2007 Winter

Furnished verses Unfurnished
Kim Phuong
The question many owners of
investment property ask themselves
is whether they should
furnish their property. There
are both positive and negative
sides of furnishing an investment property. Before
making the decision it is important to consider the
difference and discuss it with your Managing Agent
who would have a better knowledge of the market
where your property is situated.
The first thing investors should think about is
whether there is a demand for furnished properties
in the area. Some parts of Sydney such as Milsons
Point have a higher demand for furnished properties
opposed to areas such as Camperdown which
has more of a demand for unfurnished properties.
This is due to the demographic status of people the
area attracts.
This then leads to the question of what type of tenants
do you want to attract. Even though there are
higher numbers of unfurnished properties in the
rental market, you will find that there are certain
sectors of the market who will want furnished properties.
These people are more likely to want the
property for a specific term such as students, people
who are in between homes e.g. waiting for their
own place to be renovated, people who have been
contracted for work or corporate tenants who will
only use the property during the week for work but
then return home for the weekend. These are tenants
who are willing to or are able to pay a higher
rent for the convenience of not having to purchase
all the items that are required for everyday living.
As an established agency in the lower north shore
area we find that a total of 22.5% of our managements
are furnished properties and are usually limited
to studios and one to two bedroom properties.
The main reason for this is that larger properties
are usually sought by families who have their own
belongings and furniture gathered throughout the
years. Families tend to require a lease for a longer
term as they prefer stability and will not like the disruption
of constantly moving especially if they have
children.
The advantage of about having furniture is that the
landlord can show the property in a unique and different
light from other similar properties on the market.
It is the best way to highlight the better features
of the property or downplay those that are not so
great such as the amount of space the property
has. If the property is small there are ways in
which space saving furniture can transform the
property, when people are inspecting an empty
property, they may struggle to visualize all their
belongings fitting in the property of that size.
There are instances where people fall in love with
the way the property is set up but on the other
hand people have different ideas on what is considered
more to their taste and may not take the
property as they do not like the furniture at all. Unfortunately
the landlord cannot change this unless
they are willing to pay for the costs of either having
the furniture moved into storage or purchasing
new furniture which is very unlikely. The key point
is the furniture must be purchased carefully so that
it suites most tastes in that segment of the market.
The cost associated with furnishing a property can
be expensive. The initial outlay of purchasing everything
from furniture down to kitchenware can
amount into the thousands. Then later there is the
issue of whether the furniture may look outdated
compared to the newer properties that come into
the market. If this is so then it will mean that the
property will stay
empty for a longer
period of time and
the owner may have
to resort to updating
the furniture to keep
up with the trends of
people.
The other costly aspect
is that the owner is fully responsible for the
repair or replacement of every item provided to the
tenant.
Some owners have anxiety over whether there are
costs of replacing items that the tenant has damaged.
Even though larger bonds are collected, in
some cases the bond will not cover the total cost
so it falls on the owner to have the property made
ready for the next tenants. The benefit of furnishing
property is that it can be leased out for a
higher rent than an unfurnished property. It also
allows the owner to claim a tax depreciation allowance
to cover for fair wear and tear.
Regardless of whether you decide to furnish or to
leave the property unfurnished my advice to all
investors is that landlord’s insurance should be
taken out on the property to safeguard your investment
from all the unsuspected losses that you
may incur.
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