Factors to consider when furnishing your rental property
Should you furnish your rental property or not? There are benefits to each of these routes, but you’ll want to properly assess all factors before you make the decision. If you are a new real estate investor or if you are thinking about upgrading your current properties, here are some things to consider before you decide to furnish it.
Benefits to furnishing a rental property
Ultimately, if you can make significantly more profit on a furnished rental property, you should consider it. Here are the three main benefits of choosing this option:
1. Charge More Rent
Since you are providing extra value and convenience for your tenants, you can charge more for rent. On average, most charge 20-30% more than if the property was unfurnished. Over time, this extra collected rent means more money in your pocket.
2. Fill Vacancies Quicker
When your property is ‘move-in’ or ‘suitcase’ ready, tenants will need less time to prepare for their move. They save time and energy, meaning you can potentially have a tenant signed and paying rent much quicker than an unfurnished home.
3. Tax Deductions
In Canada, furniture and equipment are considered capital expenses in rental properties. This means a portion of these costs can be claimed on your taxes. Be sure to check with your federal and provincial tax rules to know exactly what applies to you and your property.
Questions to ask before you furnish your rental property
While there are financial benefits to furnishing, you want to make sure that this option attracts the right tenants and makes sense for the market. Here are 3 questions to ask yourself when getting started.
1. Who is your ideal tenant?
With location and price point in mind, who will likely rent out your property? University student? Family with young kids? Retired senior couple? Consider your target audience and the likelihood of them having furniture they will use. For example, an exchange student might require that they rent a furnished home vs. a senior couple that has accumulated furniture over the years.
2. What is your budget?
Do you plan on buying everything brand new? Or are you going to use some personal furniture or buy second hand? Either way, make sure you create a reasonable budget. If you decide to use personal items in the rental property, don’t use anything with sentimental value. Remember, anything in the home could be damaged or stolen, so keep that in mind when furnishing.
3. What design style are you going for?
Modern and trendy? Classic and traditional? Regardless, neutral is always best so that you can attract a variety of tenants while allowing space for them to add their personal style. The furnishing choices should also be suitable for the ideal tenant that you previously identified as well.
Furnishing your rental property is a big decision but it could lead to long term financial success. Need help managing your investment property? Get in touch with us at Cornerstone today!