This article is an edited extract from Landlording in Canada Kit by Michael Drouillard, published by and reprinted here courtesy of Self-Counsel Press. To download the full e-book or for more information, click here.
Last time, we looked at how to create an impactful rental advertisement for your unit. But one question to consider is whether to rent out your unit furnished, on a short-term basis, or unfurnished?
Renting out furnished space on a short-term basis is a tempting prospect. After all, a good furnished property rents for 25 to 75 per cent more than unfurnished property. An ideal furnished rental property is an apartment condominium in or near the downtown core of a major city or an area sought-after for tourism. Smaller one- and two-bedroom apartments are good candidates for this type of rental because they can be furnished more inexpensively than larger rental property.
However, this arrangement is not desirable for most landlords, and it is certainly not recommended for inexperienced landlords. It may require significant cash up front to adequately furnish the rental. Carrying costs are higher as well, as you are expected to pay for all utilities including cable/Internet access and you will have to pay these fees even when the property is vacant. You are also commonly expected to offer some sort of housekeeping service.
The most time-intensive part of property management is time spent finding tenants. The owner of a furnished rental has to do this many times each year. It can be tempting for a landlord in such circumstances to lower tenant selection standards, making the risk of letting a bad tenant in much higher.
Strata or condominium corporations may not permit owners to run this type of rental business. The bylaws of your corporation may state that prospective tenants must sign a one-year lease, or they might require a move-in fee of several hundred dollars. The move-in fee is payable even if the incoming tenant doesn’t move anything of significance into the suite other than a suitcase. Such bylaws make short-term tenancies less profitable.
It is possible to have a profitable furnished rental business, but in order to be successful it is necessary to put in much more time and effort than most landlords are prepared to do. Renting the space unfurnished is the best way to go for the vast majority of landlords.
Keep it simple!
Next time: Checking prospective tenants' references