Home > Is it worth turning your house into a Furnished Rental?
Real Estate Investing

Is it worth turning your house into a Furnished Rental?

by Editor | ezLandlordForms
furnished rental home, furnished rental house, rules for renting furnished property, renting a furnished home, renting a furnished property,

One of the fastest-growing trends in real estate is returning a higher profit by turning a property into a furnished short-term rental, typically either as a corporate rental (30 days or more) or vacation rental (less than 30 days). We personally have turned two of our houses into furnished rental home aimed at the corporate rental client for off-season and vacation rentals for peak season. While for us, furnished rentals have been a blessing, there have been a lot of consequences to this decision. The key is deciding if this makes sense for you and your situation.

What to Consider When Determining Whether to Offer a Furnished Rental Home?

What are the local laws regarding short-term furnished rental house?

Amidst the growing popularity of sites such as Airbnb, VRBO, and FlipKey, many municipalities have issued ordinances setting minimum times for rentals, changing tax laws for short-term landlords, and even banning short-term rentals outright. The first thing to do before turning your property into a furnished rental home is to research the rules where you live. In many areas, these additional restrictions only apply if your rental is shorter than a certain amount of time. While the length can vary greatly, 30 days is a common restriction. Once you know your local laws you can decide whether it is still worth it to turn your house into a furnished rental house and what your rental length will be.

How do you ensure that your tenants take good care of your furnished rental house?

Furnished rental homes are gaining popularity worldwide as a convenient option for tenants. They eliminate the hassle of bringing furniture and allow for quick move-ins. However, it’s crucial to establish clear expectations from the beginning to ensure that your tenants take proper care of your property.

Start by outlining and enforcing the rules that you expect them to follow throughout their stay. Consider having a comprehensive contract that includes restrictions on making major changes or causing damage, having visitors, or smoking in the rental home. This helps set boundaries and protects your investment.

In addition to setting rules, it’s essential to prioritize regular maintenance and enforce safety protocols to create a comfortable living environment. Furthermore, fostering open lines of communication with your tenants is vital. This not only shows that you value their feedback and concerns but also allows you to address any issues promptly.

By implementing these strategies, you can establish clear expectations, protect your property, and ensure that both you and your tenants enjoy a comfortable living experience.

How do you go about finding tenants for your furnished rental home?

Furnished rental homes are a great way to get your property into the hands of tenants quickly and easily. The first step in finding tenants is advertising your rental properties in places where potential renters will see them. This may include placing an ad on Craigslist, posting fliers around town, or making an announcement at local stores. You can also spread the word to friends and family so they know your property is available. After that, you can start hosting open houses or showing the property to interested parties. Taking time to review applications, talking with previous landlords, and conducting background checks on any prospective tenants will go a long way in helping you find the perfect people for your furnished rental home.

Do you have the time to manage frequent move-ins and move-outs?

Our furnished rentals are great, but they certainly are not as easy as our traditional rentals. Our traditional rentals use an 18-page lease with a one-year minimum term. Our tenants assume most of the responsibility of basic maintenance, such as changing filters, completing landscaping, and supplying their own washer and dryer. This means that other than collecting the rent (direct deposit, of course) and answering the phone when major items break, the houses are very much like an annuity. One tenant who recently called about a broken garage door sensor hadn’t contacted us for any issues over the preceding 18 months.

On the other hand, my furnished rentals are the opposite. In the case of daily rentals, I must manage a constant flow of inquiries in order to figure out availability and fill openings. The inconveniences can be minor or major, such as helping the tenant find the wifi password, even if that is at midnight on Thanksgiving night after you have spent a long day traveling! While you are always on call for all tenants, your furnished rental house tenants will be insisting on creature comforts, like can openers or cutting boards, that your traditional tenants won’t. Even if your rental is for a month of longer, this problem can be more frequent than with your traditional renters.

To be honest, when your tenant is paying $200 a night or $3000-5,000 a month, this is to be expected. People simply expect a higher standard. The question is whether the net income is worth it to you for the amount of time you must put in?

What types of renters are typically interested in a furnished rental property?

When it comes to renting a property, there’s a diverse array of tenants with varying preferences and needs. Understanding the types of renters who are typically drawn to furnished rental home can help landlords tailor their marketing strategies and optimize their rental offerings.

