Many landlords ask the question of whether they should rent their investment property out as a furnished or unfurnished unit. Landlords should rather ask what they want to achieve with this investment property. In most cases it’s simply a matter of opinion, neither option is right or wrong, it all depends on your expectations, approach and property type

Furnished investment properties can achieve a 25-30% higher rental rate than unfurnished properties.

Furnished rental properties

There are 3 types of rentals for furnished properties:

1.The New comer

This is usually someone with little or no furnishing of their own.  Consider a student, a divorcee, a new comer to the neighborhood.  Some one that might need a space for the immediate, but will be moving on to longer term rentals soon.

2. The professional

Consider the businessman, the expact, the contract worker.  These tenants are perfect for furnished rentals.  They tend to keep the property well kept as most work all the time.

3. The Traveler

This tenant market (holiday goers) tends to be season specific.  Making it super profitable if you can ensure your holiday season is fully booked, as the remaining part of the year might be slow.  It is also recommended that during the slow seasons that you drop your rental rate considerably.

Furnished properties attracts short term tenants. Giving the opportunity for big and quick money, but ensuring far more management, cleaning and time.

 

Pros of Furnished properties:

  • 25-30% Higher rental yield per month

Cons of Furnished properties:

  • Lower demand
  • Higher vacancy periods
  • Short term rentals
  • Repairs, Maintenance and Cleaning cost will be higher
  • Rental demands can be seasonal
  • Property Management fees can be higher due to increase in admin
  • Insurance rates can also be higher, due to the fast tenant cycle.

Despite the cons, furnished investment properties can still work out to be extremely lucrative, especially if the property is able to tap into a high-end corporate or tourist rental market.  For these gains to become reality you will have to work on your marketing plan.  Especially considering your time sensitive and target market specific property.  It is for this reason highly recommended that furnished investment properties are managed by skilled property management companies.

 

Unfurnished rental properties

Unfurnished properties are usually the investment to make. One of the biggest pros is a consistent cashflow, making it the saver financial option.

Pros of Unfurnished properties:

  • Higher demand
  • Lower vacancy periods
  • Long term Rentals
  • Better cashflow situation

Cons of Unfurnished properties:

  • Lower rental yield per month

 

Finding the best of both, Semi-furnished properties

By mixing the two options you can create yourself a semi-sweet centre between Furnished and Unfurnished rental properties.  Consider adding the big furnishings to your rental unit, allow the capability of a short term and long term tenant.

You will however need to be able to store some of the furnishings, especially when considering a long term tenant.  But allowing your tenants to be able to choose to keep your dishwasher and washing machine allows you to charge a small rental premium. While still allowing the freedom for your tenants to choose to bring their own bed set.

You should keep a few things in mind when considering this mix rental property option:

  • Choose simple and plain furnishings
  • Don’t buy the most expensive appliances, carpets, towels, bedding, est.
  • Don’t over clutter the space, only the main and large furnishings

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Written by Lizl Brink, Lizl is copywriter and designer based in Johannesburg, she is also a frequent contributor to the Mafadi blog, and as an Urban investor and rejuvenation shares a passion for urban regeneration, go check out her personal portfolio here
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