Should I Rent My House Furnished or Unfurnished?

Otherwise, even signing a year lease for an unfurnished apartment is extremely inconvenient for the tenant. The tenant has to either buy or rent furniture which may take a long time to arrive with today’s supply chain logjam, or they have to pay movers to move their furniture from their former home or storage.

Not only is this time-consuming, expensive and stressful, it adds a lot of friction to the process of moving and changing apartments. This has the effect of “locking-in” tenants to their current home so they don’t have to go through the pain of moving.

As a result, the pool of prospective tenants for a furnished apartment or house is generally going to be larger than the prospective pool of tenants for an unfurnished rental, except for metro areas like NYC where landlords have historically been able to get away with renting apartments unfurnished due to extremely low vacancy rates.

Pro Tip: It’s not uncommon for prospective tenants to filter listings by “furnished,” and to only consider unfurnished rentals when nothing furnished is available. This happened recently in the hot South Florida market due to the Great Migration.

Landlords can charge anywhere from 20% to 40% more for a furnished vs unfurnished rental unit, with wide variations depending on the local market.

Therefore, not only will landlords have less vacancy and time-on-market due to more demand, but they’ll also be paid more to rent an apartment or house furnished vs unfurnished.

For example, a furnished rental with very old, unsightly or just plain ugly furniture might not command much of a premium, if any, vs a comparable property that is unfurnished.

In fact, a furnished rental with terrible, unusable furniture might rent for less vs a comparable vacant unit if the landlord insists on the furniture remaining in place.

In this situation, the apartment might be extremely hard to rent out at all if the owner is unwilling to at least allow the tenant to store the ugly furniture somewhere, ideally in a storage unit or locker the owner might have in the building.

Pro Tip: You can easily check the price differentials for furnished vs unfurnished units in a condo building on any number of broker or 3rd party real estate search websites. You can even check out the quality of the furnishings between comparable listings and gauge what the premium for a furnished apartment in your building might be based on market prices.

There are many tax advantages to operating rental properties, such as depreciation and the ability to write off expenses against your rental income and even your other active income if you qualify as a “real estate professional.”

In dense metro areas like NYC where cap rates have historically been in the low single digits, the combination of real and paper expenses can often cause a landlord to make a net loss for tax purposes.

For example, “appliances, carpeting, and furniture used in a residential rental real estate activity” can be fully depreciated over five years according to IRS Publication 527.

However, if you are a qualified real estate professional, you may be able to fully deduct the cost of your furnishings in one year via the Section 179 deduction.

Per Chapter 2 of IRS Publication 946, “you can elect to recover all or part of the cost of certain qualifying property, up to a limit, by deducting it in the year you place the property in service … you can elect the section 179 deduction instead of recovering the cost by taking depreciation deductions.”

From a layman’s perspective, this means that if you are a qualified real estate professional, not only can you deduct your mortgage interest, property taxes, HoA fees, home insurance premiums, repair, maintenance and other ordinary expenses related to operating a rental property, but you can also fully deduct in one year the cost of all of the furniture and furnishings that you put into service.

This means not just the couch and coffee table, but also things like plates, silverware, towels and other furnishings typical for a furnished rental.

Pro Tip: Our partner accountants have advised us that you can typically consolidate the total cost of your furnishings into one line item per property, though of course you’d need to keep permanent records to back up your numbers. Remember that this is not tax or accounting advice, and that you should seek accounting advice only from your own accountant.

A major benefit for landlords, especially landlords converting their former residence into a rental property, is that they don’t have to sell, move or put into storage their used furniture. Instead, they can simply leave it in the property and as a bonus, be able to rent out their former home as fully furnished.

This is a major benefit for landlords who are moving across the country or even out of the country, where it’s impractical or not cost effective to physically move all of their furniture.

Also, remember that prospective landlords who have already moved far away might not find it practicable to sell or dispose of their furniture in order to rent it unfurnished. Or if they still are in town, it might be stressful to have to “fire-sale” all of their belongings on Craigslist for pennies on the dollar.

Pro Tip: If you’re going to rent your property furnished, please make it very clear with prospective tenants that the property is going to be delivered “as is.” This way, you can avoid tenants potentially asking you to dispose of this and that, i.e. items they don’t want in the apartment. Ideally, you have a storage unit close by or in your condo building where the tenant can temporarily store furniture items they don’t want to use.