4 clever ways to add extra living space for better rental income

Property Management

Adding an extra room or ancillary dwelling to your rental is one of the best ways to increase rental income—especially if you’re going from three bedrooms to four. After all, more rooms means more tenants, and therefore a higher rent return.

1. Rearrange

Rearranging the internal layout of your rental is one way to open up space. Removing or moving walls that aren’t structural can allow you to extend rooms, reduce redundant spaces, reposition areas (such as the kitchen), and generally make sure your rental uses space more effectively.

When you’re looking to rearrange your rental, it’s critical to keep the cost versus benefit in check. The average cost to renovate bedroom and living areas in New Zealand is estimated at $1,800 per square metre, but it can quickly get out of hand if not managed properly.

Perhaps the simplest, and most cost effective solution is to install sliding doors to shut off a second lounge or communal area for use as a bedroom. Another good option is to renovate and repurpose a basement or loft area. Since there’s not much in the way of plumbing and lighting, it’s much cheaper than reworking your interior floor plan.

2. Compact

If you don’t have room to introduce a separate room, consider using existing alcoves to create a functional space. Perhaps you can combine your bathroom and laundry, or laundry with the kitchen or garage. Could you create a study nook in the kitchen, under the stairs or in the lounge, and convert the home office room into a bedroom?

Keep your tenants in mind when considering these types of renovations. Will the tenants you’re trying to attract need a dining room? A family might, but working professionals perhaps less so.

3. Convert

Converting a garage into an extra room or granny flat allows you to charge higher rent or let to another tenant if the living space is self-contained with a kitchen and bathroom. Of particular interest is the opportunity to appeal to multigenerational households, which increased by 50 per cent nationwide between 1996 to 2013—and continues to grow.

Converting a garage is also an economical option. According to Builderscrack, it costs around 50 per cent less than building a new room and Mark Trafford, director of Maintain To Profit, estimates it to be between $5,000 and $10,000

4. Extend

It’s the most expensive option—for good reason. It’s not just the internal structures that you need to think about, but also external features such as roofing and cladding, as well as architect and builder fees. That said, adding new bedrooms and/or living spaces can open up your investment property to a significantly larger pool of prospective tenants—particularly larger families with high or dual incomes.

To add a single room extension to a home, Refresh Renovations NZ recommends setting aside $60,000 with a contingency of 15 per cent. Much like converting a garage, your extension will also need building consent and must meet all the current building regulations.

It’s also worth noting that if you are making structural changes to your rental, you may be eligible for an insulation subsidy from the New Zealand Government. This can cover up to 50 per cent of the cost of insulation.

Despite the high cost, if an extension can significantly increase the rental value of your property, then it can be a good option. It all comes back to cost versus benefit—so careful consideration and planning is required. Research the median rent rates for your suburb, know what rental return to expect once the extension is completed, and ask yourself whether it’s enough to recoup the cost of the project.



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