One of the most frequently asked questions by property investors is whether or not to furnish their rental properties. Typically, furnished rental properties fetch a higher rental price and so the assumption is often that this equates to a higher overall return.
However, the reality is somewhat more complicated, and a few factors need to be taken into account when making this consideration as both furnished and unfurnished rentals have their own respective advantages and disadvantages.
While furnished properties can yield up to 20% higher rentals than unfurnished properties, but the challenge can often lie in the type of tenant that is attracted to renting a furnished house or flat.
These renters are predominantly one of three types of people. The first type is someone who doesn’t own much of their own furniture yet, such as a student or a young professional. The second type is somebody who has just recently moved to a new area and is waiting for their own furniture to be shipped to their new place of residence, or they don’t plan to stay in the area long enough to need it such as business people in a new town working on a temporary or short-term contract. The third type is tourists or holidaymakers.
The universal trait between these types of renters is that they are often only looking for a temporary rental until they move onto a more permanent place of residence. Because of this, furnished rental properties often experience a significantly higher turnover of tenants and can be more at risk of unoccupied periods, as demand can fluctuate. In general, the South African property market has a higher demand for unfurnished rentals, which makes it considerably easier to source tenants, maintain a lower tenant turnover and lower risk of unoccupied periods.
In addition to these factors, there’s also more costs involved in renting a furnished property. It is a well-known fact that people are less meticulous when looking after other people’s property than their own, so one also needs to factor in things such as insurance costs, as well as the occasional repairs and relevant upkeep, such as cleaning costs for upholstery, carpets, curtains, etc.
Despite these challenges, a furnished rental property can still be a lucrative investment, especially if you are able to attract a steady occupancy within either the high-end tourism sector, or professional consultants, especially from abroad, who may be in the market for high-end rentals for the duration of their contracts.
If you’re still unable to decide which is a better option to suit your particular property, contact us here or email email@example.com and let one of our rental specialists advise you in the management of your rental property portfolio.