As a Charlotte property manager, you likely know that an investment property is a great way to make a passive income. However, did you know that there are more than 2,600 renters each day in the US?
Not only are there thousands of new potential tenants for you to target every day, but trends are shifting more towards short-term rentals versus rentals lasting longer than three or four years. So, should you furnish your rental property accordingly?
For many property managers, this is a difficult question with no easy answer. However, it’s a decision you will have to make when you put your property on the rental market. There are pros and cons to both furnished and unfurnished rentals.
Let’s walk you through each of those so you can make the best decision when offering homes for rent in Charlotte, NC.
What Is a Furnished Rental Property?
First, let’s start by ensuring we’re all working with the same definition of what a furnished rental property is. A furnished rental property is a residence that includes furniture and other household items in addition to the basics like plumbing, appliances, and a roof.
The level of furnishing can vary greatly, from simply providing a bed and dresser to fully outfitting the kitchen, living room, and bedrooms.
A fully furnished rental property is a house or apartment that comes with all the furniture and appliances you need to live comfortably. This can include things like:
- Washing machine
Fully furnished rentals are a great option for attracting tenants who don't want to worry about buying or moving furniture into their new home. They can also be a good option for those in rental markets that are popular for short-term renters.
The cost of fully outfitting an apartment is obviously much higher than the cost of managing and renting an unfurnished unit. However, in the long run, it can still be a cost-effective option for some property managers.
Semi-furnished rental properties are becoming increasingly popular, especially in big cities where space is at a premium. But what exactly is a semi-furnished rental property?
Semi-furnished generally means that the property comes with some essential furniture, such as a bed, couch, and dining table. However, the furnishings don’t usually include items like pots and pans, dishes, or other household items.
Semi-furnished rental properties can be a great option for tenants who want the flexibility to furnish their place without having to start from scratch. It can also be a cost-effective way for managers to provide furnished rentals without having to invest in a full suite of furniture.
In addition, semi-furnished rental properties may be more budget-friendly for beginner property managers than fully furnished properties.
Pros & Cons of a Furnished Rental Property
Choosing whether to rent out a furnished or unfurnished rental property can be a tough decision for property managers. There are pros and cons to both furnished and unfurnished rentals that you should take into consideration before making your final decision.
Some of the pros of renting out a furnished rental include:
- The renter’s furniture will not wear down your carpet or floors
- It is often easier to find tenants for a furnished rental
- Furnished rentals can be rented for a higher price than unfurnished rentals
- Tenants in furnished rentals tend to stay longer than tenants in unfurnished rentals
Cons of renting out a furnished rental may include:
- The extra cost of purchasing furniture for the rental
- You may have to replace furniture more often depending on the wear and tear over time
- Different tenants have different tastes in furniture, so you may not please everyone
- If something breaks in the furniture, the tenant may try to hold you responsible even if it is not your fault
No matter which route you choose, taking the time to weigh out the pros and cons of each option can help make your decision easier. Ultimately, you can charge more for rent with a furnished property.
Currently, the average monthly rent in Charlotte, NC is $1,639. However, when you perform a quick search on Zillow you find that the average monthly rent for furnished properties is well over $2,200 for similar properties.
Reasons to Furnish Your Rental Property
Still not sure about furnishing your rental? From increasing your monthly rent to making it easier to find tenants, there are several reasons why furnishing your rental property can be a wise decision. Aside from the pros and cons listed above, let’s break down each of these factors.
Attract More Renters
When it comes to renting out your property, you want to make it as attractive as possible to potential renters. After all, the more people who are interested in your rental, the more likely you are to find a tenant quickly and rent to them at a higher price.
One way to make your rental stand out from the rest is to offer a furnished unit. With a furnished rental, you can remove most of the hassles of moving in for some tenants. They can save on moving expenses and purchasing large furniture.
This way, you’re able to offer them a move-in ready home. Additionally, furnished apartments often attract an upscale clientele who are willing to pay premium prices for comfort and added value.
Appeal to Short-Term & Mid-Term Workers
There are several reasons why people may prefer a shorter lease term when renting an apartment. For example, many people in today's workforce are not in one place for very long.
With digital nomads on the rise, more people are working in one city for a few months and then moving on to the next place. As a result, they may not want to sign a long-term lease. A shorter lease term gives them the flexibility to move if needed.
When you furnish your property, you’re attracting these remote workers who are looking for all of the comforts of home without the hassle that comes with furnishing a new place each time they move.
These are the type of people who are most likely to appreciate the convenience and comfort of a fully furnished home. In addition, they are also more likely to take care of their property and treat it with respect because they’re used to moving around a lot.
Fill Vacancies Faster
One of the benefits of furnishing your rental property is that you can fill vacancies faster. This is because potential renters looking for shorter leases are more likely to be interested in renting straight away rather than spending time trying to find the “perfect” fit.
