Buy to let - furnished or unfurnished

soupdragon10

I am just looking at investing some of an inheritance in a buy to let property, and wondered whether it would be better to rent it furnished or unfurnished.

I have no problem with furnishing a property as I inherited a quantity of furniture all of which is in excellent condition and of good quality.

Are there any advantages / disadvantages to take into account when renting and which would be the better option. I am aiming at 2 - 3 beds so couples with or without children.

kinger101

Furnished can potentially be higher income, but probably only for HMO. But this is more work too.

Other thoughts

(a) generally, unfurnished properties appeal to people who have a higher income and can afford, or already have, their own furniture. If I'm being less charitable, I might say a better class of tenant.

(b) if you want to let furnished, do you think the furniture you have would appeal to a young couple?

(c) Is the furniture compliant with fire regulations?

(d) Have you checked out the market in your area for furnished v unfurnished.

Old_Git

tax wise you get 10% allowance for furnished .

kinger101

Old_Git wrote: »

tax wise you get 10% allowance for furnished .

That is, you get to deduct a 10 % "wear and tear" allowance when calculating taxable income from rent. This is 10 % of "net rent", which is rent less charges a tenant would usually pay but have instead been paid by the landlord (e.g. council tax).

Pixie5740

It depends on what sort of property you're going to buy and the kind of tenants it will attract. If you buy a family home then the family will most likely have their own furniture whereas a student rental would probably be better off furnished.

ognum

You know your area and the type of tenant you will attracts. You say 2-3 beds but are these professional couples, people on housing benifit or students? You need to decide according to your market and your business plan.

I have no experience of letting furnished, my properties are let with all white goods, curtains or window coverings but no furniture.

I do not think if you let furnished you will make any profit from the 10% allowance! over a 10 year period you are probably going to replace everything maybe more than once.

You will need to buy things of good enough quality to so they don't break continuously and be ready to replace/ mend when needed. Furnished will put some people off renting your property as I guess will unfurnished, it does depend on your target tenant.

IMO tenants stay longer in unfurnished properties, they make it their home with their things (as they should). I have great tenants so I'm happy with it in my properties.

Make sure you read the post above on the responsibilities of being a LL, you may have already done it.

Good luck

G_M

Depends on your business plan and target market.

Who will be your typical tenant?

Furnished does not generally attract much increase in rent, but in the right market place might make finding a tenant easier.

Or harder! Some tenants will think "where will I put my own furniture, and why do I want this ugly chair....?"

Another option is to leave some basic furniture in but market it as furnished OR unfurnished. Prospective tenants can then choose and if they want unfurnished you remove the stuff and sell/store/dump it.

Remember, all soft furniture must have "Fire Resistant" labels on it, so check your inherited stuff!

Spidernick

kinger101 wrote: »

That is, you get to deduct a 10 % "wear and tear" allowance when calculating taxable income from rent. This is 10 % of "net rent", which is rent less charges a tenant would usually pay but have instead been paid by the landlord (e.g. council tax).

In all the years since the introduction of Council Tax, I can safely say that I have NEVER seen the 10% W&T allowance adjusted for this on the numerous tax returns I have seen/reviewed. Our organisers (for one of the Big 4 accountancy firms) don't even ask for these details for rental income and expenditure, so I'm not entirely sure that what you are saying is correct.

EDIT: Reading this again I see that you are correct and that it is only in the unusual circumstances where the landlord pays the Council Tax - apologies.

G_M

Old_Git wrote: »

tax wise you get 10% allowance for furnished .

But by electing for the 10% allowance, you lose the ability to claim allowance for specific costs incurred in the course of the business.

Wear and tear allowance can be claimed in either way:

Taxpayers can elect to deduct a wear and tear allowance as an expense of their property business.
This election means that instead of claiming relief for replacing utensils, or repairing furniture, the taxpayers deduct an allowance calculated as a percentage of rents received.

http://www.hmrc.gov.uk/manuals/pimmanual/PIM3205.htm

dodger1

As a tenant I wouldn't look at a furnished property (accepting white goods). Every tenant I know has their own furniture, I'm not saying that the opposite doesn't exist but I'd say the majority will be looking for unfurnished. You can of course advertise it as both furnished or unfurnished at the same time.

SuzieSue

G_M wrote: »

But by electing for the 10% allowance, you lose the ability to claim allowance for specific costs incurred in the course of the business.

Wear and tear allowance can be claimed in either way:



http://www.hmrc.gov.uk/manuals/pimmanual/PIM3205.htm

The rules changed in April 2013 meaning that you can no longer claim for specific costs:

http://www.wsm.co.uk/blog/2014/08/renewals-allowance-the-new-furnishing-rules-for-landlords