Learn how adding bedrooms increases a property's value and rental income. Convert existing spaces or reconfigure floor plans using simple stud walls, and expect an extra $100 per week in rent. A $2,500 room pays back in a year, but valuers may not recognize the upgrade without comparable sales nearby.
Chapters
So how do you recognise a property's potential? The ability to see through the ugliness and recognise potential to add value is a key skill in the renovation game. So let's look at some renovation twists. Let's say that you've purchased a wonderful two bedroom home in an up and coming inner ring suburb that has the potential to make you a lot of money. Since the property is in an area favoured by young couples starting families, your renovation plans for the property include changing the floor plan to add a bedroom. After all, you need the property to appeal to the young families, not singles. So is it feasible? Adding a bedroom is a completely feasible plan as long as one criteria is met. Will it add value to your investment? Remember, it's all about the money. Assuming that your homework indicated that it's worth your while financially to add a bedroom, you would not have purchased the property and you've probably considered 2:1 turning an existing den, office or other room into a bedroom or two changing the floor plan to accommodate a new room. Turning an existing room into a bedroom. This is clever. In some cases you won't have to do a whole lot to turn a spare room into a bedroom. If the property has one bedroom and a sun room, you may want to consider turning the sunroom space into a second bedroom. But here's something to consider. Does the property benefit from the office, sunroom, den or other spare room? If so, you may want to consider changing the floor plan to accommodate adding an entirely new room. This, of course is the harder and generally more expensive route to go. You also need to consider how the new bedroom fits into the existing amenities, that is one. Will another bathroom also be a good idea? So let's look at adding a new room to the floor plan. Changing a floor plan assumes that you've found yourself a money making deal on the property. It's expensive to knock down walls and move structures, so to keep your addition as inexpensive as possible, look for opportunities to add a simple stud wall. Remember to have your new floor plan approved and inspected by the property authorities. So here's some other renovation Additions Adding rooms can add real value to your investment. If you're renting, an additional bedroom can easily add $100 per week to your rental. Let's say you pay $2,500 for a new room. With the additional rent, you'll make a profit on your investment in the first year. Other popular room additions include bathrooms, offices and dining rooms. But where do you find the space? You can consider splitting a larger laundry room to include a second bath. A larger living room can be split into a living room dining room combo. If you can spare a bedroom, consider turning it into an office. Even large master bedrooms can have an added en suite. Extending a floor plan can get expensive, so try to find space within the existing floor plan wherever possible. A cautionary note Valuers will have the original property value when they inspect your property at the time of revaluation or sale. We're going to go into this in the later module. However, if you're adding a bedroom, be aware that they may not be able to revalue your two bedroom unit as a three bedroom unit. To further complicate this, if the property is in an area with no comparable sales for a three bedroom unit, then the valuer will not even give your property a value because they cannot find three comparable sales. They just can't get a value for you. In that instance, you might be chasing the increased yield only because you're not going to get it in value. If this is the case, then what the valuer says may not be such a big deal if you're after the yield. But I want you to understand the risks involved with this type of renovation strategy. And if you're selling, if the valuer won't give three comparable sales, then potentially the person buying your property will will not be able to buy the property because the bank will not approve their finance because it's usually based on the valuation.
