Renting a furnished house sounds enticing at first. You don’t have to worry about moving your furniture or packing up your utensils in the kitchen, but the reality is much different.
In Calgary, furnished properties are a lucrative market when the market is good. However, when the market is in a downturn, furnished rentals are typically the last to rent.
Why is that?
Furnished rentals are typically rented to people who are only in town for a short time period; long enough where a hotel is not feasible but short enough that they aren’t ready to invest in furniture or other home furnishings. This is where the furnished market thrives. It typically has an average lease of around 6 months, however contracts get extended and terminated and thus fluctuates the length of stay for most tenants.
There are a lot of factors that go into choosing whether to rent your home furnished or unfurnished. Depending on the market, your level of investment, input and willingness to invest will all come into play into making the right decision for your home.
As a homeowner, a furnished property affects you in multiple ways:
Furnished properties are treated like extended hotels. This means that something as small as a burnt light bulb, requires replacement and it is at your cost to replace it.
If a tenant stays for an extended period of time and then vacates (the standard being 6 months), potential for new bedding, pillows, towels and other linens should be replaced – at the owner’s cost.
Most people don’t want to use someone else’s pillow that has been used for 6+ months. Bed sheets can be professionally cleaned and determined if they’re reusable, but over time, they need to be replaced – this is also at the owner’s cost.
Providing the tenant with well kept, if not new kitchen utensils is also important. Over time, people will accumulate a fork here, a cup there – which for our own home is fine, but when converting your home into a furnished rental, people want an experience similar to a hotel, which means some investment into ensuring everything matches and presents well. Utilities are also included in the monthly rent. This mean that you are paying for the cable, internet, heat, water, electricity and sewer. These costs are accounted for in the monthly rent, but in a downturn market, you’ll likely be losing money to provide these for your tenant.
As an unfurnished property, the initial investment in the property is much lower as you do not need worry about any furnishings that a furnished house would. As you are not providing furnishings or utilities however, the rental property will be advertised for less per month.
In a good economic market with a well maintained, furnished home, an owner can generate up to 25% more gross income than if the exact same home was unfurnished. Remember though, that a furnished home has more expenses which draws down that net income. In a poor market, sometimes furnished properties will have to rent at the same price as an unfurnished property and if you then take into account the extra utilities, you will decrease your net income even more than you expected.
At the end of the day, a furnished property can potentially generate a substantially more rental income, provided you’ve presented it well and it provides everything a tenant could want and need. However, in a poor market, you are often losing more money on the property than you would if it was rented as an unfurnished home.
Here at CIR REALTY Property Management, we can help you make this decision. Offering current market trends and comparative market analysis, we can help you understand which option is best for you now and in the future.