Furnished or unfurnished

[kanrent]

Hi just wondering which to choose from the above for one of my rental properties.

What are the advantages and disadvantages of renting a furnished or unfurnished property

Thanks for any input 

[Grampa]

I guess it depends what sort of market you are targeting. If you are looking for people requiring winter lets or the property is a lower end bedsit type property furnished may be the way. But it my experience most people nowadays have there own furniture and like to personalise a property with their own stuff.  30/50 years ago there were more "Rising Damp" type properties where furnished was the norm.    

Furnished as a rule I dont think demands a higher rent and will also limit your market unless you have the flexibility to offer both options and have somewhere to store the furniture if not needed.

You then get to the issue of the inventory/condition report. If we have a unfurnished property the report  could/would be 50-60 pages with photos and descriptions for a empty 3 bed property so can you imagine the work and time involved to correctly document all items of furniture as well with every chip, scratch blemish etc.and them check it again when the tenant has vacated. If you use a professional inventory company that would resolve that issue but is likely to cost about £150 for the report and then another charge on the check out. 

[Richlist]

When I started letting residential property 20 years ago I only let fully furnished. In more recent years as tenants have vacated properties I have moved away from furnished to unfurnished.

One of the big advantages with furnished was the ability to claim the 10% wear and tear allowance but that is no longer available. 

I also used to find that furnished property attracted more professionals. People with their own property elsewhere often needed to rent from me for 1-3 years whilst they were on a work contract, but obviously didn't want to buy their own furniture.

I agree with Grampa, I think it really depends on your target market. But if you are letting an average property to an average tenant(s) then now the way to go is:-

* Unfurnished.

* Hold the property in a Limited Company.

* Self manage..only using professional services when required.

[Mortitia]

Definitely unfurnished.  The problems of replacing/arguing about mattresses, beds, carpets etc is not worth the effort.

[Carryon Regardless]

Floor covering, blinds and cooker is all I provide. Any other items that were left by previous are given to the new T's, if they want them.

Years ago my first let was furnished but "I have my own" this and that made all lettings more complicated. The only potential T's that had nowt I wouldn't want anyway.

[Richlist]

So you wouldn't want to let to a single guy who owns his own property in Chester, earns £150k pa and who wants to rent a furnished property from you for a couple of years ?

Of course he wouldn't want to spend his time or money furnishing your unfurnished property and then have to give it all away in two years time.

Some people who don't have their own gear are not all bad news.

[Carryon Regardless]

Nah, a £150K pa person wanting to rent my flats, only if he wants to run it as a brothel. I don't approve of people putting holes in any of my properties

 

[kanrent]

On 12/03/2017 at 5:20 PM, Richlist said:

When I started letting residential property 20 years ago I only let fully furnished. In more recent years as tenants have vacated properties I have moved away from furnished to unfurnished.

One of the big advantages with furnished was the ability to claim the 10% wear and tear allowance but that is no longer available. 

I also used to find that furnished property attracted more professionals. People with their own property elsewhere often needed to rent from me for 1-3 years whilst they were on a work contract, but obviously didn't want to buy their own furniture.

I agree with Grampa, I think it really depends on your target market. But if you are letting an average property to an average tenant(s) then now the way to go is:-

* Unfurnished.

* Hold the property in a Limited Company.

* Self manage..only using professional services when required.

What are the advantages of holding the property in a limited company richlist

[Richlist]

Well first of all, if you already own investment property then it's probably not going to be worth putting it into a limited company. Why ? Because you would in effect need to sell the property to the limited company = selling fees, buying fees, SDLT, CGT liability etc which will likely wipe out any advantage.

But if you are buying new then it can make sense. Profits are subject to corporation tax not income tax so currently 19% (and due to fall to I think 17% as announced in the budget) vs 20% or 40% income tax.

You can take currently £5k from profit in dividends tax free, due to fall to £2k.

You escape most of the onerous tax changes due to take effect from this April 2017 thru to 2020.

I've decided I'm going to sell all my portfolio which is held jointy by Mr & Mrs Richlist.....selling one per year to minimise CGT liability over the next few years. Then I'm buying property within a limited company. Ltd Company mortgages are a little more difficult to get but are available.

[Grampa]

So would you sell your property to your limited company one per year or sell off the portfolio to Joe public and buy new portfolio via LTD Co?  

[Richlist]

I will sell them all to the public.

I have mostly flats so I have to take into account the remaining lengths of the leases together with the length of time for disposal at a rate of one per year.

For example, three flats with the shortest leases ....they originally had a 125 year lease but now have 91 years remaining. Selling these over the next 3 financial years will be perfectly ok as the lease lengths are not unduly short. But putting them into my own Ltd  Company would mean it will be faced with the cost of extending the leases.....which I'd rather not have to do. Easier for me to buy new leasehold or even freehold property within the Ltd company.

[Grampa]

makes sence.

I have wondered for a while now if I made the mistake of buying my properties (flats) in Mr & Mrs Gramps name and should have purchased via a ltd co. Other than the advantages you already have mentioned it can make the changing of ownership a lot easier and any mortgage can stay in place even thought ownership of the LTD Co changes hands. 

Do you know if it was clarified or not that purchasing via a LTD Co got around the 3% extra/second home stamp duty charge that came into effect last april?

[Richlist]

I am not aware of any special treatment of SDLT for Ltd Co's. So, the extra 3% will apply......very happy if someone tells me I am wrong on this.

Your question does raise an interesting point though. Supposing a person had a leasehold flat where the lease was approaching the point where a decision was needed to either sell now or extend the lease.

The lease extension might cost £10K vs selling the property and buying another with a longer lease for £200K would incur £7.5K SDLT (2% +3%) + agents fees + buying and selling costs. They could cancel each other out.

One other advantage of holding property within a Ltd Co is that passing that property onto family members is a lot easier and cheaper.

[Grampa]

4 hours ago, Richlist said:

One other advantage of holding property within a Ltd Co is that passing that property onto family members is a lot easier and cheaper.

And if there was a mortgage it doesn't need to be changed and stays with the Ltd Co. So it could be a way for a person whose credit rating or declared income was so bad they couldn't get a mortgage to get one in a round about sort of way. 

[Carryon Regardless]

Any Ltd  Co mortgage is likely to be covered by a personal assurance (underwritten effectively). The original directors would then be at risk of the new company owners / directors abusing the situation causing the originals to still be responsible for the payment of the debt.

[Richlist]

I was approaching the issue from a slightly different direction.

I was planning to have the family members as directors of the company from the outset. The company would of course need to raise finance to expand beyond the 'considerable' initial cash injection (from me). I agree the lender may require personal guarantees from directors but it doesn't have to be all the director's provided the security for the loan can be guaranteed. My family all own property which could be used to underwrite a commercial loan. So, I wouldn't need to provide any personal guarantees.i

My understanding is that it's entirely possible for a director (me) to resign and extricate himself from that company if required, it just may require some forward planning. Its made easier if that director (me) has not provided any personal guarantees.