums

When a rental property is unfurnished, it is usually up to the tenant to take out contents’ insurance for their own belongings.

But when an investor furnishes the property, the burden of insuring the contents falls to you as the landlord. This means an uptick in annual insurance premiums when you offer a rental property fully furnished – another cost you’ll need to factor into your overall returns.

When you might consider furnishing an investment property

While we generally recommend unfurnished rather than furnished rental properties, there are always exceptions to the rule.

There can be circumstances when you may wish to consider offering your rental property fully furnished – as long as you are prepared to wear the additional costs and risk management.

These circumstances can include:

1 – Locations where short-term accommodation is highly sought-after

In resource-based towns such as WA’s Port Hedland, a reasonably high proportion of the workforce are fly in/fly out workers. Many of these workers – and the mining companies themselves, are looking for fully furnished, short-term accommodation.

In this instance, it can make logical and financial sense to rent out your property furnished. However, you still need to consider the potential for higher vacancy rates in both your acquisition and management strategy.

2 – If you are renting out your home for a limited period

Occasionally, we receive requests from homeowners who are temporarily relocating interstate or internationally for work purposes.

These clients want to rent out their homes for the duration of their secondment to help with their cashflow, but without the costs of storing furniture. In these situations, renting out a property furnished can be the preferred option – provided, of course, there is enough demand from tenants in that area.

With the exception of unique circumstances such as the above, it is usually better to offer an unfurnished rather than furnished rental property. They generally attract a wider array of tenants, incur fewer ongoing costs, and can result in a lower vacancy rate – three benefits that are very attractive to most investors.