The main reason to consider furnishing an investment property would be to increase the annual income return.
A furnished property can provide these additional returns above the standard rent, as tenants are willing to pay more for the convenience of moving into a furnished property and possibly being able to rent for a shorter-term.
While furnished properties can attract long-term tenants they are more often than not rented to tenants looking for a shorter-term tenancy, such as three months. Less than three months is often considered a holiday rental.
Short-term tenancies, allow owners the flexibility of moving prices with the market at different times of the year.
Furnished properties are the perfect solution for longer-term vacationers, students, expatriates working from overseas on contracts, or people going through a relationship breakdown. Short stays might be the perfect solution for property investors who also want to use the property as a vacation home.
There can be fewer tenants wanting to rent a furnished property. However, there are often less furnished properties, which can increase the demand and rent achievable.
Depreciation is always a good advantage. Other tax advantages may depend on the type of dwelling it is (separate house or an apartment in a managed complex) and your tax advisor will need to advise you on these. Furniture can typically be written off at a reasonably rapid rate or often immediately depending on the purchase price.
Renting a furnished apartment means you’re going to have to buy all of the furniture and it will need to be updated from time to time, repaired and cleaned, all of which is an ongoing cost. To reduce replacement costs you could consider providing the furniture only without kitchen utensils appliances and bed linen.
As furnished properties are often considered more short-term rentals, it will result in increased let fees and advertising costs and there could be greater vacancy periods with the higher turnover in tenancies.
Reference: PPM Group Newsletter