If you’re looking for a way to maximize the possible passive income of renting out your investment property, there are a few key tools and strategies to consider. Raising the rent, charging monthly pet fees and sub-dividing utilities are all common strategies property owners use to make the most of their investments.
There is, however, another strategy landowners can use to maximize their potential passive income: Furnishing the rental. This is an easy, cost-effective way to improve the value of your property and command higher rents. Offering a furnished rental makes your property appealing to a more affluent, mobile demographic that’s willing and able to pay for the convenience of a pre-furnished living space.
The basics of a furnished property
Fully furnished rentals need to include all of the appliances, furniture and accessories necessary to live comfortably. This includes couches, chairs, tables and more. While the degree to which you furnish your property will largely depend on personal preference, it’s important to realize that the easier it is for a tenant to move into your rental property, the higher the price you can command.
Of course, furnished properties may not be desirable in certain markets. Rural or outer suburban real estate markets may not have the same demand for furnished apartments present in dense, urban areas, where modern professionals congregate.
A little furniture goes a long way
While it’s not suitable for every property or every market, furnishing your rental units makes a lot of sense for investors operating in dense, highly populated markets with strong business centers nearby. Take a look at what furniture can do for your rental—and, more importantly, your investment prospects:
•Improved rental income: One of the primary benefits associated with furnishing a rental property is that you will immediately be able to command higher rents. People are willing to pay for the convenience of living in a space that’s already been decorated and prepared for them. Furniture represents a one-time investment that will increase your operating income.
•Higher deposits and fees: Not only will furniture allow you to command higher monthly rental rates, you can also leverage a furnished apartment to charge a number of one-time fees and deposits. For instance, you can charge a deposit that will cover the value of the furniture in the unit. Similarly, you can charge residents a cleaning fee for the furniture once they move in or out.
•Desirable tenant pool: Investing in furnishings for your apartment allows access to a highly desirable tenant pool. Many people looking for furnished apartments are single, urban professionals, which means you won’t have to worry about micro-managing the unit during their stay at your rental.
•Flexible renting styles: Another key benefit of a furnished rental is that it allows you to change the type of rental you’re offering, depending on the season and demand. For instance, you could rent out the unit as a short-term vacation rental in the summer time, and convert it to a monthly corporate housing unit during the winter.
How to furnish a rental
The goal of a fully furnished rental property is to create a space in which tenants can effortlessly move-in. They shouldn’t have to worry about hauling anything more than their suitcases and one or two boxes into the unit—you should have already taken care of the heavy lifting.
With that said, there are a few rules of thumb to follow when furnishing a rental property, whether it be strictly for short-term vacation rentals or for longer-term residency:
•Know your target: When investing in furnishings and decorations for your rental abode, carefully consider your target demographic. For instance, if you’re aiming to appeal to urban professionals, pick out furniture with a sleek, neutral appearance that wouldn’t look out of place in a corporate office lobby.
•Establish a budget: Before you go furniture shopping, you’ll need to establish a budget outlining the amount of money you’re willing to spend on furnishing your property. You should strive to find furniture that offers an excellent value; it’s important, however, to never install furnishings that look ‘cheap,’ as this will reduce the perceived value of your rental.
•Create a style: Create a consistent design aesthetic and stick with it. Whether you’re looking to mimic the appearance of a creative loft or an extended-stay hotel, purchase furniture and decorations that match each other and work together to create a consistent, easy-to-identify aesthetic.
•Don’t forget lighting: Many buildings lack enough pre-installed, overhead lighting to live comfortably. You should carefully identify areas in the unit that aren’t well-lit, and purchase enough lamps to light the space evenly and cleanly. Lamps are one of the first things people buy when moving into a new apartment, and the goal of renting a furnished unit is to forgo that expense and inconvenience.
•Don’t forget the details: After furnishing and decorating your apartment, consider anything else you may need to live in the unit comfortably yourself. For instance, purchasing a single cutlery set can go a long way toward making the tenant feel more comfortable when they move into the property. The same goes for something like a Wi-Fi router.
•Make it homey: Another key thing to remember is the unit should, at the end of the day, feel like a home. While it’s important to use a professional aesthetic, putting a few hand-made touches throughout the property will make the tenants feel more comfortable spending lots of time in the space. This could encompass everything from art on the walls to window treatments and more.
Renting out a fully furnished property can provide you with a significant competitive advantage over other real estate investors operating in your area. And, it allows you access to a highly desirable market segment that all but guarantees you a better return on your investment.
If you’re looking for ways to improve your return on investment on your strategically located, urban property, consider picking up some furniture!