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Furnished rentals reap rewards

Furnished rentals reap rewards

by Staff Reporter 0 comments

A Sydney PM has said landlords in his region are turning to a new tactic to entice tenants and increase rental returns.

According to real estate group Raine & Horne, it has been “rivers of gold” for investors on Sydney’s lower North Shore since May 2012. 

However, with extensive, double-digit capital growth, rents have failed to keep pace.

Raine & Horne Mosman senior property manager Drew Schofield said investors are now finding new ways to attract tenants into their properties and increase their rental returns.

“Around 25 per cent of our available properties in Mosman, Balmoral and Neutral Bay are now fully furnished – whereas 12 months ago virtually not a single property came with furnishings,” Mr Schofield said. “This is a major change in the mindsets of landlords with assets on the lower North Shore.

“We believe more yield-hungry landlords are choosing to let out their investment properties fully furnished in the hope of beefing up their returns.”

According to the company’s research, a two-bedroom apartment in Mosman currently selling for $900,000 will rent for $750 a week if unfurnished.

Adding furniture to the same apartment will see it rent for $900 a week, Raine & Horne Mosman said. This represents a gross yield of 5.2 per cent, compared to 4.3 per cent for an unfurnished apartment.

Mr Schofield noted that investors needed to do their sums before adopting this tactic, particularly if they are trying to secure long-term leases.

“Apart from the wear-and-tear on the furniture there are also the added costs of producing a fully itemised inventory report, which needs to be monitored regularly.

“As furniture is involved, property managers must inspect a property more regularly, which means landlords can expect to pay management fees of between 8 per cent and 15 per cent for the services of a property manager, rather than 6 per cent if the property is unfurnished.”

Additionally, fully furnished properties will require contents insurance.

“While the contents insurance is tax deductible, it's still an extra financial outgoing that eats into yields, Mr Schofield said.

“It's also fair to say fully-furnished apartments can be harder to rent, as most tenants have their own furnishings.”

 

Furnished rentals reap rewards
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