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Advantages of furnished rentals for the owner
Better gross profitability
Furnished rentals show higher rents per m2 than unfurnished rentals, because of the rental equipment. The difference is worth the trouble! Indeed, rent for a furnished property can be between 5 and 30% higher than that of an empty rental.
However, who says that a higher rent means better gross profitability! The gross profitability of a rental investment reflects the ratio between the home's purchase price and the annual rent through a percentage. It calculates as follows: (annual rent/price of housing) x 100).
On average, we consider that an empty rental's gross profitability is between 4.7% and 6.6%, while it can reach 8% for a furnished rental! It can even be higher if you combine a 9-month student lease with seasonal rentals during summer vacation.
For example, take an apartment in the 15th arrondissement of Paris purchased for 200,000 €: count on a 1000 € rent per month or an unfurnished rental and 1200 € monthly for a furnished rental:
The tax regime of furnished rentals versus unfurnished rentals differs. The income generated by an unfurnished rental is "land income," that of a furnished rental is "industrial and commercial profit (BIC)." The latter is generally more advantageous. Tax authorities consider landlords of furnished rentals as merchants. There are two statuses:
The advantages for the tenant
It is not only for the owners that the furnished rental is advantageous! For tenants, renting a furnished property makes life easier too. Furnishings are provided with the accommodation; the tenant saves money while simplifying his move-in. Furniture, appliances, crockery, lighting..., everything is already there!
Not having to equip oneself makes furnished rentals the ideal type of rental for students and professionals on the move. Furnished rentals allow one to find "ready-to-live" accommodation with a reduced notice period of 1 month, regardless of the area, and with no justification necessary.
Likewise, a furnished rental implies a shorter lease term than an empty rental, with only one year compared to three years! If a student rents the property, the time of the lease is reduced to the duration of a school year, i.e. nine months, which eliminates the need for giving notice.
Check in this blog for more details on furnished and unfurnished rental in Paris.
Does a furnished rental investment involve risks?
With its high profitability, the furnished rental investment is a safe real estate project. But like any investment, it still involves some risks:
The obligations of the landlord
To rent a furnished property, one needs to provide more than two or three furniture pieces and a fridge! A decree published in 2015 thus lists the mandatory equipment for a furnished rental:
Note: a judge may decide to reclassify the lease of a furnished accommodation into an unfurnished accommodation lease in the event of non-compliance with this list of mandatory equipment. Also, remember to furnish all the rooms in the home if there are several.
A specific lease
Beyond its duration, a furnished rental's lease meets specific conditions:
Credits photoTierra Mallorca