Should I Rent My House Furnished or Unfurnished?

Renting out a property involves many decisions, with a key one being whether to offer it furnished or unfurnished. This choice significantly influences the type of tenant attracted, financial commitments, and ongoing management responsibilities. Understanding these distinctions is important for homeowners aiming to optimize their rental strategy.

Characteristics of Furnished Rentals

A furnished rental includes major appliances and basic furniture like beds, sofas, dining sets, and kitchenware. Furnished properties appeal to tenants seeking convenience, such as corporate transferees, traveling professionals, students, or those needing short-term housing. The immediate move-in readiness is a significant draw, especially for those relocating without belongings. Landlords can generally command higher monthly rental income for furnished properties, potentially 15% to 20% more than unfurnished counterparts, and even 40% to 50% more for short-term rentals.

Offering a furnished rental requires a considerable upfront investment to purchase quality furniture and appliances. Landlords assume ongoing responsibilities for maintenance, repair, and replacement of these items due to wear and tear. This increased responsibility means more frequent property inspections may be necessary to monitor the condition of the furnishings. Landlord insurance for furnished rentals needs to include contents coverage, protecting against damage or theft of the provided items, which is a departure from standard property insurance.

Characteristics of Unfurnished Rentals

An unfurnished rental includes major appliances like a stove and refrigerator, but no other furniture. These rentals appeal to a wider tenant pool, including families, long-term residents, and individuals who own furniture and wish to personalize their living space. Tenants in unfurnished properties seek stability and are more likely to stay for extended periods, reducing turnover and leading to a more stable rental income stream for the landlord.

Unfurnished rentals typically command lower monthly rent compared to their furnished equivalents. Landlords benefit from minimal upfront costs associated with furnishing the property. There is reduced responsibility for wear and tear on personal property, as tenants are responsible for their own belongings. This approach simplifies property management by reducing the need for maintenance and replacement of furniture.

Financial and Tax Considerations

Furnished rentals involve significant upfront capital for furniture and household items, with ongoing expenses for repair, maintenance, and replacement due to wear and tear. A tax benefit for furnished rentals is the ability to deduct depreciation on the furniture. The Internal Revenue Service (IRS) classifies furniture used in a residential rental property as 5-year property for depreciation, allowing its cost to be recovered over this period using the Modified Accelerated Cost Recovery System (MACRS).

Unfurnished rentals have considerably lower upfront costs, primarily limited to the property’s structure and included appliances, minimizing initial financial outlay. Both furnished and unfurnished rentals require property insurance for the building structure. However, furnished rentals need additional landlord contents insurance to protect furniture and appliances against damage or theft.

Vacancy rates also impact income; furnished units might experience higher turnover due to shorter lease terms but can often fill quicker. Unfurnished rentals attract long-term tenants, potentially leading to fewer vacancies. Rental income, whether from a furnished or unfurnished property, is reported as ordinary income on Schedule E (Form 1040) and is subject to federal and state income taxes.

Tenant Profile and Property Suitability

The choice between furnished and unfurnished rentals directly influences the type of tenant attracted. Furnished properties often appeal to a transient tenant base, including traveling nurses, corporate transferees, students, or those on short-term assignments. These tenants prioritize convenience and are less likely to own furniture, making furnished units a practical solution for immediate occupancy. Such properties are frequently located in urban centers, near universities, or in vacation destinations where temporary housing is in high demand.

Unfurnished rentals attract long-term tenants seeking stability, such as families or individuals who own furniture and plan to establish a permanent home. These tenants often desire to personalize their living space, which an unfurnished unit allows. Properties in suburban or family-oriented areas are commonly rented unfurnished, aligning with the needs of residents who intend to stay for extended periods. The property’s location, size, and the prevalent demand within the local market are important factors in determining the most suitable rental type.

Weighing Your Decision

The decision to rent a property furnished or unfurnished depends on a landlord’s objectives and the specific characteristics of their property and local market. Homeowners should evaluate their personal goals, such as maximizing rental income or minimizing day-to-day management responsibilities. Considering the financial capacity for initial investments, particularly the cost of furnishing, is an important step. The unique attributes of the property, including its location and size, play a significant role in determining the most suitable rental approach. Understanding the preferences of the local tenant demographic will help align the offering with market demand.