Renting furniture with the house?

[WBG Redcliffe]

Hi all

Went to the BIG meeting in Brisbane the other night and as always had a very informative night. Rick Otten was the speaker and part of what he talked about was increasing the rent with furniture.

He offers as an option a full house of furniture for an extra $100. he said he had little trouble finding tenants to take this deal. After 3 years the tenants get to keep the furniture.

Was wondering if any of you have had any experience with this type of arrangement?

With this type of deal I could turn my slightly –ive yields into +ive.

Your thoughts

 

[wylie]

I have always found that people usually have their own furniture and so would not rent my house. I believe it cuts down your available market to have the house furnished.

I think in really upmarket situations, it would work better. Maybe because executive types with a house somewhere else, who are moving to a city for six months or a year but with family staying at home would not have furniture.

Having said that, because our houses do not have built-in wardrobes, and these seem to be expected, we generally have some nice wardrobes available, which have been used.

Wylie

 

[Pushka]

We have just furnished our apartment. We are aiming at the short term Executive style relocation - ie coming on a short term contract for work (located at Port Adelaide, our latest boom suburb) in a new development just settled. There are several apartments available for rental; ours was rented off the internet from an interstate couple who just brought their suitcases. They fly back to their families every couple of weeks. It might work out for us - will let you know in 12 months! Maybe apartments are different to houses though?

 

[WBG Redcliffe]

I was thinking the next time an IP becomes available I would run two adds. I normal addvertising just the IP and the other the same with an option to rent the house full of furniture at an extra $90 per week. If the tenant stays for 3 years they get to keep the furniture.

I'm not going to buy the furniture until the lease is signed and deposit paid. I'll have the furniture delivered directly to the IP.

At a guess the furniture would cost between 4k and 5k.

 

[coolie21]

At a guess the furniture would cost between 4k and 5k.

Would this include fridge, washer, TV etc etc? Seems cheap to me

 

[Pushka]

Yep, me too. We included everything, all new, including dishes, bedding, kettle, toaster, washer dryer, TV (LCD - crikeys they are cheap now); dvd player and system, glass ware, cookware, microwave, leather sofas, outdoor setting, vacuum cleaner, brooms, etc etc and it came to around $15,000 all up. Does look rather good now though! Shame I cant afford to live there. But thank god for depreciation!

 

[kathryn d]

us too...now multiply that by 11 Bachelor Suites.

 

[sue78]

There's one property mgmt company in Brisbane that does Executive letting for up to 2 years. The only let out in suburbs close to the motorway i.e Daisy Hill, Rochedale, Springwood, Mt Gravatt, Underwood area. Apparently, the tenants usually receive a company car.

It has to be fully furnished. Can get between $550 to $700 p/w.

My house being rented for $420 p/w in Kuraby can apparently achieve $650 p/w fully furnished.

 

[wylie]

Sue, do you have a name for this company?

Wylie

 

[alexlee]

I'd say it limits your tenant pool a bit. Who amongst us DON'T have furniture? The only people who would want a furnished place would be new arrivals in the city / country (or like when I came back from overseas and I didn't have anything), or people working in a place temporarily.

If you have enough people passing through, it might be worth it. In London furnished flats are common, but you don't get much extra rent as a result. But in London there is such a high number of people moving into the city (and only planning to stay for a year or two) all the time that people actually want furnished apartments.
Alex

 

[Belu]

i think what people are sayig is to furnish it only when the lease is signed. it also may ensure tennant stays for a long time and looks after the furniture.

Question is though, if you charge $100/week for 3 years and it costs you $15k what is the real benefit to you?

 

[Pushka]

i think what people are sayig is to furnish it only when the lease is signed. it also may ensure tennant stays for a long time and looks after the furniture.

Question is though, if you charge $100/week for 3 years and it costs you $15k what is the real benefit to you?

Most of it is written off in the first year, when purchased with another person; the rest is depreciated at a high rate over a five year period. Have done the sums and after 12 months I am in the black!

