Updated: Aug 4, 2019
If you want to make the biggest impact on your rental returns, you MUST give serious thought to furnishing. This subject hardly gets enough attention from owners (there are exceptions of course).
In my book, The Ultimate Guide to Buying Property, I wrote about a lady whose apartment had been vacant for over 4 months. When I visited the property it struck me like a hammer to a nail why it had been vacant for so long.
The apartment was dusty and dirty, furniture were badly placed and not attractive, and a stale smell assailed the nostrils of any visitor. One week after fixing this problem, the apartment was rented.
To be clear, furnishing in the context of this post covers:
furniture & fixtures,
and anything else that affects the presentation of your property
Today, more than ever, property owners rent their properties on different models. Amongst these many models, you have the good 'ol long-term tenancies and newer short-term tenancies phenomenon (vacation rentals or short-term accommodation).
How do you furnish your property effectively for these 2 rental models? Is there a way to maximise returns?
There are different strategies you can and should employ for either model but there is also a common goal with both strategies. Let's start with the common goal of furnishing.
"A Good First Impression Can Work Wonders" - J.K Rowling
An outstanding presentation is the name of the game when you're competing with literally thousands of other owners. Have you ever wondered why 5-star hotels, on top of spending astronomical amounts on their lobbies, create their own scents as well?
There is an unmistakably distinct fragrance when you enter the Shangri La or the Ritz Carlton.
The reason they go through all this trouble is because there's ROI in it. If the Shangri La can enamour your sense of sight, smell, touch, taste, and hearing, they may have made you unconsciously attracted to their brand.
And that is also why you'll also find plush and attractive furniture, signature music, delectable restaurants and the cosiest of beds there.
Similarly, whether you're furnishing your apartment for long-term or short-term tenants, the impression you make is very important. It can even nudge a prospective tenant's subconscious to book or rent your property.
I can hear you thinking now, "how do I make a good impression with my furnishing?"
For starters, you must be honest with yourself. Not everyone has an eye for colour harmony and aesthetics. I'm not naturally good at this. So I use color wheels or I get inspiration from properties done by professional interior designers. I make a note of what colours go well together.
When I'm decorating, I make sure every piece of furniture fits nicely into the overall theme and that colours are well coordinated. This is really important.
Back when I actively did open houses to sell properties, my team and I would have nice smelling cookies or cakes inside. I had read then, that having a cake baking in the oven would increase the likelihood of a sale. Although I do not have empirical evidence to support the sales I made, I believe this made a difference.
With apartments I had on AirBnB, I made sure that the furnishing and colours were pleasing to the eye. I also got the best possible photography of the properties. With one batch of apartments in a single development, I saw a 15% increase in bookings simply by replacing a photo like this:
This apartment was easier to rent on a long-term basis after we changed the furniture. It originally looked like this:
After replacing the furniture only, and adding some wall decorations, we got it to look like this:
So give a lot of thought to how you present your property. It makes a huge difference. Changes like the above are not expensive to make. The cost to replace the furniture in the apartment above was the equivalent of 2 months rent. If this change reduced the vacancy by just 1 month every year, the cost is justified.
Now, let's look at the the major differences when furnishing for long-term and short-term accommodation.
#1 Practical Differences
When you furnish your property for a short-term tenant or guest as we call them, your furnishing has to include every single detail. A short-term guest is not going to buy cooking pots and pans or dinnerware for their 2 or 3 nights in your property.
They expect these thing to be there. Along with bed linen, towels, toiletries, internet, Netflix and every other detail to make their stay as pleasant and comfortable as possible (think toilet rolls, kitchen rolls, microwave, toaster, kettle, salt, sugar etc).
However, a long-term tenant will not expect this level of detail. You should not have bed linen and all of the items mentioned above in the case of a long-term tenancy simply because it is not practical.
Your new long-term tenants will not want to use the same bed linen and towels as the previous tenant. Dinnerware can break. When a tenant leaves, you may have 3 plates left instead of 6. Sure the tenant can replace 3 plates but it may not be of the same type. In the long run, you'll end up with a ragtag mix of plates, glasses, and spoons.
