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Top tips on multi-income conversions

A grandiose room-by-room conversion may seem like the most lucrative option, but Opes Accelerate property investment coach Ilse Wolfe explains why a top-down multi-tenancy could be a better option.

By: Ilse Wolfe

30 April 2022

Multi-income properties, either a room-by-room rental or a home-and- income, tend to earn more rent for property investors.

While Wolfe admits a room-by-room rental will almost always be the most lucrative, it is also the most costly and complex — an immediate barrier to many.

As a simpler alternative, a multi-income conversion is common and effective.

“An investor I recently worked with in Hamilton spent $105,000 reconfiguring a 3-bed standalone into a top-down home-and-income conversion,” Wolfe says.

“The original rent doubled from $525 to $1155 a week.”

Figuring out if your property could work as multi-income is Step No.2 of the Cashflow Hacking List, a six-step approach to turbocharge any BRRRR project.

The most common types are splicing a one-storey dwelling into two or a top- down conversion, which is making the downstairs area the second home.

Either way, here are Wolfe’s top 5 considerations:

1. Big Floor Plan

As a general rule, Wolfe says a floor plan needs at least 130 square metres upstairs, plus garage, to withstand a top-down conversion.

“However, you will need 190 square metres to dice up a single-storey dwelling,” she adds.

Similarly, you need vertical space. The ceiling height of a downstairs area needs to be at least 2.2 metres for it to even be considered.

“So, if you walk in the room and your builder’s hair is grazing the ceiling – it’s not going to work,” Wolfe says.

In her experience the “ideal property” would have been a slightly grand property in its day.

“Usually a 70s-something house, typically 3 bed/1 bath, with an oddly large open-plan living area and a downstairs garage.”

2. Add A Bedroom

Just because you are adding an extra house to your existing property doesn’t mean you get to skip Cashflow Hack Step No.1.

“It is still imperative to add an extra bedroom to the main property,” Wolfe says.

This is where the oversized lounge comes in. Essentially, the renovations will “infill” another bedroom into the superfluous living area.

“A master suite is a common hack, and it works well to augment a family- sized home.”

3. Windows Still Matter

Humans aren’t moles, and natural light is a big deal when it comes to homes.

“Windows are something you absolutely need to consider from the get-go,” Wolfe says.

If you’re converting your downstairs garage, the bedroom windows need to make up at least 10 per cent of the floor space.

If you’re trading a dining room/living area for a new bedroom, you might need to shuffle the windows around to meet the standard.

4. Moisture

It is a Healthy Homes standard for all living spaces to be moisture-free, but Wolfe says the reality is a downstairs basement is more susceptible to ground moisture.

If you’re fortunate enough to buy a property with an existing moisture barrier, called a polythene groundsheet, that’s great.

But if the existing poly-barrier isn’t sufficient, or if it doesn’t exist, the council will insist on one being added.

There is a fix. A professional will apply an adhesive around the inside of the property to keep the water from getting in.

“Much like tiling a shower,” Wolfe says.

“It’s a back-to-front option, but it works as a solution.”

5. Don't Involve Your Neighbors

Any renovation plans that fall within 1.5 metres of a neighbour requires formal approval, which is impossible to sort before committing to the purchase.

This is why all investors should try to avoid a plan that might need neighbour consent, Wolfe says.

“It doesn’t mean it’s an immediate deal-breaker but it means you need a Plan B in case your neighbour’s ‘no’ foils all your dreams.

“If it were me, I’d run the numbers on the property being a single tenancy to see if that would be satisfactory.”

These 5 factors must be considered within the wider context of rental assessment; the people, the social context, and the property’s physical locality, for it to be successful.

It’s a lot to get right, but when it works, multi-income properties can increase the rent substantially.

Wolfe says investors she works with tend to start with top-down conversions before transitioning to room-by-room rentals as they gain more experience.


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