Renting a furnished or unfurnished apartment: Which option is right for you?

March 4, 2021 7-minute read

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Would you like to invest in rental real estate ? Are you trying to decide between Rent unfurnished or furnished ? This is a perfectly legitimate question: the two options do not entail the same constraints, nor do they offer the same prospects for rental yields. You'll need to figure out which type of rental is right for you the best return on investment, while taking into account the level of risk associated with these Two Ways to Rent a Property. CENTURY 21 Auteuil Immobilier provides an overview of the topic so that you have all the information you need to make a decision Which option should I choose: renting a furnished or unfurnished apartment?.

What are the requirements for renting a unit unfurnished or furnished?

To make your choice, you need to consider the conditions involved the two rental options available to you. These simple conditions are used to determine which type of lease will apply.

Conditions for Renting a Vacant Unit

As the name suggests, a “bare” rental involves offering a property that is “empty” or “unfurnished,” unfurnished, for which your tenant is responsible for handling the furnishing and decorating on their own.

Renting out an unfurnished property is generally much easier to manage. However, some landlords offer fully equipped kitchens with major appliances to make the property more attractive. You don’t have to buy furniture or worry about setting it up in the home. Once you’ve purchased the property (or after any renovations are complete, if applicable), you can immediately rent out.

Requirements for Renting a Furnished Apartment

As for furnished rentals, this involves providing the tenant with decent housing equipped with certain amenities and furniture essential for daily life. You must meet the furnishing criteria as defined by Decree No. 2015-981 of July 31, 2015 (prior to 2015, these criteria were not clearly defined).

To sum up, here is the list of furniture and equipment that you must provide to tenants when renting out a furnished property:

Bedding with a comforter or blanket;
Shutters or curtains in the bedrooms;
Cooktops;
Oven or microwave oven;
Refrigerator;
Freezer or ice tray;
Enough dishes for the tenants;
Kitchen utensils;
Table;
Seats;
Storage shelves;
Light fixtures;
Housekeeping supplies.

What are the differences between renting an unfurnished and a furnished apartment?

In addition to the terms that define the type of lease, what are the key differences between a furnished lease and an unfurnished lease? Here’s what you need to know—the choice is yours.

Slightly Higher Rents for Furnished Rentals

The rent control measures Regulations specific to each city set higher rent caps for furnished apartments. As a result, by charging a higher rent for a furnished apartment, the landlord increases their gross return on investment (which is calculated as the annual rent divided by the property’s purchase price).

Renting out a furnished property may seem more profitable than renting out an unfurnished one. Rent is slightly higher, and the tax treatment is more favorable. But be aware that with furnished rentals, tenant turnover can be more frequent, the risk of vacancy may be higher, and maintenance costs can be more expensive.

Greater Contractual Flexibility in Furnished Rentals

With the 2014 ALUR Act, the management of leases for unfurnished and furnished rental properties has become very similar. A few differences However, the following remain:

Security Deposit : If you're renting a furnished apartment, you can request a security deposit (or security deposit) equal to two months' rent, compared to one month for an unfurnished rental property.
Term of the Lease : For furnished rentals, the lease is for a minimum of one year and is automatically renewable (except in the case of students, for whom the term is 9 months), compared to 3 years for an unfurnished rental.
Landlord's Notice : For furnished rentals, the notice period given by the landlord is at least 3 months, compared to 6 months for an unfurnished rental property.
Tenant's Notice : For furnished rentals, the tenant must give at least one month's notice, compared to three months for unfurnished rentals (except in cities in high-demand areas, where the notice period may be reduced to one month under the Azur Law).

In summary, the furnished rental offers greater contractual flexibility. This allows for a shorter minimum lease term than with unfurnished rentals. This means you can get your home back much sooner (one year versus three years for vacant housing) if you need to and have a legitimate reason: selling the home to move back in or to house a family member.
The minimum notice periods also support this approach.

Various Tax Options

The tax treatment differs depending on whether the rental property is unfurnished or furnished.

For unfurnished rentals, rent constitutes real estate income (Form 2044 or the “micro-foncier” option on your tax notice).

Furnished rentals are subject to the Industrial and Commercial Profits (BIC) tax regime. The flat-rate deduction is therefore more advantageous for furnished rentals (50%) than for unfurnished rentals (30%). Flat-rate taxation may seem more attractive for furnished rentals. But that’s not the only factor to consider.

Unlike income from unfurnished rentals, income from furnished rentals is subject to the CET: the Regional Economic Contribution. Since it is a local tax, the amount varies from one geographic area to another. You should therefore check with your tax office to get a better idea of how much it is.

Another factor to consider: if the cost of the work done on your home exceeds the amount of your flat-rate deduction, it is generally advisable to report actual figures. Under the actual income method, you can deduct your expenses (renovation costs, loan interest, etc.) from your rental income, while also claiming depreciation deductions against your rental income. Simply put, this allows you to deduct your expenses from your income to reduce your taxable income.

Don't hesitate to seek advice from professionals to ensure you choose the best tax option for your rental income.

Focus: Who Is Responsible for Paying the Housing Tax for Furnished and Unfurnished Rentals?

As currently provided by law, the residential tax is paid each year by the occupant of the dwelling as of the 1st^er January. This tax is paid by the tenant in the case of a furnished rental, but also for an unfurnished rental.

Please note that, for both types of rental, the housing must be for personal use only of the tenant (even during their absences). As a landlord, you cannot demand payment of the housing tax from your former tenant if they resided there before the 1st^er January (and that he has since moved out). Therefore, you must notify your tax office of any changes in your tenants' status (new tenants moving in and existing tenants moving out).

Is it more advantageous to rent a furnished or unfurnished apartment?

Renting a furnished apartment is the type of rental arrangement that, at first glance, seems to be the most profitable. Compared to unfurnished rentals, rents are slightly higher, there is greater contractual flexibility, and tax planning is often easier to manage.

That said, there is other criteria Factors to consider when choosing the most cost-effective option. Renting out a furnished unit means higher tenant turnover, higher maintenance costs (in the event of broken or damaged furniture), and an increased risk of vacancy (and thus a loss of rental income).

Renting out a vacant unit provides greater security regarding rent payments and frequent tenant turnover. This reduces your property management and maintenance costs. All of these operating costs (in terms of time and money) that tip the scales.

It's up to you to determine which rental option offers you the best return on investment, taking into account the risk-return ratio. Therefore, it is advisable to opt for a furnished rental when circumstances are favorable. This is especially true if you are located in a dynamic geographic area where the chances of renting out your property are high (with strong rental demand from students or executives on assignment, for example).

In short:

Renting out a furnished apartment allows you to charge slightly higher rent.
Renting an unfurnished unit results in lower, recurring management fees.
Renting a furnished apartment often comes with more favorable tax benefits.
Renting out a unit unfurnished results in lower tenant turnover.

Ultimately, which option should you choose: renting an unfurnished or furnished apartment? The answer is up to you.

It depends on your profile as a property owner or landlord, your preferences regarding rental management, and the specific characteristics of the geographic area where your property is located (and the corresponding rental demand).

In both cases, you also need to have the time to handle rental lease management and tenant move-ins and move-outs yourself. That’s where we can help! We are CENTURY 21 Auteuil Immobilier, an agency specializing in rental management properties in the 16th arrondissement^th district of Paris.

Contact Us Contact us today to discuss your real estate projects.

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