Furnishing a rental property is a considerable expense. Should you spend the money or let your tenants furnish your unit? We’re liv.rent and we’re here to make everything about the rental process smoother for both landlords and tenants. If you’re on the fence about renting it furnished or unfurnished, then here’s our guide to what you should consider before you sign your next lease:
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What is a “furnished” apartment?
A furnished apartment has enough of the essential pieces and furnishings inside for people to live there comfortably without moving in their own furniture. For example, a bedroom would come with a bed, mattress, and perhaps a dresser and a nightstand.
Generally, furnished units attract people moving to the city for the first time, new renters, students, and newcomers to Canada.
Furnished vs unfurnished price difference
Check the price difference between furnished and unfurnished rentals in your area for your unit type.
At liv.rent, we publish monthly rent reports in Vancouver, Toronto, and Montreal. In August 2021 in Vancouver, a furnished one-bedroom got on average $223 more per month.
With this price difference, it could be worth it to furnish your unit. However, in Toronto in August 2021 the price difference was mitigable, meaning that it might be a good idea to wait on furnishing just yet.
Key differences between furnished and unfurnished tenancy agreements
If you decide to rent out a furnished suite, you may want to make some amendments to your standard lease agreement. These amendments would serve to protect your investment in the furnishings and fixtures in the suite.
For example, you could have a rule that all the furniture is to remain indoors and away from heating and ventilation systems.
It’s a good idea to include a list of the pieces of furniture in the unit and their condition. Then, you can set the expectation that everything remains in that condition. That way, a tenant may be liable for excessive wear and tear or damage to furniture.
You could also stipulate that they report back any damage, for example, if a table leg breaks, they have to let you know rather than throwing out the table without telling you.
However, for unfurnished units, these considerations are not necessary.
Benefits of renting a furnished unit
- You can demand higher rent. A well-furnished property rents for 25 to 75% more than an unfurnished property. The difference between an average furnished and unfurnished unit is around $400 – that’s an extra $4,800 a year! However, the higher the rent, the less likely the tenant is to stay long-term.
- More short-term rentals. If you are aiming to be in the short-term rental business (6-12 month leases), furnished units help attract more short-term rentals as renters don’t have to move furniture.
- Rent it out quicker. It may be rented more quickly as tenants can save on costs and time associated with furnishing. First-time renters will find furnished options less daunting when all they need is to bring their personal belongings.
- Inventory of furnishings. When the tenancy ends, you will have the option to use the furnishings for yourself or use them in your other rental properties.
- Tax deductions. You can deduct a percentage of the cost of goods for tax purposes. It’s a good idea to know exactly which tax deductions are available for you.
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Benefits of renting an unfurnished unit
- Longer tenancy. Tenants may stay longer as they’ve furnished the place to suit their needs and space. Furnished properties are typically rented as a temporary measure by travelling professionals or students who aren’t planning to stay for long, or people moving between houses and waiting for furniture to arrive from long-haul move. On the other hand, unfurnished units are geared towards tenants who want to make the space their own since they’ll be staying for a set period of time.
- Happier tenants. Tenants are typically happier when they get to design and customize their own space.
- No need for furniture insurance. You are not responsible for insuring their furniture or any other items they bring to the property.
- Avoid wear and tear concerns. You don’t need to worry about wear and tear on your belongings.
- No carrying costs. Carrying costs can be transferred to the tenant whereas when the unit is furnished, the expectation is that the higher rent includes all utilities, cable/internet etc.
- Longer leases, less tenant turnover. One-year leases are most common for unfurnished properties whereas you’d likely be negotiating shorter terms for furnished apartments.
- Less management involved. Unlike furnished units which generally experience higher tenant turnover, unfurnished properties require less management.
Should you rent furnished or unfurnished?
Consideration 1: Target market and location
Typically, smaller properties, near the downtown core and amenities, attract younger, more mobile tenants who are more likely to enjoy the convenience of a furnished apartment. They are also easier to furnish inexpensively.
Landlords with larger apartments or houses could benefit from leaving them unfurnished. Tenants for these types of units are likely to be older and may have families. They’re also more likely to have accumulated furniture over the years.
Do your due diligence and evaluate your market, including knowing the latest rental averages, before making a decision.
Consideration 2: Additional costs
While a furnished unit has the potential to fetch a much higher market rental rate than an unfurnished one, there are additional upfront costs involved that you’d have to recuperate first before you see a significant profit.
Also, as tenants damage or create expected wear and tear, you will also have to update or replace pieces and fixtures as you go. Landlords can within reason use part of a damage deposit to replace some items and can write others off at tax time.
Whether you rent it furnished or unfurnished, using liv.rent to streamline your rental process saves you time and money. Learn more about how to get started with liv.rent today.