  1. Corporate Professionals: Executives, consultants, and employees on short-term assignments often seek furnished rentals for convenience and flexibility. These tenants appreciate fully-equipped spaces that alleviate the hassle of furnishing a temporary home.
  2. Relocating Individuals and Families: People in the midst of a relocation, whether for work or personal reasons, often opt for furnished rental homes to ease the transition period. Having everything they need from day one can simplify the moving process.
  3. Students: College students and those pursuing higher education often prefer furnished accommodations, especially if they’re moving from out of town or abroad. Furnished rental home offer convenience and eliminate the need to purchase and transport furniture.
  4. Travelers and Vacationers: Tourists, digital nomads, and individuals seeking short-term stays may gravitate towards furnished rental homes for the comfort and amenities they provide, offering a more homely experience compared to hotels.
  5. Seniors: Empty nesters or retirees downsizing from larger homes may find furnished rentals appealing due to reduced maintenance and the ability to maintain a comfortable lifestyle without the burden of managing furniture.

By catering to the needs of these diverse tenant demographics, landlords can attract a steady stream of renters and maximize the occupancy and profitability of their furnished rental properties.

What are your expenses?

Another thing to keep in mind is that furnished rentals are all-inclusive. That means you supply cable, internet, trash, water, gas, electric, landscaping, and pool service (if applicable). For my vacation rentals, I provide linens (which need to be replaced often as they become worn out), toilet paper, paper towels, starter laundry detergent, dishwasher soap, shampoo, conditioner, and the like, which can add up quickly. For guests who are renting for at least three months, you don’t need to feel obligated to provide such personal care items. It is also easier to put limits on the utilities.

Be sure to anticipate all costs. The monthly electric bill for one of our vacation rentals varied from $450 to over $800. A similar phenomenon occurred with our water bill and paper goods costs. The reality is that when guests are not paying for utilities, their usage can go way up and vary wildly, depending upon the renters and the time of year.

Are there any legal considerations or regulations to keep in mind when renting out a furnished property?

Renting out a furnished property can be a lucrative venture, but it’s crucial for landlords to be well-versed in the legal considerations and regulations that come with it. Here are some key points to keep in mind when operating a furnished rental home:

  1. Landlord-Tenant Laws: Familiarize yourself with local landlord-tenant laws and regulations, which may vary from one jurisdiction to another. These laws typically cover areas such as lease agreements, security deposits, rent increases, and eviction procedures.
  2. Rental Agreements: Ensure you have a comprehensive rental agreement that outlines the terms and conditions of the tenancy, including rent amount, payment schedule, maintenance responsibilities, and any restrictions on the use of the property.
  3. Security Deposits: Understand the rules governing security deposits in your area, including the maximum amount allowed and the procedures for handling and refunding deposits at the end of the tenancy.
  4. Fair Housing Laws: Familiarize yourself with fair housing laws, which prohibit discrimination against tenants based on protected characteristics such as race, religion, gender, disability, and familial status.
  5. Insurance Coverage: Consider obtaining landlord insurance or a specialized furnished rental insurance policy to protect your investment against potential risks such as property damage, liability claims, and loss of rental income.
  6. Safety and Building Codes: Ensure that your furnished rental home complies with local safety regulations and building codes, including requirements for smoke detectors, carbon monoxide detectors, and other safety features.

By staying informed and adhering to applicable laws and regulations, landlords can minimize risks and ensure a smooth and compliant operation of their furnished rental properties.

Are you a great cleaner or do you have a great cleaner available?

If you are doing frequent turnovers – many of them same day – you will either always need to be available to do the cleaning, or you need to have a great cleaning crew that is reliable and fast. We went through four cleaning crews until we found our current cleaner, who does an amazing job.

Can you or a handyman be on call?

Corporate or vacation guests will treat your house like a hotel, so it is critical to fix problems right away. Negative reviews on social media can do great harm to your business. For example, if a smoke detector starts going off, the renter will not stop to charge the battery, they will call you right away and want you there ten minutes ago. This means that you are never off the clock, even when calls come in late at night or early in the morning. If you have a great handyman to help share the burden, remember that these costs will also add up.

How much will it cost to furnish the home?

When thinking about a furnished rental home, don’t forget the furniture! This includes kitchen appliances, pots and pans, dishes, linens, and everything else you might find in a home or hotel suite. Keep in mind that the physical furniture – tables, chairs, beds – may not be the most expensive party. I quickly realized it was not the furniture, but everything else that adds up. And all of these items, from the top to the bottom of your rental, will wear out and have to be replaced.

What is your seasonal availability and can it support the house?

