This is my first time contributing to this very interesting site so I hope this works.
There is a lot of talk about negative cash flow.
My solution is to fully-furnish my rentals. I pay all utilities including high-speed internet and telephone. All my tenants need is a toothbrush!
For this, the rent is double or triple or more that of an unfurnished home.
I have been doing this now for 4 years, and have about 45 furnished rentals.
Would there be a demand for knowledge about this? Am I the only one (other than vacation rental owners) who get much higher rent doing this?
This business started very small. I bought a home with a boarded-up cottage in the back yard and wanted to earn rent from it. I fixed it up and decided I could get about triple the rent if I furnished it. Four years ago, that was $900/mo instead of $300. There was demand, and the business grew.
The work is greater, but so is the rent. I would be interested in any feed-back.
Very interesting topic. It sounds like you’ve found a nice niche market. Do you have any cash flow data to determine how your expenses/cash flow is affected with your model? I’d love to hear your experience on this issue.
I am in a town of 50,000 in the Southwest.
All units are completely furnished–linens, dishes, pots, pans, tv’s microwaves, ironing boards,etc.
The units range from studios to 3-bedroom homes.
Some are owned, and some are leased. People here locally have told me this was a really good idea. There has been a large demand.
We just got fully computerized this last year when we had Canadian snowbirds (retired accountants) stay with us for the 2nd year and they took us under their wing and helped us set up financial programs. Before that we were doing it Mom-and Pop style with monthly expense receipts and the little rental receipts booklets.
We are making money, although some of the smaller units are break-even but help keep our inventory of homes up.
I calculate monthly operating overhead per unit at $300/month. This goes under office expense, but we will soon start breaking that down better into cleaning, yard, repairs, employee cost.
So how do you handle tenants running the A/C on 62 degrees 24 hrs/day? Or setting the heat at 80 degrees non-stop. I just don’t see how paying the utilities on any property can be a good idea, but I too am interested in hearing about this.
We write a clause in the lease/rental agreement that says something like “Landlord will pay utilities up to a maximum of ____/month.” We then write in $350 or $400,etc. We give the tenants a courtesy call if their bills are out of line. We have a utility chart that logs it in every month. If they continue to have extra high bills we would invoice them. But in practice we really don’t. We also give them flannel sheets, space heaters, fans to keep them comfortable.
It is a different mind-set. Sort of like running a hotel for well-paying and usually well-behaved guests.
Interesting topic. It sounds like you are more of an extended stay hotel than a traditional rental. This is a great idea for long term, temporary workers from out of the local area who don’t plan to relocated. All those on per diem for expenses will flock to you if you are less than the extended stay hotels.
We are making money, although some of the smaller units are break-even but help keep our inventory of homes up.
If you are getting 2X to 3X the normal rent, why do you think they’re only break even? Is it primarily the utilities or the damage to the furnishings? Is the vacancy rate high? Do you put brand new furnishings in your units or do you put in used furnishings? Do you find the cleanup after a tenant leaves to be excessive with all the dishes, bedding, and furnishings? Do you have a lot of theft of the things you furnish? Do you have a lot of damage to furnishings (I can’t imagine getting sheets and bedding back in a reuseable condition).
Some of the smaller leased homes are break-even because they were an experiment to generate more income from more units without a big capital investment. Now I write and negotiate better leases. It’s too complicated to cover in a paragraph or two.
The owned units do generate money. Just like unfurnished owners I found the multi-family complexes to be much more lucrative. Just sold a SFR because the costs were too high. I use used furniture but good mattresses and electronics. I have lots of fun decorating. Tenants don’t damage stuff any more than they do at the Marriott. I have a 2-car garage with cabinets full of sheets, towels, pots and pans. We replace worn stuff. Cleanliness is everything for happy tenants. I am enjoying sharing this as I felt I was in a desert with no peers. I wrote a big financial info. yesterday but it didn’t go through. I am not very computer skilled, so don’t know why. Maybe I’ll try later. I am enjoying the dialogue because you all are the experts.
I’m getting the feeling that you don’t sign the tenants to annual leases, more like a short term thing? Right/wrong? You’ve mentioned that you rent to people who are in a per diem situation. Have you worked out deals with companies who have a large number of these types of employees or do you advertise and hope for the best? Keep the info coming, I’m getting some ideas here.
I adjust to what the tenant needs. No, have only done one annual lease ever. Tenants who are buying or selling a home might rent for 1 month and then extend weekly. Workers and trainees often come for say 13 weeks, and then may extend if they like their job. I advertised in the newspaper, joined the Chamber of Commerce to network with business owners, even put flyers on truck windows. Now my website draws inquiries. Looking at my rental board in front of me I see a cheese factory, medical agency, elevator repair company, Homeland Security, oil company, rent-a-doc, aviation parts company. All nice working people who are happy not to be in hotels.
Very interesting topic. When my wife and I vacation down to FL we rent a 2 bedroom cottage in a residential neighborhood similiar to what you describe. It is fully furnished right down to a DVD player, bed linens, kitchen pots, pans, utensils etc. It is a cozy place and we keep going back again and again. Even has a shed out back stocked with bicycles ready for use. Has a fenced in backyard for pets too.
I checked out your website furnishedowner - looks great!
I sure wouldn’t get 3 times the rent. If I get $1000 for a house bare, 3 times that would be $3,000 a month. The tenants can rent a bare house and then pay a couple of hundred a month to rent furniture. That gets them into a house for 1/2 of the $3,000 a month.
The local hospital has a nursing internship program for 4 months. I get calls from those students all the time, but they are trying to put 3 roommates into one house because that is the only wy they can afford the rent of teh bare house.
I’d get $200-$300 a month extra for furnished and it isn’t worth it to me to risk all the damage and costs of turn over every 3 months.
Yeah, if I could get triple the rent, I’d think about it. But it is easy to run up a $350 electric bill without even trying. Another $50 for water, $12 for trash, $35 for sewer, $150 for yard service, $50 for cable and cable internet. That’s nearly $650 in increased expenses, and the tenants could easily double that if they were a bit self-indulgent, which often happens when people don’t pay the bill directly.
I’m gad to hear that you’ve found a place where it works well. It sounds like you’ve found a sweet niche.
You are right. And furnishing a 3-bedroom house is a big task. Even here single family homes don’t work out financially unless they were purchased very inexpensively.
What if you put those nurse trainees into studios?
I have learned that you can’t be all things to everybody. But “build it and they will come” applies to small (inexpensive to purchase) but fully furnished “lil cottages” as they are ideal for most travelers. I love 1-bedrooms! They are the backbone of my business. They work for both singles and couples.