Rental properties are a popular investment option that requires the landlord to make strategic decisions about the property and prospective renters. To maximize the potential rental income and return on investment, landlords consider factors such as the location of the property, the size, the appropriate rental price, and more. One very important decision to make is whether to lease a furnished or unfurnished apartment. Making this decision requires consideration of several key factors. This article shares information about factors such as price difference, lease agreement considerations, essential furniture, and offering the option of furnished or unfurnished.
Price Difference Between Furnished and Unfurnished Apartments
In exchange for the renter’s convenience and financial savings, landlords renting furnished apartments can charge higher prices. The exact price difference varies depending on the location of the property and the duration of the lease term. Renters can increase the price more significantly for short-term rentals because the demand for a furnished unit is greater than for renters looking for a long-term lease. Even for longer-term rentals, the price increase averages at least 15% to 20%. If you are open to short-term rentals, offering a furnished apartment can be very lucrative in the long run.
Related Financial Considerations
One thing to take into consideration when determining the benefit of furnishing an apartment is the cost associated with maintaining or replacing the furniture if damaged. There is an inevitable value depreciation from daily wear and tear, which typically happens slower when renting to one individual and faster when renting to families or a group of roommates. There is also the risk of more serious, even irreparable, damage to furniture, such as broken lamps, cracked mirrors, or damaged electronics. Luckily for landlords, there are several precautions they can take to offset these costs.
To account for routine wear and tear, many landlords file a depreciable asset deduction on their taxes. This provides an opportunity to recover some of the costs associated with replacing or updating the furniture. For broken or more seriously damaged items, landlords may withhold a portion of the renter’s security deposit. Repair costs in excess of the security deposit can sometimes be recovered through a renter’s insurance policy. Asking for a larger security deposit or requiring a renter’s insurance policy as a lease term are two options for ensuring you can recover the cost of replacing damaged furniture.
Essential Furniture to Provide
Renters looking for a furnished apartment will expect the essentials in each room and will appreciate nonessential items as well. Essential bedroom furniture includes a bed, dresser, nightstand, and a lamp if there is no overhead lighting. Nonessential but desired items include an iron, a mirror, hangers, and possibly a wall hanging for a warm effect. Essential dining and living room furniture includes a table and chairs, a couch, and an end table or coffee table. A television, dishes, kitchen linens, or living room lamps are nonessential but appreciated. Bathroom linens are also nonessential but appreciated in a furnished rental apartment.
Individuals catering to a luxury rental market can increase renter interest by including a dishwasher, washer/dryer, exercise equipment, and decorative accents. Rugs, curtains, and wall decor also add to the warmth of a rental unit, especially for short-term renters who might be living away from their permanent home for that time. In addition to the basic kitchen appliances included in all units, landlords can appeal to luxury renters through more specific items, such as a Keurig machine, wine and cocktail glasses, or serveware for hosting. Although typically not included, landlords can consider including a television or other electronics.
Lease Agreement Considerations
There are several stipulations that landlords of furnished rental units might add to the lease agreement to ensure that the decision to furnish remains a financially beneficial one. One such stipulation is a no pets policy. Pets increase the likelihood of stains, tears, or other furniture damage and thus are more likely to be prohibited in furnished rental units than unfurnished. Another possible stipulation is related to the placement of the furniture. Landlords may request that furniture remain indoors at all times and that furniture be positioned a certain distance from the HVAC systems.
Additionally, landlords may include a list of all furnished items, a description of their condition and the expectations for repair or replacement if damaged in the lease agreement. A pre-occupancy walk-through or photographs of the items at the time of the lease start are two options for ensuring both parties agree with the furniture descriptions at the onset of the lease. There may also be language about the expected timeline for reporting or repairing items damaged during the course of the lease. This can help prevent a pileup of repairs or replacements at the end of a lease term.
Offering the Apartment Furnished or Unfurnished
To broaden their pool of prospective renters, some landlords choose to list the apartment as available furnished or unfurnished. Doing so requires the landlord to store furniture when renters choose unfurnished, which comes with additional costs. Although less desirable in the short term, a landlord can often recover that money through increased rental prices for tenants that choose furnished in the future. If you are unsure whether you prefer to rent your unit furnished or unfurnished, this could be a good way to test it out.
Just as the market of prospective renters is diverse, so too are the options available to landlords as it relates to furnishing or not furnishing their apartments. The information provided about rental price, lease considerations, and other related factors can help inform your approach to renting your unit or units. Regardless of your choice, you can feel confident knowing you are approaching the process equipped with helpful information about the benefits of renting furnished or unfurnished.
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