Will furnished rentals increase after COVID?

Question

I believe that furnished rentals are really going to see a boost in the upcoming years. Having the option to move into a property without having to worry about the stress of furnishing it could be a huge opportunity for any landlord. You can typically get 15 to 20 percent more for a furnished long-term rental. It’s a convenience. People are willing to pay for convenience. And for a furnished short-term rental, you can get 40 to 50 percent more at a minimum. In some cases, you can even double that, getting 100 percent more, depending on the location of the property. Especially with how COVID has affected the market, I believe people are going to be migrating from these big cities into the suburban rental markets and furnished rentals would attract them to your property even more. As a millennial, I believe that I would pay more for a furnished rental that has quality furniture in it than I would for a place where I have to go out and buy my own furniture and move in it.

However, my main question here is more for the landlord...

Wouldn't advertising a furnished apartment attract more high class tenants which are people that you want in your properties as a landlord?

Can you not also charge a larger security deposit that is fully refundable which makes sure that the furniture will not be damaged?

If there was a furniture company out there that would be willing to partner with landlords to accommodate them with furniture and design at a great price, would you partner with them?

What are your pros/cons in adding a furnished rental to your portfolio?

However, my main question here is more for the landlord...

Wouldn't advertising a furnished apartment attract more high class tenants which are people that you want in your properties as a landlord?

Can you not also charge a larger security deposit that is fully refundable which makes sure that the furniture will not be damaged?

If there was a furniture company out there that would be willing to partner with landlords to accommodate them with furniture and design at a great price, would you partner with them?

What are your pros/cons in adding a furnished rental to your portfolio?

Jay Hinrichs · Answer

Kyle,  I kind of stumbled on to this..  we dont have many rentals and when we do its only a stop gap until we can exit.

but I got contacted by an agency that places insurance clients who have been displaced or higher end folks who are building a new high end home that is going to take a year or more.

So did this in Vegas and spent maybe 10k on furniture and fair market monthly rent is 2k or so and they are paying me 4500. for turn key. with a 6 month minimum.. that keeps getting extended for this one property.. so if it goes 6 months then that's fine then i can pop down and use it when i want to .. did another one out in Indy same thing rents 900 they paid 2500 for 6 months and a big security deposit.. So this one is moving out end of Feb we will see how they leave it..

I think its a niche as you state but probably not viable unless you do the J martin travelling nurse gig like he does  or those that do flop houses for airline employees..   although I have talked to some folks in Cupertino and its not unusual to have 8 people in a 4 bd home 20 something tech engineers that are single ?? and used to cramp living situations.

WE played around with shared housing back east in the work force space and that is a NIGHTMARE  never again in that type of tenant.

Jay Hinrichs · Answer

Totally agree this is the thing I see most beginning landlords fail to realize  turn over KILLS returns Kills them..

for us the Vegas home we use if its not rented but it cant be rented for less than 30 days based on CCRs

I would think SR and Sonoma county had huge demand after the fires ???  I know over at Silverado it sure did..

However I think you and I agree its a very narrow niche if that..  and it has to be done with A plus tenants  anything lower and your stuff would be destroyed.. I mean look at what a C class tenant does to their own possessions and the house..

Kyle J. · Answer

@Jay Hinrichs It’s interesting that you say that. I don’t often have vacancies, but on one of my last ones, I was actually contacted by an insurance company who inquired as to whether I’d be willing to rent to one of their clients (a family who was displaced I think due to a fire).

The insurance company was willing to pay a premium significantly above what I was asking. However, it was only for a limited number of months.

I ultimately declined because that’s not my business model (short term tenants and high turnover), and even the offer of higher rent didn’t make it worth it to me.

I like long term tenants (most of mine have been with me for 5 to 8+ years) and low turnover. Turnover can be a lot of work, and the longer you do this you realize that turnover/vacancy between tenants can really eat up any cash flow / profits you thought you had. So it just wasn’t for me.

But I’m sure someone else could make a nice business model out of it. Assuming they could get consistent referrals from the insurance companies, as one here and there like I got just wouldn’t cut it.

Kyle J. · Answer

@Casey Penland  I think it largely depends on your market and your target renter.

For example, could there be a need for something like this if you're in a trendy area and marketing to young millennial-aged professionals who are just starting out and don't have much/any furniture?  Or you're near a hospital and trying to attract traveling nurses?  Or near a higher education institute and marketing to students finishing up their schooling (i.e. graduate students, doctors doing their residency or fellowship, etc) where it doesn't make sense for them to buy a house and furnish it because they'll likely move as soon as they're done?  Then perhaps it's a good idea.

And in these cases, many states do allow you to charge a larger security deposit for a furnished unit than you can for an unfurnished unit.  (In my state, I could charge a deposit equal to 3x rent for a furnished unit, whereas I'm limited to a deposit equal to 2x rent for an unfurnished unit.)

With all that being said, I think there's many markets and types of renters this would NOT work with.  For example, I rent mostly 3 bdrm, 2 bath single family houses.  The typical people who apply for (and ultimately rent) my properties are established families with kids, and a houseful of furniture.  So not only would it be an unnecessary expense for me to pay to furnish my places, it would likely end up eliminating my entire tenant pool.  Because it wouldn't be a convenience for them to have the house already furnished, it would actually be an inconvenience.

Realistically, they're not going to get rid of their lifetime accumulation of furniture.  So either I'm going to have to pay to empty the house back out, or they're not going to be interested in renting it, and I just lost a tenant.

So I guess ultimately, you'd need to do a lot of market research, and really know your market and your target tenant.  Because I could see there possibly being a market for it, but not always.

Will furnished rentals increase after COVID?

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