The Value Of More Bedrooms
Adding bedrooms correctly to a property can make an investor sleep well at night, writes Joanna Mathers.
1 July 2022
Adding value via the creation of extra bedrooms has been James Goren’s speciality for many years. It’s a formula he’s used in his own investment properties and those of his clients, via his company, The Renovation Team.
Investor Kirsten Hawke has experienced first-hand how effective this strategy can be. Goren’s team recently completed the renovation of her family’s block of three units in Papatoetoe, Auckland, resulting in a huge value increase (after costs) in just eight weeks.
Hawke met Goren after viewing a webinar he made for the Auckland Property Investors’ Association last year. He was discussing the value-adding opportunities created by turning onebedroom homes into two-bedroom homes, and it sounded like an excellent wealth creation strategy. So, Hawke decided she would try The Renovation Team on a small job at one of her existing properties.
“A tenant had moved out of the unit, so it was an excellent opportunity for a trial,” says Hawke.
By adding an additional bedroom Goren’s company was able to increase the rent of the unit by $100 a week, for a cost of just $62,000.
Adding bedrooms or making extensions can add value to your home. But you need t o consider:
- How: Your budget, space available and structural requirements will dictate whether you move insides, extend upwards or outwards, or build somewhere new on your property.
- Who: Whether you opt for an extension, a new room, additional story or self-contained unit, begin planning early with a designer. It’s generally always a good idea to consult your chosen builder at the same time.
- Consents: All home extensions require a building consent, and the work must be done or supervised by a Licensed Building Practitioner.
- Insurance: Regular home insurance often won’t cover loss or damage while structural alterations are being made. Give yourself peace of mind by checking for any exclusions, and adding ‘Contract Work Insurance’ before your extension job begins (cover varies depending on size and risk of alteration).
- Unforeseen: Be prepared for consent or material delays, and consider how you’ll accommodate tenants’ needs if the unexpected occurs.
Builderscrack has access to a range of local tradespeople across New Zealand, from architects to builders, that can help you realise your property extension. Post your job at bc.co.nz.
Wear And Tear
Hawke was so impressed by the results she started looking for a bigger job for The Renovation Team, and searched for a block of units to buy with the express purpose of adding extra bedrooms.
As she was very specific about her requirements (they must only have one bedroom) it took a few months to find the right property. But in February this year she found a rundown, but structurally sound, block of three units in Papatoetoe.
“They had been owned by a community trust that provided people with emergency housing,” she says.
'There was a lot of wear and tear, damaged bathrooms, and the carpet was orange and brown’ Kirsten Hawke
“There was a lot of wear and tear, damaged bathrooms, and the carpet was orange and brown.”
She was initially concerned the units, just under 50m2 in size, may have been too small. But Goran viewed them and suggested they would be ideal for her requirements.
The units looked unkempt, but the issues were mainly cosmetic. Hawke managed to secure the property for just $1,390,000 (a steal in this market), then she and Goren planned how to pump up the value and rent.
Goren explains that the bathrooms were very tired and dated, so the reno team ripped off the wallpaper and lined the brick walls with GIB to give them a better look and feel.
The kitchen areas were converted into new bedrooms, and the kitchen relocated to the living area to create an open-plan dining and living space.
Existing carpets were replaced and new power boxes, hot water cylinders and heat pumps added to bring the property up to Healthy Homes standards.
There was also a lot of landscaping and other outdoor work needed. The backyard was overgrown: “There had been bamboo pulled out, but this was filled up with construction materials. This was cleaned up and small, fenced outdoor living spaces created,” says Hawke.
The exteriors were water-blasted and repainted, and extra security lights fitted. The entire renovation took eight weeks.
Hawke says tracking renovation progress was made much easier through the use of a digital tool that The Renovation Team uses, which allowed her to know exactly what was being done on any given week.
“You would be able to look at it and see when the plumber was doing this, or when the electrician was doing that. It was a really useful app.”
The renovation ended up costing just under $219,000. The properties were being rented out for $370 a week, and have now been appraised at $500 a week, which when multiplied by three, is a significant increase.
And the property, which was purchased for $1,390,000, now has an estimated value of about $1,900,000.
It’s been a really positive experience for Hawke. “I found the process was streamlined with great communication from the Renovation Team. Yes would definitely do it again.”