Good morning, Everyone!
Here is your weekly 5 Minute Friday, highlighting a couple of the questions or issues posed to me this week.
From Terri: Does offering a house fully furnished change how much I can charge for rent?
My Response: Terri–Thanks for the question. The short answer is Yes, it can and will change how much you can charge for rent…..or rather, a better answer is it can and will change how much you will earn in rental revenue. Here’s some things to consider when choosing to offer a property fully furnished or completely unfurnished:
- What is the actual market for furnished rentals in your area? In most market segments across the country, especially in SFR’s (single family residences), furnished rental demand is a small sliver of the total demand. As in less than 10%. So, if you have a 4 bedroom home, if you offer it only fully furnished, you’ve just eliminated 90% of your prospective tenant base from even considering the property since they will have an entire household full of furniture themselves they can’t use and would thus have to pay to store. Not a good idea, per se…..Most of the time I’m asked this question from landlords, it’s not out of an attempt to maximize gross potential rents but rather an attempt at simply avoiding having to move all their stuff out of a house they personally live in. Convenience and rental rates are not linked, folks.
- If the answer to #1 is indeed that there is a large demand for furnished rentals in your area, then yes, you could possibly charge more for rent, but market dynamics still come into play here. Be careful to not overshoot your rental price compared to other furnished rentals. In addition, plan on some contingency costs related to replacement of the furnishings from reasonable wear and tear and accidental breakage. These costs can, and often do, eat into profit margins easily.
- Finally, be sure to communicate with your insurance agent to have adequate insurance coverage on these pieces of personal property in a furnished rental. The last thing you want to find out is replacement cost is not covered should there be a fire or flood and you didn’t have appropriate coverage for the items!
As always, please let me know about your questions or issues on Twitter @DanBaldini and put #5MinuteFriday in the tweet so I can search for it or by posting a Reply Comment on these posts.
Here’s to your pursuit of your Financial Freedom!
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