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Furnishing IPs

Discussion in 'Real Estate' started by Chris C, 7th Apr, 2008.

  1. Chris C

    Chris C Well-Known Member

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    I have yet to buy my first IP but I wanting to know what people's opinions were on whether to furnish an IP or not? Or is this something you'd decide on a case by case basis depending on the prospective tenants? If so what sort of situations would you most likely get furnish an IP? And what sort of furnishing get the best ROI?

    Thanks in advance.
     
  2. Tania

    Tania Member

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    Hi Chris, I decided I want houses that can pay for themselves,
    So I bought near the Uni and shops in Newcastle.
    I bought big houses with lots of common areas and furnished modern comfortable.New kitchen appliances, queen beds etc.They look good.
    I like having boarders over tenants as I have the control.
    Ive heard so many unpaid rent stories.
    When I advertised on Shareaccommadation.com alot of people wanted a furnished room and an ensuite.
    I got my tenants from the Uni accomm web site.
    I also go for 1st years doing a 3 year course.
    Next house I might look closer to town and beach.
    I could furnish and rent to young professionals.
    All the best.
    Tania
     
  3. islandgirl

    islandgirl Well-Known Member

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    Chris
    I'd say generally the answer is no. For most regular rental houses you would not furnish. Its not worth the extra hassle for cleaning and repairs when tennants take less care that they would with there own furniture.It would probably be detrimental to finding a tennant rather that helpful as most families would already have their own furniture.

    In saying that is does depend on the market you are trying to attract. As Tania said, student accommodation is a perfect example of where you would supply some basic furniture. The other types would be executive accommodation and holiday rentals. But these are specific markets.

    The key is finding the area you intend to invest in, the market you are catering for and the cost benefits to you.
     
  4. Chris C

    Chris C Well-Known Member

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    I was reading a Australian Property Investor magazine last night and I came across an article that mentioned that deprecating furnishing can help create positive cash flow properties once depreciation is taken into account.

    @ islandgirl - Thanks for the feedback. So are you saying that it is dependent on who your prospective tenants are? but in general you don't opt to furnish the place with things like lounges, beds, desks etc.

    I was also wondering how people felt about placing things like fridges, dishwashers, microwaves, washer, dryers in an IP to help boost rental returns and allow your to write off some depreciation on tax? These seem to be items that don't really need a lot of TLC from the tenants.

    I'm not quite sure how the whole depreciation aspects works when it comes to specific furnishing and appliances in IPs (can someone please explain it to me) but I'm assuming the items above, if bought new would cost between $2500 - $3000. So how much can you write off on tax each year? and how much could you reasonably expect to increase your weekly rent on $300,000 property that was renting for $280 without the fridge, dishwasher, washer, dryer, microwave?

    Also what about items like TVs, A/C and Stereos systems? These seem more like luxury items that tenants may be able to do without...

    @ Tania - thanks for the reply. I also like the idea looking to potentially buy near my local Uni, largely because I'm certain there will always be demand for rental properties. Although I'm worried about having student tenants, mainly because they tend to be a little messier, a little more strapped for cash and I feel are more likely to change there living situations more often than the regular public. How do other people on these forums feel about student tenants?
     
  5. Simon Hampel

    Simon Hampel Co-founder Staff Member

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    Don't forget that depreciation is still a cost - the whole point is that you pay the money up front, and then get a portion of it back over a period of years (rather than all in the year you bought it like fully claimable expenses), and at the end of its useful life, you have to fork out the money to replace the item and start all over again.

    Despite what the "gurus" may say about depreciation - it is not a money making exercise ... it only helps cover some of the costs!
     
  6. Chris C

    Chris C Well-Known Member

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    Surely when it comes to adding general appliances to IPs there is an element of "money making" in the form of higher rents. I was looking at the situations as being best of both worlds (higher income and less tax to pay)... as long as you are willing to look past the initial outlay and wait for the returns in the long run.

    :confused:
     
  7. Simon Hampel

    Simon Hampel Co-founder Staff Member

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    Sure - you would need to charge a higher rent to cover your costs - but you still need to do the research to determine if there is enough demand for furnished properties at that price point to justify the investment (taking higher ongoing maintenance costs into account too).

    Remember that renters are often very price sensitive - and won't always go for premium properties charging premium rents (unless you are specifically targeting that market). Furnished rentals is a very niche market - careful research required before entering.
     
  8. Jacque

    Jacque Team InvestEd

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    Sim and the girls have made some highly valid points so far, and I agree that market targeting is paramount to your decision to furnish or not.

    A few years ago I had some Rockhampton property which was furnished and let out to two longstanding tenants who weren't going anywhere in a hurry when I took over ownership. Their units were fully equipped, with whitegoods, furniture and TV's. During the short period that I owned the properties (15mths) I had to completely replace a fridge and pay for a washing machine part. Maintenance is not to be taken lightly with these types of properties, and particularly if you have hard-wearing tenants who aren't likely to clean out filters or care for items the way you would as an owner.

    Yes, depreciation can assist, but, like Sim says, at the end of the day you are only getting a portion of your money returned and it may well not be worth the hassle, depending on the quality of care your appliances receive :D

    I've also offered whitegoods for a higher rent in a couple of my properties but have been refused, as the tenants already had their own from a previous rental. Here in NSW (as opposed to other states, especially regional QLD) unfurnished is the norm, unless you're servicing uni students or the inner city corporate market.
     
  9. Simon Hampel

    Simon Hampel Co-founder Staff Member

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    Do we have any members who do currently run furnished rentals ? It would be great to have some feedback from them about the market they are in and how successful they believe their properties are!