While peak season should always be profitable for you, the key is knowing your downtime and being able to survive it. If the winter months will be slow in your area, you not only need to cover your costs during the summer, but you’ll need to make enough to cover the slow months, too. Be realistic when you think about your expected profits and the conditions in your region.

What is your true take-home profit and is it worth all the work?

This is the biggest and most important question: What are you truly bringing home after expenses? Is it worth it compared to all of the work? Do not let the big numbers that you could charge for a short-term, or even nightly, rental blind you to the actual costs and time that are required.

The Pros and Cons of Turning Your Property into a Furnished Rental House

Are you trying to increase the return on your real estate investment? Making your house a furnished rental home is one choice to think about. There are some possible drawbacks to take into account, but this may be a fantastic approach to get passive income. Consider the benefits and drawbacks of renting out a furnished portion of your home in addition to some advice on how to make it work for you.

Pros:

  1. Increased Rental Income: The possibility for a greater rental income is one of the main benefits of converting your home into a furnished rental home. Rental properties that are furnished frequently attract a higher price, particularly in markets with a shortage of availability or in high-demand locations. Because of this, it can be more profitable than customary long-term rentals.
  2. Increase the Number of Renters: Tenants seeking a complete living arrangement tend to find furnished rentals more appealing. Young professionals, international students, or even families searching for a temporary residence while they refurbish their own house might fall under this category. You might be able to draw in a larger pool of possible tenants by providing a pre-furnished apartment.
  3. Tax Benefits: As a landlord, you may be able to claim deductions for expenses such as mortgage interest, property taxes, insurance, repairs, and maintenance. Be sure to consult with a tax professional to fully understand your options.

Cons:

  1. Extra Expenses: Furnished rental properties may enable you to increase your rental revenue, but they also come with additional costs. To entice potential tenants, you’ll need to spend money on high-quality furnishings, appliances, linens, and other household amenities. If you want to utilise the rental property for personal use at any time, you might also need to consider the expense of storage.
  2. Higher Turnover: Furnished rentals often attract short-term tenants who are looking for a temporary living situation. This means that you may need to invest more time and money into finding new tenants and preparing the property between renters. Higher turnover can also lead to increased wear and tear on your property, which may require more frequent maintenance and repairs.
  3. Legal and Liability Issues: A furnished rental house also entails a certain amount of legal and liability risk. You must make sure that your rental agreement is explicit and enforceable on both parties, and that you are adhering to any applicable local laws governing landlord-tenant interactions. To safeguard yourself against any losses or mishaps that happen on the property, you might also need to make an investment in liability insurance.

Tips for Turning Property into a Furnished Rental Home:

  • Do Your Research: Before making any purchases or committing to anything, make sure to properly investigate your area’s rental market to see whether a furnished rental house is an affordable alternative.
  • Invest in High-Quality Furnishings: To draw renters and require a higher rent, you must buy furniture, appliances, and other household goods of superior quality. Choose goods that can withstand repeated usage that are strong and fashionable.
  • Consider Property Management: If you’re not able or willing to manage a rental property on a daily basis, you might want to think about working with a property management business or employing a property manager to handle the details for you.

Your own financial objectives, the state of the market, and your investment strategy will ultimately determine whether you decide to convert your home into a furnished rental home. A furnished rental property can be a wise and successful investment for many real estate owners, even though there are undoubtedly advantages and disadvantages to take into account. To ensure the success of your rental property, invest in high-quality furnishings, conduct thorough research, and consult experts as needed.

These are only a few of the questions to consider when deciding whether or not to furnish a rental. Making this determination is a personal process with many more variables. I personally love having both furnished and unfurnished houses. Our unfurnished houses allow me to have a relatively hands-off, passive income. While we don’t make that much on them, they are paying their mortgages, and are less work. While our furnished rentals are almost a full-time job, the payout makes the additional workload worth it. It helps us diversify our cash flow, our risk, and our work. With the unpredictable nature of furnished rentals, bear in mind that you can protect yourself by ensuring that any property you convert to a furnished rental home also works well as a traditional rental, in case you ever need to switch gears. Surviving the real estate world requires multiple exit plans.

Note: To learn everything you need to know about screening services and drafting the ideal Lease to safeguard your investment, go to ezLandlordForms.com.

Related Articles

5 1 vote
Article Rating
Subscribe
Notify Of
guest
0 Comments
Inline Feedbacks
View all comments
0
Would love your thoughts, please comment.x
()
x