We get many call from clients that ask why is furnished rentals seems so expensive compared to regular long term lease. I will try to make it as simple as possible and at a minimum you can understand the inner workings of a furnished apartment operation
So lets start by what it is considered the rule of thumb for furnished rentals across the country and that is that the price for a corporate apartment, vacation home etc is twice the amount of a unfurnished rentals and below are some reasons why
1. Cost of Insurance – Liability insurance
Any time you deal with the public and advertise any product of service you are required to take more caution and due diligence than and its imperative that a patron of a furnished apartment be protected in case someone her or she encounter a serious accident and they find themselves in litigation and the only viable way to protect yourself is to have the proper insurance policy in place and by no means are they cheap
2. Lag time and Open dates – Like hotels the average occupancy rate is around 70 – 80% for hotels and short term housing so the prices need take this metric in consideration when setting up their market rate and not assume their rentals in going to be full 365 days of the year
3. Taxes are 13% – If you sign a 6 month lease you are not required to pay sales tax but any rentals less than 6 months unless exempt, will increase your cost of a furnished apartment because the end user may want you to include this cost in the final price
4. Furniture – Yes there is this mysterious cost that many clients seem to oversee. As a corporate housing provider or furnished rentals operation you have 2 options – You buy your furniture or you rent it and that is pretty much your only option . Both of which cost money on a constant basis and it works mush like a car – you can lease for life and always have a new car every 39 month or you have a car that is 39 months old and it starts to give your problems and maintenance becomes a issue until you have to change the car all together . Its not a simple one time expense
5. Overhead – Mostly furnished apartment companies due short term rental and its not done by rental communities by salary employees . Rental communities only expect a return on their investment – Short term rental is done for profit higher than 4% returns and it requires added overhead to include marketing, cleaning supplies, office space etc
6. Maintenance- Short term rentals maintenance is higher and one reason is that if you have for example an air conditioning not working in a long term apartment on a Saturday the building will only send the repair personnel on Monday since weekend is considered an emergency call for all AC repair companies, but if it is a furnished rentals the client is not concerned about the price of repairs and excuses and expects a working unit that same day
There are many more expenses associated with furnished rentals but I think you get the point that its not simply a few more dollars added to the overall cost of a long term rentals but a completely different business model and cost associated with its operation .