At the outset, you may think that this is not a huge cost difference but you'd be wrong. I've repurposed apartments that were rented out long-term and adding on these details for short-term tenancies can cost thousands of Ringgit.
As an example, good pillows can cost as much as RM150. If you had to buy 8, this would cost RM1,200. Bedsheets inclusive of quilt and quilt covers can cost as much as RM400. If you need 2 sets minimum for each bed and had 2 beds, you'd need RM1,600 for bed linen.
As you can see, bedding alone could cost as much as RM2,800.
How do you ensure you get all these practicalities inside your short-term accommodation property? Create a checklist. Do not even begin to furnish your apartment, be it for long-term or short-term tenancies, until you create a checklist. This will ensure you get everything and that you do not have cost overruns.
Once you have this covered, it's time to look at the decorations (yes, you should have a checklist for this as well).
#2 Differences in Form
This is an apartment that is ready for short-term accommodation (STA):
Notice how a lot of attention has been put into soft furnishing? There are picture frames, artificial plants, extra sofa cushions and other little decorative pieces. All these items add up to give a very pleasing look to the apartment.
This is not the same as having bed-linen or towels. This is a finer touch to the decoration of the whole property.
This is not necessary for a long-term tenant. In fact, you may find many of these pieces broken or missing at the end of a long-term tenancy. Long-term tenants may have children for example, and having these decorative items may be more of a nuisance to your tenant as they would have to exercise extreme caution.
Now look at this apartment, which is ready for a long-term tenant.
This apartment is well furnished and has good aesthetics but it does not have the same level of decoration as the previous apartment. This form is sufficient for a long-term tenancy. Tenants staying long-term would like to add their own personal touches to a property they are renting and you should allow them this freedom.
As you can see, STA requires minute detail in soft furnishing while long-term accommodation should allow potential for personalisation.
Therefore, there is a significant cost difference in furnishing for either. STA will be relatively more expensive.
Before you head off to IKEA or Rozella to get your furniture, you must take note of one more big difference. This pertains to your rental strategy.
#3 Furnished or Unfurnished
If you're planning to have your apartment prepared for a long-term tenancy, you have the option of choosing to go fully furnished or partially furnished.
Fully furnished properties, as the name suggests, will have all the major furniture a tenant would need like complete kitchen, dining table, living room furniture, beds, wardrobes... basically the full works.
Partly furnished properties only include permanent fixtures and sometimes, curtains too. For example, there would be air-conditioning, kitchen cabinets with cooking hob and hood, built-in wardrobes, and lighting but no beds, living room furniture, dining table, and electrical appliances (TV, microwave, toaster, washing machine, etc).
Whether you opt for to be fully furnished or partly furnished depends on your rental strategy. What type of tenant are you catering for? Singles, young couples or new families may prefer to rent properties that are fully furnished while older, established families may prefer partly furnished. You must understand your target tenant and create a package most suited for that particular target.
Please note that even partly furnished properties have to be beautiful and aesthetically pleasing. You can't slap a few fixtures in according to a whim and expect to rent them quickly. Even here, careful though and planning is crucial.
With properties on the STA model, they MUST be fully furnished with every single detail mentioned above, You don't have any other option for STA.
...you will need to think about practicality as well as form when furnishing for a long-term tenant or for STA. There are differences which affect cost. In general, it is cheaper to furnish for long-term tenants than it is for STA.
On the bright side, you should note that STA offers the possibility of higher rental returns. You need to do the math and gauge if there is a reasonable ROI on your investment before pressing the pedal.
At the same time, don't be penny wise, pound foolish with your overall presentation. Understand exactly what you should have in you property based on the model you're applying for revenue and then make sure it is presented in the best possible way to potential tenants or guests.
Remember to have a checklist of what you should buy or put into the property. It is very easy to forget important items or overrun your budget without a checklist.
Very often, properties don't get tenants because they're not impressive and therefore have no perceived value. If you give more attention to furnishing and do this correctly, you greatly improve your chances of finding a tenant or increasing your bookings.
Vacancy cost is a killer to your overall ROI so you don't want to neglect furnishing.
For more detail on how to furnish your apartment like a pro read my book, The Ultimate Guide to Buying Property that is available for free download.