For owners of furnished apartments in Sydney, long term leases are looking more appealing than ever right now. With the current restrictions on travel all but stopping the short stay and holiday rental markets, the security and stability of an ongoing tenancy is highly desirable.
While furnished properties are usually targeted toward holiday makers and visiting executives, there is also a market for furnished apartments in Sydney on long term leases. Many owners of properties listed on sites like Airbnb and Stayz are aware of this and have begun looking for more traditional rental arrangements. This has led to an oversupply in some areas, increasing competition for landlords and choice for tenants.
So, before deciding if you should lease your furnished Sydney apartment long term, there are a few things you should consider.
To furnish, or not to furnish?
If you’re a landlord, there are a few key differences between leasing furnished and unfurnished properties.
Most obviously, there’s the furniture. If the property is your holiday home or a short stay rental, you probably won’t need to buy anything new to lease it longer term. However, you will be responsible for the maintenance of any furniture your property is leased with and will probably need to repair or replace it every 3 – 5 years.
The good news is that some of your costs will be offset by the additional tax deductions you will be able to claim. You will also be able to charge more rent if your property is furnished, meaning that your returns could potentially be higher than an unfurnished property.
The rental bond that you can hold is the same whether the property is furnished or not – which is 4 weeks.
The main challenge for owners of furnished apartments in Sydney is finding long-term, stable tenants – which can be hard. While most of the people looking for a furnished property are busy professionals that just do not have the time or want to spend money buying furniture – they just want to move straight in and start enjoying the property or get on with their work. They also want to a level of flexibility that is not possible with traditional longer term leasing – leading to a high tenant turnover rate, a higher vacancy rate, and increased advertising and property management fees.
Also, as the market for furnished properties is fairly small, as such, it can take longer to find a tenant and standing out from the crowd (by highlighting the benefits of the location or the quality of the fixtures and furnishing) is crucial.
With all of this in mind, before listing your furnished Sydney apartment for a long term lease, it’s important to consider your options, financial situation, and investment goals. For example, if you need the extra income to meet your financial obligations (e.g. pay your mortgage), organising storage and listing your property as unfurnished could see it tenanted – and money coming in again – sooner. Alternatively, if you want to maximise your potential income and can shoulder a longer vacancy period, you can list your property as a furnished long stay Sydney apartment or even hold out until the short stay market picks up again.
Long lease v short stay – which is better?
Until recently, a short stay rental could be quite a lucrative investment. Thanks to sharing platforms like Airbnb and Stayz, most properties had a high tenancy rate and renters were willing to pay a premium for the flexibility and convenience. All of this combined to create a healthy income stream and a new model for property investment.
One of the difficulties for owners is adjusting to a much lower rent under a long term lease, versus the significantly higher rental with the short term stay market. In some instances, it can be almost half the weekly rent you were receiving! However, each week the property remains unoccupied in the short term market, also adds up.
The recent challenges faced by the market have highlighted the instability and uncertainty of shorter leases. This has many investors questioning whether the risk is worth it and if they would be better off locking tenants in for a longer term.
The answer is… it depends!
In working out the right lease structure for you, you should consider:
- The location and style of your property: If the area is ‘tourist-friendly’ and the layout suits holiday makers, it could be quite a profitable short stay rental once the current restrictions are lifted and life returns to ‘normal’.
- Your financial situation: If you require consistent income to meet your financial obligations, the security and stability of a longer term lease could be best.
- Your future plans: A short term rental provides both landlord and tenant additional flexibility and may be more appropriate if you have plans to sell, move in or redevelop.
- Your risk appetite: There are different levels of risk – and potential returns – associated with different lease types (e.g. in Sydney, long stay apartments are lower risk, but offer potentially lower returns, than short stay properties).
Advertising your furnished Sydney apartment for a long term lease
Once you’ve decided to lease your furnished Sydney apartment long term, you will need to work out your advertising approach.
While there are companies that specialise in leasing furnished properties in Sydney, and Airbnb and other sharing platforms are moving into the longer term market, their marketing approach is usually very targeted. As such, we recommend listing with an agency that manages both furnished and unfurnished properties. This will mean that your advertising net is cast as wide as possible and you may even end up attracting a tenant that wasn’t necessarily after a furnished property.
Want more information?
If you’re considering leasing your furnished Sydney apartment long term, but aren’t sure whether it’s the right move, give Local Agency Co. a call. We’re your local property management experts that help property investors SAVE MONEY + TIME & REDUCE STRESS by finding great tenants. So, if you have any questions – or just want to discuss the current state of the market – contact us on 1300 258 888 or via info@localagencyco.com.