What you need to know before investing in furnished apartments
A furnished property is not always ideal for all types of tenants. Tenants who already own their own furniture will be less likely to rent a furnished property. Photo by Ismail Kezaala
The property market is transitory in nature. Investors are always looking for the next big thing that can make them even more money. More and more property investors are now turning to furnished apartments because they have a higher profit yield than long-term residential tenancies.
“Here, you are dealing with a different tenant profile - someone willing to pay more for luxury, some home comforts even if it is for a short while,” Prosper Kalanzi, a property investor explains.
According to Kalanzi, this kind of investment is a way of adding value to a similar investment thus increasing profit exponentially.
“There are several benefits of furnishing your property, but the biggest one for me is that people are willing to pay more for the convenience of moving into a furnished place and stay for shorter-term giving you flexibility in moving your pricing with the market,” he says.
Although furnished properties promise to deliver great returns on investment, they are not feasible for every investor because of the cost involved.
“This is an exclusive investment for people with a healthy bank balance who are looking to diversify their strategy, retirees with a lump-sum payment or real estate companies. Whether you are a wealthy investor or company, this investment if managed, guarantees financial security and an attractive exit option,” says the investor.
There are a few things one should consider before jumping onto the furnished property bandwagon.
Location
Renting furnished homes is extremely popular among people looking for short-term rentals such as tourists, business professionals or expatriates who only plan on staying at a certain place for a limited amount of time but want a homelier experience than a hotel. This makes the location of your furnished property crucial.
Since you will need to attract guests, Hasheem Kantongole, a property developer, says the ideal location should be in the city centre. “The good news is although the city centre is the most ideal location; other areas too can work because of the diversity of renters.
A water front property can be popular for tourists on vacation while a suburb can be the perfect spot for an expatriate who has a family,” Kantongole notes. The property developer states that this kind of investment can be successful in any area that is already in demand.
Likewise, your property should be in the perfect environment for the specific guest you are targeting.
“You might have a prime plot in the centre city but the surrounding area will make the difference. Few expatriates will choose to live in apartment on Kampala Road; the high class ones prefer quieter suburbs such as Nakasero or Muyenga even if they are staying for a week. This means you will struggle with your investment if the location does not match with the clientele it is intended for,” says Katongole.
Management
A furnished property requires more time-intensive management than long term rentals. So before making this decision, Kalanzi recommends first examining whether you have the time to manage the property or not.
“Unlike long term rentals, here the landlord has an influx of people checking in and checking out. And to make profit, it is essential that the property is always ready to welcome as many guests as possible. That means you may find yourself spending more time at the property which can be stressful especially when you have a nine to five business day,” he explains.
Other options of course would include getting a team that manages your properties or hiring a company but this means their cost will cut into your profits. “To be able to enjoy the high rental yields prepare to work for them,” warns Kalanzi.
High investment
According to Katongole, since furnished properties often appeal to the wealthy, to attract the right guest will require the investor to make a huge investment.
“The kind of guest willing to pay highly expects quality furnishing and finishing. In addition to basic furniture such as living room sofa and coffee table, dining table and chair, bed and dresser, basic kitchen appliances and cabinetry some units may also include a washing machine, dishwasher and other electronic appliances to make the guest comfortable,” he notes.
The quality of your furnishing has an overall effect on the rent and demand of the property.
As well, the furniture having to be updated from time to time repaired and cleaned – all of which is an ongoing cost furnished properties, whether short or long term, require more maintenance and attention.
An ongoing capital expenditures budget is required to ensure your property is maintained to the highest possible standard.
Choosing furnishing for your property
A furnished property is not always ideal for all types of renters. Renters who already own their own furniture will be less likely to rent a furnished property. Furnished apartment renters are also less likely to be long-term tenants if they decide they want to personalize their home or begin buying furniture.
