Now that more and more countries are opening up and the pandemic requirements are being reduced at the airports, your city may be expecting a wave of travelers and newcomers. Many of them want a shorter-term, furnished accommodation before they decide to settle down. These furnished rentals mostly demand higher rates than the unfurnished ones, while providing a hassle-free and welcoming experience for the newcomers. Although it may sound like a no-brainer, furnished rentals must be approached with caution by investors as operational costs, time, and your own efforts can overrun quickly.
Not all properties can be furnished rentals.
We often hear “location, location, location” in real estate, and that rings more true for furnished rentals. Demand for furnished rentals, short-term or long-term, will generally be higher in the Entertainment District of downtown Toronto, rather than in the Wexford neighbourhood of suburban Scarborough. Such downtown areas like the Entertainment District offer plenty of nightlife, shopping, dining, transit, parklands, and tourist attraction options, along with the convenience of being close to workplaces. Ideal locations will also contribute to the higher rent demanded by furnished rentals. Aside from the location, check your condo bylaws to see if short-term furnished rentals are even allowed in the first place. Some condos will require a minimum number of days for you to rent your unit, and their building management teams may scour the internet to hunt down your listings.
Higher price and higher expenses
Furnished rentals could charge 15~30% more than their unfurnished comparables, and such higher prices are necessary to cover the following:
- Furnishings— like a sofa, bed, and dining table, but also cutlery, plates, and even non-standard appliances like toaster ovens, smart lighting, and surround sound systems. You will need to factor the normal wear and tear, along with setting aside contingency funds for unusual circumstances like abuse or theft of appliances. Don’t forget to consult with your insurance provider on the appropriate coverage limits and terms for your furnished rental.
- Cleaning professionals to get the property ready for the next guests. Whether you hire a 3rd-party professional or you do it yourself, make sure all garbage is removed, linens are changed, beds are made, toiletries and supplies are refilled, along with the usual cleaning of countertops, door handles, floors, washrooms, and other parts of the home that require attention. As furnishings are concerned here, many guests will require a comprehensive sanitization process during this time as well.
- Utilities such as hydro, water, heat, cable, and internet TV. Remember that for units where Residential Tenancies Act applies in Ontario, your tenants cannot be restricted from bringing guests in, and hence, overcharge on your utility bills is possible from time to time.
- Transaction fees, which vary based on the source of your tenant or guest acquisition, with some internet listing sites and classifieds like Craigslist charging no fees and a flat service fee of 3% of the booking subtotal on Airbnb. You may also consider tenant placement agencies like Tolobi, which offer full tenant placement and property management services to take the hassle out of your day-to-day operations.
- Permits and taxes, which vary based on the city or town that your furnished rental is located in. Keep in mind the anti-short term rental sentiments rising in many major cities due to increasing unaffordability for the locals, which lead to more fees and short-term rental regulations being enforced by the local government. In Toronto, short-term rental operators need to register with the City of Toronto and are required to collect and remit a 4% Municipal Accommodation Tax on all rentals.
Remember the Non-Financial Factors
As much as the location is important, you will be targeting a subgroup of the wider tenant population with furnished rentals. Some may be short-term visitors to the city for vacation, and others may be professionals on extended business travel looking for a hassle-free move-in experience. Although you will have a competitive advantage over the unfurnished units for these types of guests, you should consider your competition, like other furnished rental providers and hotels, and how much demand your neighbourhood really has.
If you’re managing it on your own, you will need a more extensive process than managing unfurnished rentals. When the internet or cable TV stops working, your tenant will message you instead of the telecom provider. More appliances, like the toaster oven or sound bar, will mean more potential issues raised by the tenants when they malfunction and the more you need to clean.
Shorter-term furnished rentals sometimes attract unruly guests, who may be a source of complaints (and fines) by your neighbours or the condo building management. If possible, leverage any online reviews about your future guests and clearly explain to them the building rules that they must abide by. Such manuals are one-time set-up costs, so spend some time to invest in them, as they could leave a great impression on the guests when they move in and prevent any future complications during their stays.
Furnished rentals can present a great opportunity again for investors ready to capitalize on the easing of the pandemic restrictions. There are great profits to be made, and you could provide a welcoming experience for the newcomers ready to explore your city. Consider all the factors above to create a foolproof process for your furnished rental business, and if you need consultation, our team at Tolobi is always reachable at rent@tolobi.com.
