Furnished or Unfurnished Rental Properties?

In Perth, most properties are rented unfurnished but could leasing out your investment property furnished be a better financial decision?

We explore the pros and cons of furnished and unfurnished rentals and explore when it might make more sense to go against the flow and lease yours fully, or partly, furnished.

The difference between furnished and unfurnished properties

The obvious difference between the two property types is that one comes with furniture and even furnishings (such as cushions, bedspreads, crockery and cutlery), while the other does not.

That doesn’t necessarily mean, however, that unfurnished properties are stripped bare.

In the Perth rental market, most investors will choose to leave major appliances in their property even if they’re renting it unfurnished – such as a built-in dishwasher or front loader washing machines in new apartments. They’ll also usually leave light fittings, curtains or blinds and other important fittings. However, in an unfurnished property, the tenant will usually be responsible for providing furniture, non-fixed appliances (such as fridges or freezers) and other non-major items.

When do people choose to rent furnished properties?

As we already mentioned, most properties in Perth are leased unfurnished but there are times when a landlord may make an informed decision to furnish theirs before putting it on the market.

Furnished properties tend to appeal to people only staying in Perth for a short period of time, or those looking for a temporary home before moving into a more permanent one. For example, they might be an executive who’s working in the Perth CBD for a one or two year contract. Alternatively, they may be a family who are rebuilding and need temporary housing, or who are waiting to move into a newly purchased home or long-term lease. First-time renters are sometimes attracted to furnished accommodation as they don’t have to invest in fitting it out.

For these tenants, it’s usually not worth their while fitting out a property when they won’t be there for long, so they’re often prepared to pay more to lease one fully furnished.

Tenants in these categories are often looking for inner-city properties close to the action, as well as those close to major working institutions and those in holiday areas (think Airbnb). But for most areas in Perth, the number of tenants seeking furnished properties will be much lower than the number seeking unfurnished ones.

The benefits of renting out a furnished property

The main benefit of renting out a furnished property is usually that you can charge more weekly rent. Just how much more depends on the laws of supply and demand (more on that later). So the gap between the rent you’ll achieve from an unfurnished versus a furnished apartment is likely to be much higher in premium areas where professionals and tourists want to stay.

Another benefit of furnishing properties is that they can attract significant tax breaks because you may be able to deduct the depreciation that’s associated with the cost of furnishing your home. Your accountant should be able to give you more information on this.

The disadvantages of renting out a furnished property

That said, there are some downsides that come with leasing out a furnished property too.

Despite commanding a higher rent, your property is likely to be vacant more frequently than if it was unfurnished. That’s because most people who rent a property furnished only want it for a specific purpose and a shorter period of time.

Your ability to rent your property is also likely to be more influenced by market conditions, or the laws of supply and demand too. For instance, the COVID-19 pandemic has reduced the flow of tourists and temporary workers into Perth, even if this has been offset by an increase in Australians returning from overseas, who make up another market for furnished properties.

It’s also likely to be a more volatile investment, with the amount of rent you can charge rising and falling depending on the time of year, as well as how much competition is out there in the marketplace.

Finally, there are also higher start-up costs associated with having to buy everything for the property. And, given that you may be supplying everything from beds and linen through to kitchen cutlery, there’s a lot more that can go wrong too.

In short, even if your property does lend itself to a furnished rental market, renting a property furnished tends to be a higher risk/higher reward approach to leasing.

Case study: switching from furnished to unfurnished in COVID-19

One of our long term clients, a savvy property investor, leased out a Fremantle townhouse on a fully furnished, short-term basis through AirBNB. Because it was in Fremantle, the property appealed strongly to tourists and others looking for somewhere to stay while visiting Perth. When COVID-19 struck, the owner made the decision to lease it on a long-term basis. Read more about the case study here.

Want more?

If you’d like to know more about renting properties furnished or unfurnished in the current Perth property market, get in touch.

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