Real Estate 101 Home >> Renting Unfurnished vs. Furnished

• Renting Unfurnished vs. Furnished

  Author: Anoop Majithia Date: May 1, 2017

  Before I get into the details of this question, let’s establish why addressing this is important to the success of your investment. Most condo investors whom I’ve spoken with are initially reluctant to rent their condos as furnished units. Their first thoughts are: additional work, potentially lower occupancy rates and property damage caused by a higher turnover of short- term tenants. While these concerns are legitimate, there are strategies to effectively deal with all of them. More importantly, what cannot be ignored is the impact of the additional rental income on the long-term financial performance of your property.

  By Example

  
  

  Let’s use the specific example of an actual downtown Vancouver condo property that I own today: a low floor, 446 square foot studio with no parking at 928 Beatty Street The Max – market value: $275,000. With a 30% down payment, the initial mortgage loan would be
  $192,500. Financed at a fixed rate of 3% over a 25-year amortization period, the monthly
  mortgage payment would be $912.86.
  
  Here is an estimate of the financial performance of this unit if it was rented unfurnished, and its actual financial performance actual data has been used for all items except the mortgage payment as it's more relevant to use the mortgage payment that an investor would pay if a similar unit were purchased today:

  	UNFURNISHED	FURNISHED
  MONTHLY INCOME
  Rent	$1150	$1550
  MONTHLY EXPENDITURES
  Mortgage Payment	$912.86	$912.86
  Strata Fees	$205	$205
  Property Taxes	$105	$105
  Management Fees	$50	$150
  Repairs/ Furnishing Reserve	$45	$75
  Utilities	$0	$75
  Insurance	$20	$20
  Total Monthly Expenditures	$1337.86	$1542.85

  
  

  So, if this unit were rented unfurnished, the monthly negative cash flow would be: $187.86 which equals -$56,358 over 25 years. Instead, I have always rented it furnished and it has never been vacant.

  

  Most importantly, over time, your tenants will pay your entire mortgage loan.

  
  Furnished Apartments Unfurnished Apartments

Author : Anoop Majithia
Anoop Majithia is the Principal and Director of Plan A Real Estate Services Ltd. Anoop became a Chartered Accountant upon his graduation from the University of Toronto and subsequently completed his law degree at the University of Saskatchewan in 2001. Since that time, he has been a successful entrepreneur and avid investor in the downtown Vancouver condo real estate market. Anoop is a qualified Managing Broker with the BC Real Estate Association. Plan A Real Estate Services Ltd. is the culmination of his wealth of educational and personal experience, and his passion for real estate.