Furnished or unfurnished - what’s the better option?

A crucial question for every property let is whether you should offer it to the market furnished or unfurnished. Whilst this depends on many factors such as who your target market is, we have found that on balance and in most cases, unfurnished is the better way to go.

In this article we will look at the different aspects to consider when making the decision how to let your property.

1.       What is included in a furnished let?

2.       Will I get more rent if my property is let furnished?

3.       Do tenants prefer a furnished property?

4.       Are there tax advantages when letting a property furnished?

5.       Can I claim money from the deposit if my tenants damage my furniture?

6.       Mistakes to avoid when furnishing a property.

7.       Conclusion

What is included in a furnished let?

First of all, let’s get clear about what ‘furnished’ actually means. It is generally expected that a furnished property has a bed and a wardrobe in the bedrooms, the lounge has a sofa and table and a dining room has some sort of table and chairs. That’s it at it’s most basic level. However, there is no prescribed standard for what must be included in a furnished property, so many landlords go to various degrees of including items. Whilst the above describes the minimum standard that should be achieved, at the upper end there is almost no limit to what you could include. I’d call that the AirBnB standard where you go as far as including a toaster, a kettle, cutlery and any imaginable item you can find at your Tesco Extra. Then of course, there is also ‘part-furnished’ where you might have a bed and wardrobe for one of the bedrooms or the lounge might just include one couch – you get the idea. Now with that out of the way, let’s get to the next crucial question.

Will I get more rent if my property is furnished?

Generally there is a small difference in rent that reflects the additional items provided in a furnished property. After all the tenants are getting ‘more’ in a furnished property. However, the amount is not really significant; we’re talking between £25 and £75 depending on the range and quality of items provided. Considering that even a basic level of furnishing can set you back by several thousand pounds it will take a long time to achieve any sort of pay back. Not to mention that you have to deal with van trips to Ikea to get everything in the first place. Then of course, items will have to be replaced in the course of the let. Mattresses, sofas and dining chairs all have a limited life span and even if your tenants treat these items well, you will have to factor in replacements after a few years or a few tenancies. My recommendation in regards to extra rent vs cost of furnishing is this: Don’t furnish your property to achieve a higher rent; let the tenant demand for furnished or unfurnished be the main decision driver for you.

Do tenants prefer a furnished or unfurnished property?

To best answer this question, it's important to recognize that tenant preferences can vary based on numerous factors including location, demographic, and individual circumstances.

In my experience as a letting agent, I've found that there's no one-size-fits-all answer. However, I can offer some insights.

Furnished properties often appeal to tenants seeking convenience and immediate comfort. These tenants might be students, young professionals, or those relocating for work, who prefer not to invest in furniture or move bulky items. Furnished properties can also attract short-term renters or those looking for temporary accomodation.

On the other hand, some tenants, particularly families or individuals with established households, may prefer unfurnished properties. They may have their own furniture and want the flexibility to personalize their living space according to their tastes. Additionally, unfurnished properties might appeal to long-term renters who prioritize lower rent costs over convenience to get a fully furnished place provided.

Ultimately, the key is understanding your target market and catering to their specific needs and preferences. Conducting market research and staying informed about local trends can help you make informed decisions about whether to offer furnished or unfurnished properties in your portfolio.

Are there tax advantages when letting a property furnished?

When it comes to letting a property furnished in the UK, there can indeed be some tax advantages to consider.

One advantage is the ability to claim tax relief on furnishings and equipment provided in the property. This can include items such as furniture, appliances, and even kitchenware. The "Wear and Tear Allowance," which used to allow landlords to deduct a percentage of their rental income for the replacement of furnishings, has been replaced by the "Replacement of Domestic Items Relief." This allows landlords to deduct the cost of replacing furnishings, appliances, and equipment in the property.

Moreover, furnished properties may qualify for a lower tax rate on rental income due to the "Furnished Holiday Lettings" (FHL) scheme. Properties meeting certain criteria under this scheme can benefit from favorable tax treatment, including potentially lower tax rates and eligibility for certain capital gains tax reliefs.

It's important to note that tax laws and regulations can be complex and subject to change, so seeking advice from a qualified tax professional or accountant is advisable to ensure compliance and to maximize potential tax benefits. By understanding and leveraging these tax advantages, landlords can optimize their rental income and investment returns.

Can I claim money from the deposit if my tenants damage my furniture?

As a landlord, you have the right to claim money from the deposit if your tenants cause damage to your furniture beyond reasonable wear and tear.

In the UK, tenants are typically required to pay a security deposit at the beginning of the tenancy, which serves as financial protection for landlords in case of damage to the property or furnishings. If your tenants have caused damage to your furniture, you can make a claim against the deposit to cover the cost of repairs or replacement.

However, it's important to note that the damage must be more than just normal wear and tear. Wear and tear refers to the gradual deterioration of furniture or other items due to ordinary daily use, which landlords are generally expected to cover themselves. Examples of damage that may justify a claim against the deposit include stains, tears, or breakages caused by negligence or misuse by the tenants.

Before making a claim, it's essential to document the damage thoroughly with photographs or written descriptions to provide evidence in case of dispute. Additionally, you should follow the proper procedures outlined in the tenancy agreement and relevant legislation regarding deposit protection and dispute resolution.

By understanding your rights and responsibilities as a landlord, you can effectively address and resolve issues of damage to your furniture while maintaining a positive and professional relationship with your tenants.

What are the advantages of letting furnished

When letting a furnished property, there are a few common pitfalls landlords need to steer clear of. One big mistake is not having a proper inventory done by an independent third-party clerk. A detailed inventory protects both landlord and tenant by documenting the condition and contents of the furnishings at move-in. Without it, disputes over missing or damaged items can easily arise at the end of the tenancy.

Another error is providing furnishings that are worn-out, damaged or of very poor quality. Remember, you are essentially selling a lifestyle and experience as well as just renting out space. Cheaply furnished properties rarely attract the best tenants. Invest in good quality basics like beds, sofas and appliances that will last.

Cleanliness is also crucial with furnished homes. Don't cut corners on professional cleaning between tenants. Nothing puts off prospective renters faster than grubby carpets, dusty surfaces and lingering odors from the previous occupants. Fresh, clean and welcoming is the way to go.

Finally, be mindful of personal tastes when choosing decor. Opt for neutral colors, minimal clutter and inoffensive artwork and accessories. You want your furnishings to have wide appeal rather than being too personalized to your own style preferences.

Summary

When deciding whether to let a property furnished or unfurnished, it's important to consider several factors. Tenant preferences play a big role - furnished rentals are very popular with students, young professionals, and anyone requiring flexibility and low upfront costs. However, some tenants prefer a blank canvas to make their own.

Tax advantages to furnishing are now very limited as the 10% "wear and tear" allowance has been phased out.

Speaking of costs, furnishing is a significant upfront investment but quality pieces can last for years. Factor in regular replacement of items that see heavy use like beds, sofas and appliances. Furnished properties also require more regular cleaning and inventory checks.

As covered previously, some key mistakes to avoid include providing substandard or unappealingly personalized furnishings, failing to have a proper third-party inventory, and neglecting cleanliness between tenants. Take care to create an inviting, neutral space.

Overall, furnished rentals can be the right choice for landlords willing to make the investment and manage them diligently. Consider your target tenants' needs to make the right choice.