In an effort to secure a greater return on a rental property, many investors turn to furnishing a rental property in the hope to achieve a higher rental - especially with the massive buzz surrounding entities like AirBnB. Grant Rea, Certified Residential Rental Specialist with RE/MAX Living in Cape Town, says that the decision to furnish a rental property is sometimes a costly error on the landlord’s part.
He notes that the assumption that a furnished property will bring a higher rental return is a common misconception, and that offering the same property as an unfurnished option, opens the property up to a surprisingly larger potential pool of tenants.
According to Rea, most local tenants in Cape Town have at least the basic number of items required to be able to furnish a property on their own, and there is a massive local market.
"Too many landlords get caught up with the hype of foreign tenants and corporate tenants, assuming they will pay significantly more than market-related prices for furnished properties. However, regardless of whether the unit is furnished or not, it is imperative that rental properties are competitively priced," advises Rea.
He adds that with winter just arriving in Cape Town, short-term furnished lets are struggling to remain booked and many landlords are feeling the pinch.
"The demand for rentals in Cape Town is naturally a bit lower during the rainy season. As a result, landlords face significant, unnecessary losses with furnished holiday rental units standing vacant during the winter months," says Rea.
He notes that numerous landlords approach him after facing too many periods of vacancy for short-term lettings, having grown weary of the time consuming aspects of managing such a property.
"Invariably these landlords then opt to offer their units as long-term rental properties. Even though the daily rental on short-term lets is much higher, countless investors state that the returns even out between short- and long-term rentals, purely because of vacancy. If a landlord is prepared to spend a significant portion of their time and resources on marketing their furnished daily rental, it can be a lucrative endeavour. However, many landlords underestimate the immense drain of time, energy and cost to manage this kind of letting option," says Rea. "With an expert rental agent working for you and exposing your rental to a wide online audience, there is no reason why a rental property should be vacant in Cape Town."
According to Rea, being flexible as a landlord is vital to ensure you minimise your vacancy rate.
"Be willing to offer items included or be willing to remove them. Even a single month’s vacancy can create major cash flow implications," advises Rea.
He suggests that landlords keep their options open by getting quotes for storage or moving the furnishings back to their primary residence if possible.
"Many landlords I have advised have simply offered their older furnishings up for sale to numerous companies and stores that will purchase the lot," says Rea. "Having said this, offering the option of the larger appliances as part of the property may be the prudent move to attract the largest pool of potential tenants to the property."
A further aspect to consider is that furnishings offered in a unit are often not cared for as well by tenants as the landlord would like. Additionally there is the added cost of having to insure the items. The onus will be on the landlord to make good repairs based on wear and tear of these items.
"All this hassle is simply eliminated by offering the same property 'unfurnished', at not much less of a rental to large number of ever growing tenants seeking long term rentals in the City Bowl, Atlantic Seaboard and surrounds," Rea concludes.