Letting a property: should you furnish it?

Are you letting a flat? Is it advantageous to furnish your property before letting it?

In this article, we explain everything you need to consider before making a decision.

To furnish a two-bedroom flat, for example, you should budget between 7000 and 10 000€. A furnished property must be ready to move into: the tenant should simply be able to ‘put down their suitcases’, so everything must be provided, including pots and pans, crockery, a vacuum cleaner, etc.

The main advantage of a furnished property is that you can charge rent that is 10 to 20% higher.

However, with a furnished property, the rental period is generally shorter, so the risk of the property remaining vacant between tenancies is higher. Maintenance is also more demanding because, in addition to the flat, the furniture will need to be maintained or replaced.

If you declare your property as furnished, you will also have to pay additional tax. Some landlords therefore fail to declare the property as furnished. They risk an administrative fine, as well as the tenant damaging or leaving with their furniture.

Taxation

• If the landlord lets an unfurnished property to an individual who uses it exclusively for private purposes, the landlord will be taxed on the basis of the indexed cadastral income, increased by 40%.
• In the case of a furnished property, the landlord must distinguish between the rent for the furniture and the rent for the property.

There are two possible scenarios:

1. If the landlord has specified the rent for the furniture in the tenancy agreement and the agreement has been registered, this is the amount that must be declared.

2. Otherwise, if the landlord does not specify the rent for the furniture, the tax authorities will consider that 40 % of the total rent relates to the rental of the furniture.

In both cases, the income from movable property (i.e. the proportion of the rent relating to the furniture) is taxed at 30%. However, the tax authorities allow a 50 % deduction for expenses.

It is therefore important to specify the distinction between the rent for the furniture and the rent for the property in the tenancy agreement yourself, in order to optimise your income.

Example:

1. My rent is 1000€. I declare 10% of the rent as relating to the furniture, i.e. 100€. After a 50% deduction, I therefore pay 30% tax on 50€, i.e. 15€.
2. My rent is 1000€, but I do not specify the rent for the furniture. The tax authorities will therefore estimate that 40% of the rent relates to the furniture, i.e. 400€. After a 50% deduction, I pay 30% tax on 200€, i.e. 60€ (4 times higher!)

Please note that some municipalities also levy a municipal tax on furnished properties!