Key Takeaways
- Furnished rentals can increase income but require more investment: They often command higher rent, lease faster in some markets, and appeal to remote workers and short-term tenants, but they come with upfront furnishing costs and ongoing maintenance.
- Unfurnished rentals offer greater stability: They typically attract long-term tenants, resulting in lower turnover, fewer management responsibilities, and more consistent passive income.
- Location and target tenant matter most: Furnished rentals perform best near business hubs, tourist destinations, universities, and medical centers, while suburban markets often favor unfurnished homes.
- Choose based on your investment goals: Landlords should weigh potential rental income against costs, maintenance, and turnover to decide whether a furnished or unfurnished rental best fits their long-term strategy.
There are many important strategic choices that landlords will be faced with in preparing their property for rent, which will have an impact on profitability as well as demand for leasing by tenants and responsibilities for property management over the long term.
One of the major factors to consider when renting out a property is whether to make it available as a furnished property or an unfurnished property.
Some landlords believe that if they offer a house that is furnished, this will lead to higher income, while some landlords choose to minimize the amount of complexity associated with the process of renting out their property and insist on renting their property out unfurnished.
In this article, we at McCaw Property Management will discuss the main factors that should be considered when a landlord is making the decision to rent their house furnished or not. This will include profitability, efforts from potential tenants to rent the property, operational risk for the landlord, and investment impact in the long-term.
How Do You Define a Furnished Rental Property?
When Texas landlords decide if furnishing is worth it, it’s important to know what tenants are looking for when they rent a property furnished. Many things could be considered essential living items, which means that most furnished homes allow a tenant to move right in with little or no additional purchases.
Examples of common items found in a furnished home are beds and mattresses, sofas and seating, dining table and chairs, dressers/storage, appliances, TV stand, basic kitchenware, and curtains and blinds.
Benefits of Renting a Furnished Home
Increased Potential to Earn More Rent
Landlords can charge higher rents for a furnished home because of the convenience that comes with renting a furnished home. A tenant who rents a furnished home is usually paying rent with the expectation of having flexibility, simplicity, lower cost of moving, and the ability to commence tenancy immediately.
Speedy Lease
Urban living, business districts and areas with a high relocation volume may have a higher speed for leasing apartments that are furnished. Furnished rental homes stand out more among renting or leasing options where the ease of renting or leasing a home is a priority.
Additionally, furnished homes may help mitigate the impact of time spent by residents without a home while limiting vacancy periods.
Flexibility with Short Lease Terms
Furnished home rental units may allow landlords to be more flexible with lease length. Short-term furnished home rental units give landlords the ability to frequently change their pricing to match market conditions and also pivot if necessary. Flexible rental units tend to produce higher profits for landlords during high demand periods.
Significant Demand by Remote Workers
As more companies permit employees to work remotely, demand has increased for furnished home rentals. Remote workers or individuals taking job assignments temporarily prefer a furnished rental home for the established livability of the home with access to a work area and other associated amenities.
Disadvantages of Furnished Rentals
Cost to Furnish
The initial investment in furnishing a home is generally substantial. For landlords to prepare their furnished rentals, they may need to purchase:
- Living room furniture.
- Bedroom furniture.
- Dining room furniture.
- Appliances and decorative items.
Avoid poor-quality furniture. This can lead to easier wear and tear and discomfort for the tenant. Find a balance when shopping for furniture. There’s no need to spend too much on expensive furniture, either. Look for good quality options that use reliable materials.
Increased Wear and Tear
A furnished unit will experience consistent use from various tenants, so additional replacement expenses are incurred.
In addition to walls and flooring, landlords of furnished rental properties will also have to deal with damages such as stains, broken items, scratches, mattress wear, and upholstery damage.
More Maintenance Responsibility
A furnished rental requires additional management responsibilities. A landlord is responsible for the integrity of the furniture, appliances, electronics, decor elements, and will experience a significant increase in operational complexity.
Higher Turnover Rates
The average term of a furnished rental is shorter than that of an unfurnished rental. This means a higher turnover rate. Therefore, landlords of furnished rentals will experience higher vacancy rates, increased cleaning and advertising costs, and greater overall administrative burden.
Situations that Favor Furnished Rentals
The following are circumstances where furnished rentals are more popular in Dallas:
- Proximity to large employers: Typically, the corporate relocation market has a high demand for furnished rentals.
- Vacation/seasonal tourist area: In this type of market, furnished houses generally offer a better chance than traditional long-term leases.
- Proximity to university/medical centers: Temporary scholars/healthcare workers are another segment of the market that would benefit from furnished units.
Location is the most significant deciding point. What works in one area may not work well in another.
When Unfurnished Rentals are More Desirable
Usually, renters are going to be looking to rent unfurnished rentals when they are planning on being a long-term renter. Suburban rentals will usually attract those seeking to establish permanence and will bring their own furniture, decor, and houseware.
Unfurnished rentals typically provide longer tenancy periods than furnished properties, leading to lower turnover rates. Additionally, managing unfurnished units is generally much easier than managing furnished ones.
Bottom Line
Renting unfurnished units would be an ideal solution for landlords who are looking for long-term passive income and want to keep things simple. The choice of whether to rent a home furnished will ultimately depend on what type of tenant you want to target.
In creating a strategy for renting homes, landlords should consider their overall objectives. By determining both the financial trade-offs and the level of the landlord’s responsibility for property maintenance, you can make an informed decision. Let McCaw Property Management help you.