Once you have bought your ideal property for investment in Luxembourg, there are still several questions you might be asking yourself before starting to rent out your asset. For example, you might be wondering if it is necessary to make some improvements to rent out for a better price and obtain better returns, or whether it is better to rent it furnished or unfurnished. Here are a few points to help you find out more about this subjects.
The Advantages of Renting Furnished: Higher Rent and Possible Tax Deductions
If you plan to rent out your property in Luxembourg to reduce your tax bill, it is in your best interest to opt for a “furnished rental”. Indeed, you can benefit from the possibility to amortize all the equipment bought to furnish your place. In other words, you can deduct the equipment costs from your rental income—but always make sure you comply with the regulations in force.
In addition to the positive impact on your tax bill, you will also have the opportunity to set up a higher rent. Logically, for the same surface area and characteristics, renting a fully equipped property in which you only have to unpack your suitcases implies that you will have to pay a higher rent every month. However, if you are planning a rental property investment in Luxembourg to reduce your taxes and ask for the highest possible rent, you should know that you cannot exceed twice the threshold applicable for rented apartments or houses without furniture.
“Renting a fully-equipped property in which you only have to unpack your suitcases implies that you will have to pay a higher rent every month.”
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Holiday Rentals and Potential Damage: What Are the Risks to Take into Account
When furniture enters the equation, real estate renting between private individuals can become complex. Indeed, at the time of the inventory of fixtures, you do not just check the conditions of the walls, the taps or the electrical equipment, but you have to take stock of all possible damage to the furniture, whether it is a broken drawer, a cupboard door that no longer closes properly or even a faulty refrigerator, for example.
In any case, since the risk of damage is greater, so is the risk of litigation. This is why, for this type of real estate investment in Luxembourg, we recommend you to entrust the rental management to a real estate agency, which will take care of all these practical details for you.
You will appreciate this service all the more when you notice that in the world of furnished rentals, occupancy prove to be more erratic. In concrete terms, the risk of rental vacancies is much higher as, even if it is generally fairly quick to find tenants, leases can be short term… And it is quite often necessary to put the advertisement back online to sign a new contract.
“The risk of rental vacancies is much higher for furnished properties.”
To the question “should I or should I not furnish my property for rent in Luxembourg”, there is no simple answer: it all depends on your personal objectives and expectations. In any case, do not hesitate to ask for expert advice to ensure you make the best decisions.