Not only that, but by having furniture in the unit, former tenants can move out much faster. They don't have to worry about getting all of their furniture out of the unit and can focus on packing up their personal belongings and moving on with their life.
To some, this might sound unstable, but for today’s digital nomad-focused workers, this is a massive benefit. Either way, it allows you to fill vacancies faster and get new tenants moving in as quickly as possible. And we all know that the sooner you fill vacancies, the more rental income you receive.
Charge Higher Rent Prices
If you’re using your investment property to make a passive income off rent then offering a furnished rental can be a great idea. You can charge a lot more for furnished properties than you can for unfurnished ones.
However, keep in mind that the costs of furnishing a space can also be high. You’ll need to consider these additional costs when calculating the rental price.
When calculating how much to charge for a furnished property, try to think about the cost of replacing the furniture.
No matter how careful tenants are, it's impossible to prevent wear and tear on furniture. You can project how long each item will last and how much it will cost to replace it. Use these figures to come up with your rental price.
Charge Higher Security Deposit
Charging a higher security deposit is one way to offset the higher risks associated with renting your property. In North Carolina, a security deposit can be up to twice the monthly rental value when you rent a unit for longer than two months.
This deposit covers not only your rental property but also your furniture, so it's important to keep this in mind when setting the price. Instead of charging the standard one or one-half months' rent, protect yourself by requiring a higher security deposit.
Deduct the Cost of Furniture on Your Taxes
When you furnish a rental unit, the furniture is part of the cost of doing business. This means that you may be able to deduct the cost of the furniture on your taxes as a business asset or expense.
By labeling the furniture as a business asset, you should be able to deduct the cost over time through depreciation. This means that you can deduct a portion of the cost each year until the furniture is eventually retired.
Typically, deducting the cost of the furniture as an expense allows you to deduct the full cost in the year you purchase it. However, this deduction is only available if you itemize deductions on your tax return.
The important thing here, however, is to save your receipts and consult a tax professional to make sure you are taking the correct deductions.
What to Consider When Furnishing a Rental Property
Thinking that furnishing your rental property is right for you? Here are a few things to keep in mind before you go out and furnish an entire home.
Consider the Local Market
When furnishing a rental property, it's important to consider the local market. What type of furniture do renters in your area expect?
If you're catering to a high-end market, you'll need to provide furniture that is suited to their needs. On the other hand, if you're catering to a budget-conscious market, you can get by with less expensive furniture.
It's also important to consider the size of your rental property. If you have a small space, you'll need to be careful not to overcrowd it with furniture. In general, it's best to keep things simple and use furniture that serves multiple purposes.
Think about the renters in your market and what they need out of furniture, too. If you’re catering to a lot of digital nomads, for example, you’ll need to have a great office space.
Consider the Type of Furniture
This goes hand in hand with the point above, but it's important to consider the type of furniture you'll need.
For example, if you're renting a studio apartment, you'll need to be careful about choosing pieces that won't make the space feel cramped. Conversely, if you're renting a larger space, you'll have more freedom to choose furniture that fits the style of your potential tenants.
In either case, it's important to select pieces that are durable and easy to clean. This is especially true for upholstered furniture, which can be difficult to keep in good condition over time.
With these factors in mind, you'll be able to choose the right furniture for your rental property.
Consider the Cleaning Fees
If you're not careful, you could easily end up spending more on cleaning than you ever made in rent. To avoid this, it's important to choose furniture that is easy to clean and doesn't hold onto dirt and dust.
Here are a few things to keep in mind when choosing furniture for your rental property when it comes to cleaning.
Consider the Fabric
Some fabrics are more difficult to clean than others. If you're not planning on hiring a professional cleaner, it's best to stay away from delicate fabrics like silk or wool. Opt for something that can be easily wiped down, such as leather or vinyl.
Consider the Color
Darker colors are more likely to show stains than lighter colors. If you're looking for something that will be easy to keep clean, stick with white or light-colored furniture.
Consider the Style
Some styles of furniture are harder to clean than others. For example, furniture with lots of nooks and crannies is more likely to collect dust and dirt than something with a simple, streamlined design.
When in doubt, opt for something with a minimalistic design. IKEA furniture is a great example of furniture that is durable yet minimalistic.
Get Help With Charlotte Property Management
So, should you furnish your rental property? It’s ultimately up to you. However, it’s worth taking a look at the current Charlotte market to see if renters are interested in furnished properties and, if so, how you can cater to them.
Regardless of whether you are renting a furnished or unfurnished property, it pays to have help. At Bottom Line Property Management, we offer a variety of services that can help you increase your bottom line.
Click here to learn more about our property management services and to book a call with one of our experts.