 

[Belu]

lets say $10k is written off in first year and $5k over the 3
Tax bracket 45%
Year 1: tax back $5,250
Year 2: tax back $750
Year 3: tax back $750

Extra Income tax on $100 p/w
Year 1: tax of $2,340
Year 2: tax of $2,340
Year 3: tax of $2,340

Initial outlay: $15,000
Opportunity cost (of putting $15k in offset at 8%) = $1,200 a year

Extra Income: 52 * $100 * 3 = $15,600

Summary:

Tax back:$6,750
Extra Income: $15,600

Gross gain: $22,350

Extra income tax: $7,020
Initial Outlay: $15,000
Opportunity cost: $3,600

Gross loss: $25,620

Net loss: $3,270

This doesnt even take into account time value of money by outlaying the money.

I could understand if it was say $5k worth of furniture, but beds, couches, tv's, appliances, bedding, etc all adds up.

I may have something wrong so please let me know as these are just rough figures but interesting to see.

 

[nomadic]

Not sure if an extra $100pw is realistic. I'm told by PM's on the Gold Coast that $40-$60pw extra is about the going rate for FF. The biggest problem with FF is the high wear & tear plus you're responsible for anything that breaks down or needs repairing. If it's not an executive type property, you'll find that the tenants you attract for FF are usually transients who stay for 3-6 mths before going elsewhere... they can also be marginal members of society who can't afford furniture.

Hi all

Went to the BIG meeting in Brisbane the other night and as always had a very informative night. Rick Otten was the speaker and part of what he talked about was increasing the rent with furniture.

He offers as an option a full house of furniture for an extra $100. he said he had little trouble finding tenants to take this deal. After 3 years the tenants get to keep the furniture.

Was wondering if any of you have had any experience with this type of arrangement?

With this type of deal I could turn my slightly –ive yields into +ive.

Your thoughts

 

[Pushka]

lets say $10k is written off in first year and $5k over the 3
Tax bracket 45%
Year 1: tax back $5,250
Year 2: tax back $750
Year 3: tax back $750

Extra Income tax on $100 p/w
Year 1: tax of $2,340
Year 2: tax of $2,340
Year 3: tax of $2,340

Initial outlay: $15,000
Opportunity cost (of putting $15k in offset at 8%) = $1,200 a year

Extra Income: 52 * $100 * 3 = $15,600

Summary:

Tax back:$6,750
Extra Income: $15,600

Gross gain: $22,350

Extra income tax: $7,020
Initial Outlay: $15,000
Opportunity cost: $3,600

Gross loss: $25,620

Net loss: $3,270

This doesnt even take into account time value of money by outlaying the money.

I could understand if it was say $5k worth of furniture, but beds, couches, tv's, appliances, bedding, etc all adds up.

I may have something wrong so please let me know as these are just rough figures but interesting to see.

Well, for a start you have to pay tax on the Interest at the same rate as extra rental income. And it isnt just a matter of extra rent, you attract tenants who would otherwise not stay there. So you can capture another market who tend to pay a premium for the convenience.

 

[softmonkey]

Not sure if an extra $100pw is realistic. I'm told by PM's on the Gold Coast that $40-$60pw extra is about the going rate for FF.

the $40-60 could go on indefinitely and the tenant doesn't keep the furniture after.. this is $100/wk up to a max of 3 yrs then the furniture is theirs to own.

 

[WBG Redcliffe]

The $100 Rick Otton was refering to excluded the electrical items. Thats why I figured 4k would cover. Otton also mentioned getting the furniture for nothing. Having it included in the contract of sale.

Thanks for your replies, has made me put a little more thought into the idea.

 

[Xenia]

We have trialed furnished and unfurnished houses side by side. Our findings were that if offered as furnished accomodation sometimes it can take longer to rent as the market of tenants with no furniture is limited.

Best to give a choice rather than just furnishing everything.

Furnished houes in Adelaide work best if they are excecutive style new appartments or or the beach or in the city. The do not work well in all other areas!!!

Was Rick Otton talking about a rent to own scenario? Was the furniture part of the rent to own package? This is a different area alltogether