What are the risks and disadvantages of furnished rentals?

Furnished rentals attract many investors thanks to their advantageous taxation and increased profitability. However, like any real estate investment, it also involves risks and drawbacks that it is essential to anticipate before starting.

A more frequent rotation of tenants

Unlike bare rental, where the lease lasts for three years, furnished rental is for a renewable one-year term, or nine months for students. This flexibility is an advantage for the landlord who can recover their property more easily, but it leads to a higher turnover of tenants. Result: more announcements to be published, inventory to be carried out and risks of a rental vacancy between two occupants.

Costs related to furnishing and maintenance

The owner must provide and maintain the mandatory furniture: bed, table, appliances, dishes... This furniture wears over time and must be replaced regularly. It is therefore necessary to plan an annual budget dedicated to renewal to maintain an attractive housing and comply with the regulations. These costs reduce part of the theoretical profitability.

More time-consuming management

The investor must devote more time to the daily management of his property. This includes the search for new tenants, management of entries and exits, routine repairs, but also administrative follow-up related to the LMNP or LMP regime. For those who own several properties, it may be necessary to delegate this management to an agency, which generates additional costs.

Tax and accounting risks

If the LMNP regime is advantageous, it requires a good understanding of tax rules. The depreciation of the property must be calculated correctly, under penalty of tax adjustment. Many investors use a chartered accountant, which represents an additional cost, but secures their tax optimization.

Market and location risks

Furnished rentals work particularly well in student or tense areas (city centers, large metropolises). On the other hand, in small municipalities where demand is lower, it may be less profitable. The choice of location is therefore decisive to limit the risks of vacation.

Conclusion

Furnished rentals are a successful investment strategy, but they require more active management than bare rental. Before starting, it is recommended to properly evaluate the local market, anticipate the costs related to furniture and be accompanied on the tax part.