The pros and cons of furnishing a property to rent
An investment property should be your ticket to a better life. It gives you this by providing the cash flow to pay for the things you want to do. If you hire a good investment property manager to do all the day-to-day work for you, you’ll have the time to do those things, too. The question to answer is how to maximise your rental income profits.
One solution may be to let your BTL property furnished. You should be able to charge a higher rent, but will that rent cover the cost? What about wear and tear?
In this article, you’ll learn about the pros and cons of furnishing your buy-to-let property.
What are the rules concerning furnished properties?
Before we look at the pros and cons of furnishing your buy-to-let investment, it’s worth noting the rules about furniture, fixtures and fittings in an investment property. For example:
- First, there are no rules about the furnishing that you must offer. If you want, you could offer your property to let with absolutely no furnishings. Not even a washing machine. The thing is, if you do so, you are severely limiting your market.
- Second, any items you do provide in the property must pass certain standards. For example, soft furnishings must comply with fire safety regulations.
- Third, any electrical goods that you supply must be PAT tested and certified as safe. Similarly, gas appliances must be tested and certified under the gas safety regulations.
So, you don’t have to furnish your investment property, but if you do, you must comply with rules and regulations that cover items rented to a tenant.
Why would you want to let a property furnished?
There are two main reasons to let a property furnished:
- To appeal to a wider market – and therefore rent more easily
- To maximise your rental income – and therefore increase your profits
Why do furnished properties appeal to a wider market?
When you let a property as furnished, don’t get blinded by the notion that you’ll only attract students and benefits claimants. We’re seeing a big increase in the numbers and variety of people that want to rent furnished homes because of this:
- Saves tenants money
- Saves tenants time
- Makes moving in and out easier and less costly
- Offers greater flexibility
Furnished homes appeal to young professionals, the corporate market, families, divorcees, and more.
How much more rent is a furnished property worth?
Typically, a fully furnished property might achieve a rental income of around 15% to 20% more than an unfurnished property. That’s a hefty uptick, and very valuable to you as a property investor. This extra rental income could:
- Cover the cost of professional property management, and more
- Transform a negative cash flow property into a positive cash flow property
- Help to build up a reserve fund far quicker – very valuable protection against emergencies or unforeseen void periods: one of the reasons I don’t stress about void periods
- Simply boost your pre-tax rental profits by 15% to 20%
What about damage and maintenance?
One of the drawbacks of letting a property furnished is the perception that tenants won’t look after your furniture properly; that they won’t treat it as their own. This is a risk, but only if you let to one of the five tenant types every landlord should avoid. Always vet applicants properly and you won’t get:
- Roger with all the rights, who thinks the world owes him a living
- Unemployed Eamon, who’ll knock you for the rent and then disappear
- Shaun the serial tenant, no more than a scam artist searching free tenant sites for his next victim
- The Filthy family, whose father pulls apart engines on the kitchen table and whose kids think walls are artists’ easels
- Del Boy, who always pays his rent but fills your property with knocked-off gear
In our experience, these types of tenants can easily be avoided. Good tenants will look after your property as if it is their own home. They’ll be proud to invite guests into a good-looking, well-kept, and tidy home. Consequently, the damage will be accidental and maintenance costs will be minimal.
In addition, you should:
- Make sure that your landlord insurance covers accidental damage to your property and furniture
- Ensure that your tenancy agreement includes clauses stating how the tenant should treat your property, and how the tenant’s deposit will be treated in the case of damage
- Make sure you keep property inventories and inspect the property regularly (a good investment property manager will do this for you)
What if the tenant doesn’t want all the furniture?
It may be that a tenant would prefer, say, their own bed rather than one supplied by you. Entirely understandable. For investors with a portfolio of properties, this is rarely a big issue. You simply move furniture not needed in one property to another where the tenant requires it. If you don’t have this facility, simply put the item into storage until it is needed.
What about wear and tear?
Having got good tenants and dealt with the issue of damage to your property, the next disadvantage of letting furnished is the issue of wear and tear. Nothing lasts forever. Over time, furniture and white goods will depreciate and you’ll need to replace them. This is a cost that you will need to factor into your calculations.
Ensuring items of furniture are maintained properly will help them last longer. All such maintenance costs are tax deductible. The longer they last, the more profit you get from them.
By letting a property furnished, you could:
- Appeal to a wider market
- Increase your rental income
- Reduce void periods
- Increase your cash flow
However, when deciding whether to let furnished or unfurnished, you must ensure that all items comply with regulatory requirements, and consider the financial side of the equation. You’ll need to calculate the cost to you and weigh it up against the extra rental income you could gain.
We’ve noticed the positive impact that quality furnishings have on rental income. So, we’ve added a range of furniture packs and design options to make your property stand out from the crowd. To discuss how furnishing your buy-to-let property might impact your rental profits, contact Gladfish at +44 207 923 6100.
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