Is It a Good Idea to Furnish an Investment Property?

People usually buy a property for investment with two key reasons: either to rent it out or to sell it later at a higher price. When a person buys a property for investment, there are some important questions that come to his mind. One of them being – Is it a good idea to furnish the property? A furnished property consists all the furnishings from a dining table to a ceiling fan and TV, and a wardrobe to a couch. The article addresses this question with the advantages and disadvantages of furnishing an investment property.

Advantages of furnishing

There are some advantages of furnishing a house which you intend to either rent out or sell at a higher price. Some of them are as follows.

1. Tenant and future buyers don’t need to buy their furniture as the furniture and fittings are already available in the property.
2. More tenants look for a furnished property than an unfurnished property. As such, a furnished property may be let out faster.
3. Once the tenant leaves, a new tenant can use the furnishing. Moreover, you still own the furnishings once the tenant have left, which you can use.
4. You can deduce a percentage of the cost of furnishings from the tax liability. You may also be able to get some depreciation allowances on the furnishings.

Disadvantages of furnishing

While there are simple and straight advantages, the disadvantages carry more weightage. Some of the disadvantages are as follows.

1. With furnished properties, you may get more transient tenants who are usually not stable. Moreover, the wrong kind of tenants may give you more headaches. For example, an unruly tenant may easily break your plasma TV, or the tenants cat may scratch the couch destroying it. This ultimately taxes your pocket and bank account.
2. Furnishings have depreciating value. The initial cost involved in furnishing the property is also high. Moreover, you need to keep changing the furniture once they get old. This is an additional investment. If you fail to get regular tenants, the furnishings may prove to be a dead investment.
3. The rental yield in India for a residential property is, at best, 3-4 per cent. Hence, the cost of furnishings is extremely difficult to recover even with higher rents.
4. Assuming that furnishings may attract a tenant or a future buyer may not always be true. Many tenants and buyers have their own taste of furnishings and may not necessarily like your furnishings. Moreover, several prospective buyers have their own furniture, they would like to bring in. In these situations, your furniture may become an unnecessary baggage.
5. A semi-furnished house, on the other hand, with just the basic amenities such as cupboards and kitchen cabinets would be easy on the pockets and useful for tenants.

As you may have seen, furnishing a property bought as investment may not be such a great idea if you intend to rent it or sell it in the future. It may however be useful if you intend to let it out for a short period and plan to keep it for personal use later. Hence, before furnishing a property, think about the purpose of investment. A semi-furnished property may be more apt if you plan on furnishing a property intended for sale or rent.