A “Must Read” for Investors
Before listing the five most important reasons given by thousands of investors over the years as to why they chose to furnish their properties, I would first like to ask you the one question which is key to every investor…
Q: What is your end goal when buying an investment property?
A: In 98% of cases it is to maximise your return on investment in the most risk-averse way.
So how does furnishing your property support and protect this statement?
1. Play the Percentages
The percentage of furnished properties in the new build property market varies widely, but I can name only one or two areas where the percentage of furnished dwellings for tenants is lower than 50%.
In most areas the rate is above 80%, with some locations such as Canary Wharf and Nine Elms running at more than 95%!
So, the obvious question is “why wouldn’t you furnish?” Deciding not to furnish is to act contrary to verified market data – do you really trust yourself to know better than the market experts? I’m sure you were advised by your agent or developer to buy into their development to maximise your return on investment based on their expert knowledge – so why would you ignore what the data is telling you now?
2. Your Target Market
I am confident that when you bought your property you had in mind High Net Worth individuals (HNWIs) / aspirational and successful business people that would rent the property from you. Ideally, a tenant who is low maintenance, eats out and socialises regularly and, possibly, travels home at weekends to see friends and family living elsewhere in the country. This tenant makes light use of the property and its internal resources, which consequently ensures the property stays looking as new as possible for as long as possible.
This calibre of tenant demands that their rental property is finished to the highest specification, thereby reflecting their lifestyle (wouldn’t you in the same position?). In order to win these tenants it’s essential to present your property furnished to a level which meets their exacting expectations.
3. What are Tenants paying for?
Answer: Convenience.
People choosing to rent a new build property in preference to an older apartment or house are paying primarily for one thing – convenience.
For many professionals it’s the provision of 24-hour Concierge – greeting visitors, supervising tradesmen, taking deliveries at unsocial hours and offering to arrange dry cleaning collections and similar personal services. For others the peace of mind provided by 24hr security when arriving home late is an invaluable comfort. Or, it could be as simple as having the privacy afforded by the in-house, residents-only gymnasium where they can work out without bumping into colleagues or having to fight for a turn on the treadmill. Whatever the reason… they are prepared to pay a premium for it.
New build properties, both to purchase and to rent, are generally 15% -30% more expensive than an older, standard equivalent property in the same area. Tenants are paying extra for the perks afforded by a New Build lifestyle. Landlords who fail to embrace the fact that this applies to furnishings will see coveted potential tenants move elsewhere. Why would they pay for all this convenience and then be expected to take time off to build / buy / transport furniture of their own and organise an install.
4. Survival of the Fittest
As in all walks of life, the most successful reap the biggest rewards and the New Build property market is a shining example of this. The best developers sell the most units, the best units in those developments sell first and the units that rent the quickest are the ones that appeal to their target demographic the most – simple.
If a tenant searches on Right Move/Zoopla or similar looking for a one bedroom property in Canary Wharf, they will probably achieve 100+ hits even after filtering by price and location. It is possible that within a single development which has recently completed that this number of units could be available for rental at the same time.
How does a tenant choose which properties to view? They choose those with immediate lifestyle appeal – the most attractively furnished. Where personal taste is a factor it’s possible a tenant may select the property of another landlord, but properly finished, your property will definitely be one of the small percentage of apartments which rent early.
In a particularly competitive part of Nine Elms we have seen a 7-9 week difference between 2 bedroom properties renting at the same price. The deciding differential being how well dressed the apartments were and how well they catered to furnished market /part furnished equivalent. Without the identity of furnishings what is your unique selling point on these property portals? An empty flat with the same colour flooring and same sized bedroom and style as every other empty flat online.
Which leads on to my final point…
5. Avoid the Void
To maximise your return, make this your single immediate aim when completing on a property until you sell it. You need to be willing to commit to all the elements needed to make this a success. Not just through furnishing but through your agency choice as well.
Void periods are nothing but a loss of profit.
Final word:
Let’s revisit the answer given at the start of this article when I asked the question:
“What was your end goal when buying an investment property?”
The answer was to secure the highest and safest return on your investment.
To achieve this result it’s clear that if you’ve spent between £600,000 and £2m on an apartment it is not just sensible, but wise, to further invest between £5000-£15,000 to ensure you achieve this. Renting your properly quickly to long term, high calibre tenants thereby guaranteeing a swift and secure return on your investment would result in a success.
If you were selling your property, securing a mortgage or buying a car you would go to an expert to make sure you received the best advice possible. Why risk not taking advice from experts in their field? Furnishing a property is no different. Why would you wait 3 years for a property to complete, only to risk not maximising your return in the final 30 days.