Whether or not to furnish a rental property is a very common question asked by investors. Furnished properties typically command higher rentals, and are often assumed to offer greater returns as a result.<\/p>\n
\u201cFurnished and unfurnished rental properties each have their own set of pros and cons,\u201d said Bill Rawson, chairman of the Rawson Property Group. \u201cWhether one is better than the other is often just a matter of opinion, but the landlord\u2019s expectations and approach to the management of his investment also play a big role.\u201d<\/p>\n
Rawson explains that, while furnished properties can achieve 15 \u2013 20% higher rentals than if they were unfurnished, they tend to attract a specific type of tenant which can bring some challenges into the picture.<\/p>\n
\u201cFurnished properties tend to be rented by one of three types of people,\u201d said Rawson.<\/p>\n
\u201cThe first is someone with very little in the way of furnishings of their own, like a student, a young professional or a recent divorcee. The second is someone who is living in a new area and is either waiting for their own furniture to arrive, or doesn\u2019t plan on being around long enough to need it, like a recent immigrant, a corporate expat or a contract worker. The third type of person is a holiday-maker, or long-stay tourist.\u201d<\/p>\n
As Rawson points out, the common thread between all these tenant types is the fact that they are often looking for a temporary place to stay, or to tide them over until a more permanent arrangement can be made.<\/p>\n
\u201cVery few people rent a furnished property over the long term,\u201d he said. \u201cMost of us are more comfortable having our own things when we settle into a more permanent home. As a result, furnished properties usually see a higher turnover of tenants, and have a higher risk of unoccupied periods, since demand can be seasonal and suitable tenants can\u2019t always be found right away.\u201d<\/p>\n
Higher management costs can also be required with furnished rental properties and insurance is sometimes higher than normal.<\/p>\n
\u201cTenants are renowned for being less fastidious with furniture and appliances that aren\u2019t their own,\u201d Rawson said. \u201cRepair and maintenance costs must be factored into expenses as well, along with cleaning costs for carpets, upholstery and curtains between tenancies.\u201d<\/p>\n
Despite these challenges, Rawson pointed out that properly-run furnished rental properties can be exceptionally lucrative, particularly if you manage to tap into a high-end corporate or tourist market. If you don\u2019t have the time or inclination to really invest in proper management or marketing, however, an unfurnished investment property might be a better choice for you.<\/p>\n
\u201cThere is a much higher demand for unfurnished rentals in South Africa, and its usually easier to source long-term tenants for these properties,\u201d said Rawson. \u201cThat means lower tenant turnover, less risk of unoccupied periods, and a more stable, reliable source of income \u2013 albeit a little lower than the furnished equivalent.\u201d<\/p>\n
There is, however, some middle ground to be found between furnished and unfurnished, and Rawson says that this can be the ideal solution for an easily lettable, profitable investment.<\/p>\n
\u201cInstalling a few key items and large appliances can be a great way to tap into elements of both furnished and unfurnished rentals,\u201d said Rawson. \u201cParticularly if you have the option to place some furniture in storage if the tenant prefers to bring their own. This way, you can charge a small premium on your rental without excluding yourself from the larger pool of tenants looking for an unfurnished property who may still be very keen to have access to a built-in stove, fridge, washing machine and tumble dryer, for example.\u201d<\/p>\n
In these cases, Rawson stressed the importance of keeping furnishings minimal and neutral in style, providing all the basics without overly cluttering the space. That way, tenants can add their own items and personal touches without feeling overwhelmed, and it\u2019s easy enough for you to remove and store any duplicates like beds and couches if necessary.<\/p>\n
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