To furnish or not to furnish, that is the question. Furnishing can increase the rental value of your Wellington investment property to tenants who want a furnished property, but is it worth the extra effort and stress?
The Benefits of Furnishing
Providing furniture will help increase the rental value of your property and maximise your rental income, but whether it’s worth the extra time and stress largely depends on what type of property you have. Furnished properties are usually best suited for apartments, short-term rentals, or properties that are difficult to access (for example, properties with high narrow stairs to the entrance).
Furnishing properties can also help if you’re having trouble with long vacancy periods, as furnishing the property can increase tenant demand, and will help attract tenants that are unlikely to have their own furniture, like students or foreign visitors working on a visa. We find that 1-2 bedroom CBD apartments in Wellington can appeal to technically skilled people who are in the city for a specific project. Outside of this bedroom and location category the appeal of furnishing falls away.
What Furniture Should A Landlord Provide?
When advertising a furnished rental property tenants usually expect the landlord to at least provide the basics – beds, sofa, washing machine, appliances, dining room table, and other home necessities. If you really want to attract good tenants, you can make the property look more comfortable and homely by adding a coffee table in the living room and free standing lighting to show the property in its best light. If your property is 1-2 bedrooms and in the CBD, you may find the fully furnishing, including cutlery, crockery and linen will add to the appeal and rent.
Tips For Creating A Furnished Investment Property
Sort Out Your Insurance
After you make the decision to provide a furnished property, you need to purchase a contents insurance policy that specifically covers furnished rental properties. To prevent complications on any future claims, it’s also a good idea to check the requirements of your insurance policy, as some insurance companies require landlords to complete a thorough tenancy selection process before honouring claims. Every item of furniture should be photographed and an inventory list kept so any loss or damage can be proven. Provide these images to the tenant at tenancy commencements. This reduces the incidence of damage.
Be Practical With Your Furniture Budget
It’s best to be reasonable with your furniture budget, and try purchasing reasonably priced quality products, as lower quality furnishings will likely require more frequent repairs and won’t last as long, causing more stress for you and your tenants.
Don’t Forget To Budget For Future Wear and Tear
Wear and tear is a guarantee in any property, rented or otherwise. It’s best to prepare for this and add an estimate for possible expenses to your annual budget to prevent being caught unaware. Adding a small cost to the tenants weekly rent can also help soften the blow on any necessary repairs. Keep in mind that tenants are only responsible for furniture repairs caused by careless or intentional damage by themselves or their guests. Provide the tenant with an inventory of what furniture is yours, to ensure tenants won’t accidentally take a piece of your furniture with them when they move out.
Contact IRD About Depreciation
Whether your Wellington investment property is partly or fully furnished, IRD can allow you to depreciate the contents for tax deductions. By furnishing your rental property you are investing in a consumable product necessary to your business, allowing these purchases to be deducted as a business cost. Check out the IRD Rental Income Report for more information about depreciation in rental properties. Your accountant will be able to advise on depreciation of each item, but you will need to provide them with either an original purchase price or their individual valuations when you purchased the property, if they came as part of the purchase.
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