Sydney’s population is booming with more than 2 million more people expected to move to the harbour city over the next two decades, according to a recently released government report. This will bring the city’s population to nearly 6.5 million people. While the suburbs are still dotted with terraced and detached houses, the city centre is seeing the development of several new tall apartment towers that are transforming the skyline. This opens up a whole new world of opportunities for property investors. Will they choose the conventional route of renting unfurnished 12-month apartment tenancies, or will they choose the furnished rental model?
What are Furnished Properties?
A furnished property will generally have more than just furniture. It will also include rugs, scatter cushions for beds and couches, linens, artwork for the walls, centrepieces, mirrors, cutlery, dining sets, cookware, stemware, knife block, bookshelf and other accessories. Appliances should include a standard refrigerator, stove, dishwasher, washing machine, dryer and air conditioner. A barbeque and patio furniture can be nice amenities as well. For entertainment, consider including an LCD TV, DVD player, Foxtel cable and stereo. Choose good quality items that will last longer, need less maintenance and need to be replaced less frequently. Good quality furnishings may cost more upfront, but the investment will more than pay for itself over the life of the furnishings.
Considering the Target Market
Not all markets are equally amenable to the furnished rental model. Families, older tenants and those who are fairly established likely have their own belongings and prefer to rent an unfurnished property. However, furnished properties are hot commodities for the corporate market, young urbanites, families on holiday, students and those who are new to the city. They appreciate the convenience of a fully furnished unit that is completely outfitted with all the comforts of home that is ready to go with no effort on their part, and they are prepared to pay top dollar for that convenience.
A multi-storey detached home might be tempting to a large family but is far less likely to appeal to a professional who is travelling on contract. A small CBD unit can be convenient to business travellers while a beachfront condo may be far more attractive to travellers on holiday. The new apartment towers currently being built are likely to attract corporate travellers, students and young urbanites looking for luxury accommodations, including furnished accommodations.
Weighing the Pros and Cons
One of the biggest pros of renting a fully furnished property is financial. Rents can be 50 to 100 percent higher than the rent of unfurnished apartments, and property owners can have access to more lucrative markets, including corporate and tourism markets. This can, in turn, lead to a higher-quality tenant. Business and corporate travellers often prefer to avoid spending months in a cramped hotel room and are willing to pay a premium for the luxury of a furnished property.
Furnished properties also tend to have a broad appeal, drawing tenants from local universities, tourism bureaus and the competitive short lets markets. Shorter term leases allow for more flexibility in pricing, and owners can adjust the rents to keep up with the market. These short-term leases also make it easy for property owners to regularly inspect their properties and make any necessary repairs or updates.
Finally, furnished properties offer unique tax benefits. Furniture and other property can often be written off as a depreciating asset. Lower priced items can typically be written off fairly quickly while the most expensive items are written off over their estimated lifespan. Consulting a tax advisor can ensure property owners are getting the most for their money within the parameters of the tax laws.
Although the pros of renting a property furnished are extensive, the cons should be considered before any property investor makes a final decision. When a property is furnished, there can be damage not just to the property but also to the furnishings, including the furniture, the appliances, the electronics and the artwork. The cost of replacing these items can be high even with insurance. Deposits might be higher, which can be off-putting for some tenants. Additionally, property owners must use careful planning and staging when furnishing their properties to ensure their properties are tastefully and attractively furnished rather than crowded and cluttered.
Making an Educated Choice
Many property investors are not aware of the many options available to them. The unfurnished model is so common that they automatically choose it, but it might not be in their best financial interests. In fact, the furnished property model is becoming increasingly popular as renters seek convenience and ease-of-movement and are willing to pay extra for it. By comparing all available options, investors can find the one that best fits their needs. A property manager can be an invaluable ally who can help property investors get the most out of their investments.