All Topics / Help Needed! / To Furnish or Not to Furnish – that is the ?????
I currently own a 1974 strata titled townhouse which is in a good area and is only 5km out of the city. At the moment, it needs a bit of work done on it but I was wondering whether when I’ve finished doing it up whether It’s better to rent it out with furniture included in the deal or to leave it bare?
I know that –
(1) If I rent it out with furniture included then I’ll be able to command a higher rent but will the increased rent finish up paying for the furniture.
(2) As an investment property, I’ll be able to claim the costs associated with the furniture depreciation against my taxable income.
(3) Some (although not all) renters don’t look after their own property let alone – other peoples property.
Also, should I fit it out with new (for tax purposes) or secondhand furniture?
I’m sure these same queries must have passed through every investors mind over the years and that someone must have done the figures on the exercise.
Any help would be greatly appreciated.
Regards – Moolah [dead2]
Furnishing a rental property would greatly restrict the market of potential tenants. Most people would have their own furniture-I imagine. So what happens if you buy all this furniture and then can’t rent it furnished? You may have to move the furniture out into storage.
Actually this could work well, you could store all of these new applicances in your home. You would still claim depreciation etc as they were pruchased for your investment property!
Terryw
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North Sydney
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Terry is right, unless…it is normal in your area to have furnished properties.
I am not sure how much more you could ask for rent if furnished as opposed to not. I have a few furnished properties but they are all furnished over there, so it is expected.
Also, some of the best and most expensive real estate are rented furnished, to corporate executives.Replacement needs for furniture….I can only tell you that in one year I replaced one lounge one fridge and one mattress cover out of 6 flats that have all 10 year old stuff in them, replacement due to old age.
Unless the furniture needs replacing because of normal wear and tear, you can claim damage by tenants on your landlord insurance.
Make sure you make a detailed list for depreciation.
New or old? I suppose it depends on the quality of your property. An old holiday place, or mining town worker’s cottage may be ok with second hand stuff, a nice new home in a nice suburb may pay to have new stuff and charge a bit more rent.
Terry has a point regarding tenant that has his own furniture. To move house content and store it is expensive unless you do it yourself and have a big shed for it.
_________________________________________
“What you want in your life occasionally shows up…
what you must have… always does.”
……….– Doug FirebaughMay God Prosper you.[biggrin]
Marc…http://www.chosen4u.com/?aceCheck with managing agents in the area your investment property is in as to whether is is worthwhile to furnish it. I have 4 properties which included furniture and whitegoods when purchased. They have never been untenanted and many properties in the same area are furnished. At the same time, some furniture and white goods have had to be replaced due to age, eg a couple of clothes dryers, fridges, a dining suite and lounge suite. You can buy presentable furniture to suit the property, area and situation without overspending.
Anna
Thanks Terryw (I like the suggestion you made in your last paragraph), Marc (may God Prosper you too)and Anna for your responses.
Can anyone throw any rough feasibility figures at any proposals to furnish the townhouse i.e. what sort of extra rent could I expect from a furnished townhouse vs a non-furnished townhouse etc?
Moolah [juggle] [winking]
Hi Moolah,
You do need to consider the tenant market in yoru area and what you will do if the new tenants ever wanted an unfurnished place.
We ‘target’ the international student market and fully furnished our place for around $8K three years ago. We didn’t get to the linen, crockery, cooking gear and cutlery stage but were prepared to do so if necessary.
After furnishing our place our rent went from $220/week to $300/week and any subsequent vacancies have only been 1/2 days at most.
Our unit is one of the few furnished ones in the complex and as most international students do not travel with their furnishing we are ahead of the pack (so to speak)
Derek
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0409 882 958
Property investment advice and researched property in quality locations available.Hi Moolah when my wife and i first got into real estate investing a mentor we had used to suggest using a $40 investment policy instead of second guessing the market. By this he meant run an ad in the paper (which at that time used to cost about $40)and see what sort of response you get to what you are trying to sell.I would run two ads one for furnished and one for unfurnished see what response you get and then you will know whether it is fesiable and profitable to rent your property out furnished.Remember there is no black and white answer as to wheter to furnish or not you are best to let the market tell you what it wants. Hope this helps Regards Beanie
Live every day like its your last
Thanks Derek & Beanie for your responses.
Moolah [biggrin] (Should really be [angry2] for Mr Burns – shouldn’t it? Oh well – I’m afraid I’m not a very good actor)
I have a furnished flat in an inner suburb in a capital city and the rent is so much higher $200 per week vs $140 unfurnished.
I also target international students and aim for a 12 month lease Jan – Jan.
The problem I’ve had is with a less than progressive PM (and at times I wouldn’t hesitate throwing the term useless in) They prefer set and forget traditional tennants and methods of advertising.
One year when they ignored my instructions it sat vacant for 8 weeks and cost me $500 in advertising. The next year as I requested they placed free ads on the university website and it was gone within a week.
I have old furniture purchased at garage sales. Noone has complained and it hasn’t caused problems yet. I do intend to sell the property within the next year so have never looked at is a 10 year plan.
Good luck – don’t let it be too hard because the extra return is worth it.
Cheers
Kate
Hi,
We have a set of four units that were furnished when we bought them three years ago. Until now we have left them furnished but are moving toward taking the furniture out, as I think where they are, it lowers the quality of tenant that we get and it is also much easier for tenants to move on if they don’t have many chattels, creating more days/weeks when a unit is untenanted, and costing another letting fee. Re whitegoods – never any problems with fridges, but heaps with washing machines packing it in. Yes, we do receive a few extra dollars in rent, but I’m not sure that it has been worth it.
However, it depends on your market I guess.
Cheers,
JKMTThanks Kate and JKMT for your responses
Moolah
ASSUMING that there IS a demand for furnished rental places in your area, I would look at it like this:
Apply the good old 11 second rule –
If furnishing you place would cost you say, $5000 for new/good 2nd hand furniture, and you could generate and extra $40 a week in rent:
$40 per week, divided by 2, mulitiplied by 1000 = $20,000. Which is higher much higher than the initial outlay of $5000.
These figures would give you a Cash on Cash return of 41.6% if you payed cash for the furniture upfront, before even taking into account depreciation at tax time. Which seems pretty good to me.
Even factoring in another $500 a year for replacing or repairing items of furniture, that still gives a cash on cash return of 31% before tax considerations.~jo~
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