Furnished or unfurnished?
Buying all the furniture for a property can be a major expense. Should you go ahead, or is it best to let tenants bring their own furniture? Our guide will take you through the pros and cons of letting a property furnished or unfurnished.
The first thing to understand is that there are no strict rules guiding whether a landlord should furnish a property. It's completely up to you whether you offer it with nothing but bare walls and floorboards, or every possible kind of furniture, appliance, tools, kitchenware, bathroom scales and magic lanterns.
Nevertheless, the decision to let a property furnished or unfurnished will make a difference to your chances of finding a tenant and the kind of tenant you will attract.
- It saves tenants money, since they don't need to buy furniture
- You may let the property more quickly than an unfurnished property, because (generally) there are more tenants looking for furnished lettings
- When the tenancy ends, you will still own the furniture and can use it yourself, or offer it to future tenants
- You can deduct a percentage of the cost of the goods from your tax liability (see more details below)
- Tenants who buy their own furniture may stay for longer periods, since they have made an investment and moving could be complex and expensive
- Tenants may be happier with their own furniture and less problematic for you
- You are not responsible for insuring tenants' furniture or any other items they bring into the property
- You have no concerns over wear and tear if the property is let unfurnished
The positive things about furnishing a property include:
The positive things about letting an unfurnished property include:
A third option is to let a property 'part-furnished', which is a term completely open to your interpretation. You could put in everything except beds (since many tenants have their own beds) or you could show the property to potential tenants, offering them the choice of whether to have additional furniture or not.
Lettings agents favour this option, since it gives the greatest flexibility and therefore makes it easier to find tenants. Ideally, there should be enough furniture that the property looks 'lived in' and functional, but not so much that the place is cluttered. Having too much of a landlord's furniture crammed into a property is off-putting.
Some landlords have a range of properties, allowing them to spread their furniture around. Others hire warehouse space to store furniture in case it is needed in future.
In general, landlords with larger apartments or houses tend to let them unfurnished, since tenants are likely to be older and may have families, along with their own furniture. Smaller properties are more often furnished and attract younger, more mobile tenants.
You are not legally obliged to take out contents insurance on the furniture and other items in a tenanted property, but you are well advised to do so.
A common practice is to hire an inventory agent who will make a detailed list of everything in the property before the tenancy starts.
When the tenancy ends, the agent will return to check that everything is still there and make a note of any damage or wear and tear. There are rules of thumb guiding how much a landlord can charge a tenant, for example for stains on carpets or chipped crockery. You are not allowed to charge tenants the full cost of replacing items suffering from normal wear and tear.
See the Association of Residential Lettings Agents information pages for more details.
Not all insurance companies offer insurance for tenanted properties and those that do will commonly charge a premium over contents insurance for your own (non-tenanted) property. And if your property changes status, from owner-occupied to tenanted, it is the landlord's responsibility to inform the insurance company. Otherwise a future claim could be invalidated.
Lettings agents recommend that you carry out a Portable Appliance Test (PAT), which ensures that all your electrical goods are in good order and are safe. This is not a legally required lest, but is helpful to assure potential tenants that you take their safety seriously.
Furniture, however, must conform to the legal fire resistant standard - all fabric furniture such as sofas and armchairs must have labels proving that they meet this standard.
Council tax exemptions
There are two types of council tax exemptions that you can apply for, regarding unoccupied properties:
Class C exemption applies to unoccupied, unfurnished properties. The exact level differs from one council to another, but in many cases it is a 100 per cent discount, running for a maximum of six months. After the six months has elapsed, if the property is occupied for at least six weeks, then a further Class C exemption can be applied for.
If the property is furnished, you can apply for an 'unoccupied discount'. Again, this varies from council to council. Some will offer 10 per cent, others 50 per cent. The discount runs up to the end of the tax year and you may have to reapply for the following year, after 31 March.
Contact your local council tax information office to get specific details of what discounts apply to your property.
Income tax issues
If you let furnished property, you are permitted to claim an allowance on the tax you pay for letting income, equal to 10 per cent of the 'net rent' i.e. the total rent minus charges and services such as council tax and water rates. This is known as a 'wear and tear allowance'.
Alternatively, you can claim the net cost of replacing a particular item of furniture, but not the original cost of the item. This is known as a 'renewals allowance'.
You cannot claim either of these allowances for unfurnished property. And you have to decide which allowance you want to claim and stick with it. As the Revenue and Customs website puts it: "It isn't possible to chop and change…from year to year".
See the HM Revenue & Customs wear and tear guidelines for more details of how to claim the allowances.
Some lettings agents think that they can achieve slightly higher rents from furnished property than unfurnished - somewhere between five and ten per cent - but most argue that flexibility is key. The best thing is to offer whatever arrangement meets the needs of your customers.
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- guide to letting a property
- Association of Residential Lettings Agents
- HM Revenue & Customs wear and tear guidelines
If you let furnished property, you are permitted to claim an allowance on the tax you pay for letting income, equal to 10 per cent of the 'net rent'