A furnished rental can bring in more rent than an unfurnished rental. For example, I used to manage a small apartment complex that had both furnished and unfurnished rentals. The unfurnished units rented for $750 a month. The furnished units rented for $850 a month. The furnished units were also more popular with new tenants and kept a 90 percent occupancy rate on average.
While a furnished rental is a good way to draw in tenants and earn more income, they also require more management. Here is what you need to do to increase profits, minimize problems, and reduce your risk of loss.
Selecting Furniture
When buying furniture for a rental unit, look for pieces that will appeal to the widest range of people and last through a lot of wear and tear. For example, the furnished units I managed had all of the basics in simple, modern designs. The modern style and neutral colors matched most tenants' personal belongings and appealed to nearly everyone.
We also bought pieces that cost more upfront, but were more likely to last several years. While it's tempting to buy the cheaper furniture, keep in mind that the cheap stuff may not hold up against wear and tear. You may find yourself paying to replace it all after a tenant moves out.
Setting Rent Rates
You can charge more rent for a furnished unit. However, to keep from losing tenants, your rent rates should be in line with those in your area. For example, most one bedroom apartments in the area of the apartment complex I managed rented for $700. We charged $50 more for our apartments as they were a bit larger and nicer than most in the area. We also added $100 a month for the convenience of having furniture. I wouldn't suggest going much higher than that as you may have a hard time finding renters willing to pay.
Writing the Lease
Most standard rental lease forms do not include a clause on furniture. When you rent a furnished apartment, you'll need to add the clause to the lease yourself. Make sure the lease states that the furniture is included in the security deposit and that the tenant will have to pay to repair or replace any furniture that was damaged beyond normal wear and tear. This clause will protect you financially should a tenant wreck the furniture while he is living in your rental.
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