Fully-furnished investment properties on the increase on the Lower North Shore
Media release - Thursday 16th April, 2015
It’s been rivers of gold for Lower North Shore residential property investors since May 2012, yet rents have naturally failed to keep pace with average annual double-digit capital growth.
“Around 25% of our currently available properties in Mosman, Balmoral and Neutral Bay are now fully-furnished, whereas twelve months ago, virtually not a single property came with furnishings, so this is a major change in the mindsets of landlords with assets on the Lower North Shore,” said Mr Schofield.
“We believe that more yield-hungry landlords are increasingly choosing to let out their investment properties fully-furnished in the hope of beefing up their returns.”
According to Raine & Horne Mosman’s research, a two-bedroom apartment in Mosman, which is currently selling for $900,000, will rent for $750 a week if it’s unfurnished.
However, adding furniture will see the same apartment rent for $900 a week. This represents a gross yield of 5.2%, compared to only 4.3% for an unfurnished apartment.
“However investors need to do their sums before offering fully-furnished apartments to the market on a long-term lease of six months or more,” said Mr Schofield.
“Apart from the wear and tear on the furniture, there are also the added costs of producing a fully-itemised inventory report, which needs to be monitored regularly.
“As furniture is involved, property managers must inspect a property more regularly, which means landlords can expect to pay management fees of between 8% and 15% for the services of a property manager, rather than 6% if the property is unfurnished.”
Other costs involved in maintaining a fully-furnished investment property include additional contents insurance, which is an additional charge to landlord insurance.
“While the contents insurance is tax deductible, it’s still an extra financial outgoing that eats into yields.
“It’s also fair to say fully-furnished apartments can be harder to rent as most tenants have their own furnishings.”
On the flipside, by taking a fully-furnished apartment to market, landlords can save on storage costs, according to Mr Schofield.
Short-term leases can maximise returns from a fully furnished property
Mr Schofield advises that a mix of lease terms can be the best way to maximise returns from a fully-furnished property.
“A fully-furnished two bedroom apartment with views of Sydney Harbour can rent for as much as $1,700 a week on a short term lease in the summer months.
“Short-term leases can be as short as a week, and as long as three months,” said Mr Schofield.
“Then when the weather starts to cool down after Easter, the aim should be to sign the properties up to longer six month leases to see the properties through the winter months, when demand for fully-furnished investments falls.
“Also if you’re renting out an apartment, be sure to check that the strata by-laws allow for a short-term lease, as some individual owner’s corporations don’t support leases of fewer than three months.”
However the key to a successful strategy of short and medium term leases involves ensuring that the property has the ‘wow’ factor that justifies the additional rent, said Mr Schofield.
“There must be no expense spared on the furniture, the fittings and the interior, which should all present in an immaculate fashion.
“The exterior must also present well, along with the foyer when you walk in, which can be tricky unless you own the entire block, or you have a very strong say every time the body corporate meets,” said Mr Schofield.
“Only when the property presents at its very best, can a fully-furnished apartment on a short-term lease truly justify a premium weekly rent.”
For further media information contact:
Drew Schofield, Senior Property Manager, Raine & Horne Mosman on 02 8668 3966
Andrew Harrington, National Communications Manager, Raine & Horne on 02 9258 5400