Is Renovating Or Building A House Extension For Extra Income Worth It?
Covid-19 has caused lots of people to review their lives and even how they generate an income. Many have come to enjoy the Working From Home (WFH) lifestyle and some are actively looking to explore how they can capitalise on that. Some people are considering how they can use their home to generate that additional or replacement income.
That income could be generated by renting existing space in their home, however, a stumbling block for some people, is the lack of available or usable space in their home. In this article we will look at the options and viability of renovating or extending your home to generate additional income.
Potential Revenue Sources
We are not looking at simply renting a room for a flat-share or an Airbnb but bigger ideas where the homeowner wants to produce more income by using land on their property. In short, how can a house renovation or extension generate extra income?
Different Uses and Income Sources
There are numerous types of businesses you could run, ranging from a bed and breakfast, a short-term holiday let, creating a long-term rental unit, to building a workshop or studio. You can rent the studio space or run classes yourself.
A common option is a granny-flat or even renting space to your children.
Another idea is to build a smaller unit for yourself and rent out the main home. This can suit young couples with no children yet or older couples who no longer need the space of the big house.
For those people who are self-employed already but work out of a leased office or shared practice space, you might consider building your own working space. This will save you commuting time and costs as well as the rent on your office or practice building. Accountants, lawyers, therapists, and many other professionals can make huge financial and emotional changes to their lives by working from their own premises built on their property.
Each of these ideas for income requires different amounts of capital input and ongoing work from you. A bed and breakfast for example, will require you to cook and clean each time you have guests. A studio or long-term rental will need very little ongoing input from you.
Extend Or Renovate?
The answer to this depends on your ambitions and also your property.
For some homes, the physical land or location will determine what you can and cannot do. This in turn will also affect the costs.
A good starting place is to talk to a local building contractor who will be able to give you tips and pointers on what you can do within broad ball-park costs.
After that, you can do some more research and costings to see which is more viable for your particular aims.
Financial Considerations From Extending Or Renovating Your Home For Income
Besides the obvious income you can generate from whatever business type you choose, there are other financial issues too.
Tax on any net income is of course an expense you will have to pay. You may decide that the after-tax figure is not worth the expense of the building work or the ongoing input from yourself.
On the other hand, if you hire the right renovation builder and designer, you can add a considerable amount of value to your property. This can be far in excess of the construction and administrative costs. In fact, people often look at income generation jobs as a means of financing their capital expansion rather than being a career.
You need to look at your finances to see what you can afford to do, whether it is from existing resources or from additional lending, and forecast the potential revenues. You must talk to your accountant, the Council and a mortgage broker before you commit to any big projects.
The Next Steps To Generating An Income From Home
Before you can talk to an accountant, you need to have a solid idea of the extension or renovation costs involved. The safest way of achieving this is to talk to an experienced renovation builder who can give ideas on not just costs, but good advice on the types of work, extension or renovation you might consider. A good local builder will also have a strong understanding of the actual ground of your property and the amount of preparation work you will need before any construction can begin.
The other big issue is the Council. Getting building consent is a time-consuming and potentially expensive process. At Cain Built, as a long-standing North Shore builder, we have worked on many renovations and extensions over the years and as a result, had lots of experience working with the Council. We can give you some pointers or put you in contact with who you need to talk to about the work you will have to do to get Consent from the Council.
Will 2021 Be The Year To Make Your Property Profitable?
2020 is drawing to a close and more people are taking a serious look at their life to see what they want and how they can achieve it. For many, making your property a revenue-generator is a great way forward.
If you have aspirations to either WFH or want to create other revenue streams from your house, we are happy to have a chat with you to talk about the renovation or extension options you might want.