Looking for some extra help with your mortgage, better cash flow, or just some extra spending money? Then you may want to consider the idea of making your property work a little bit harder for you.
Many homes hold a lot of potential for bringing in a bit of extra money without having to do a lot of work. Every home is unique and yours may have a lot to offer without you even realising it.
For example, do you have a garage you don’t really need or use? Maybe you’ve got a spare room that’s become a dumping ground or storage space for all that 'stuff 'that you no longer use.
For around $5,000 you can convert your garage into a rentable living space. It’s important any structure is insulated, has electricity, and is warm and dry. There are two options here. One is where the garage adds space to the existing property but can’t be let as a separate tenancy. The converted garage will be a living and sleeping space for your renter, but they will need access to the main house to use the kitchen, laundry and bathroom facilities.
When it comes to creating an income producing property, your other option is to fully convert the garage into a self-contained space. Depending on available floor area you may be able to add a bathroom, or at least a sink for running water. Check with the building consent rules about adding a kitchen or laundry. Resource consent may also be required to turn your converted garage into a legal attached or detached minor dwelling.
Read more: 5 expenses you can claim on your rental
The same goes for extra rooms. If the family home is looking emptier, the extra space is only costing you money in power, electricity, rates and maintenance bills. Why not rent out your spare rooms and get some extra cash? The best part about this scheme is that you can have up to four boarders in your home without having to pay tax on the profit you get from them!
Inland Revenue states that if you have 1-2 boarders, you do not have to file a tax return if the board is less than $257 per week for each boarder. So even if you charge just a little less than this a week you can easily make an extra $500 or so a week, tax free! Now isn’t that something to think about!
If you have more than 2 boarders, you can charge up to $257 per week for the first two and up to $210 for each subsequent boarder. If you have five or more boarders, or you wish to charge more per week, you will have to file a tax return and include all payments as income.
If you use your garage but have a large backyard, you may want to think about building a sleep out. You may not need building consent if the sleep out “does not exceed one storey, does not exceed 10 square metres in floor area, and does not contain sanitary facilities or facilities for the storage of potable water, but may contain sleeping accommodation if the detached building is used in connection with a dwelling". (Building Act 2004: Schedule 4). Since the Canterbury Earthquakes, many shipping containers are being converted and sold as living areas. Getting a sleep out might be as simple as getting unloading it off a truck.
As always, you do need to ensure that what you’re planning to do is legal, the last thing you want is the IRD and your local council knocking on your door to see how you’re getting your money and what that structure on your property is! The best way to go about this is through your accountant. Talk them through your plans and have them advise you on what you’re entitled to and the legalities surrounding it.
So whatever your goal is, an exotic holiday every year, a new car, even paying off your mortgage, your home might actually have all the answers you’ve been looking for.
Download our A-Z guide is a handy guide to help you navigate the property investment world, and make buying, leasing, and selling homes that much easier:
