investor-q-a

Increase value with an extra bedroom

By Staff Reporter

When it comes to renovating, there are a few changes that pretty much always guarantee a profit. And these additions aren’t always as expensive as you might think.

Squeezing in an extra bedroom to a property is a strategy we have used in the past through Smart Property Investment’s Investment in Action series. By adding a bedroom to our Berkeley Vale property, by re-constructing a wall, we added an estimated $25,000 to the value. Adding the wall cost a mere $700.

This turned a two bedroom property into a three bedroom property with just a bit of gyprock, timber framework, paint and labour.

Adding a studio downstairs, which was counted by the valuer as an extra bedroom, this made the property a 4-bedroom home.

We are not the first investors, nor will we be the last, to look to do this with a renovation.

“The added value is based on comparative sales with other three-bedroom and four-bedroom properties,” explains Right Property Group's Steve Waters who worked with editor Philip Tarrant through the process.

Investors looking to try this method should bear in mind that not every room addition will be profitable, and making other rooms cramped can be at a detriment.

“For example let’s say you have a room that is four metres by five metres, you would never go in and chop that bedroom in two by adding a wall as it would produce two small rooms that are four metres long but only two and a half metres wide,” says Renovating for Profit’s Cherie Barber.

“Inserting a wall in this instance would actually compromise the quality of the other spaces and devalue the property as a whole given prospective buyers or tenants would deem the rooms too small to be of any value.

“For bedrooms you want rooms to be, at the very minimum, eight to nine square metres, three by three metres, as anything below this size is starting to become too small and impractical,” she says.

The values

Regardless of where a property is located, generally you will find that the number of bedrooms a property holds will largely determine where it sits on the price scale; a three bedroom property will typically fall within a higher price range than a two bedroom.
Given the number of bedrooms can greatly influence what price bracket a property will fall into within a suburb, adding a wall to create two smaller rooms is definitely worth the effort.

Given there are no structural elements to consider when erecting a wall to split a room in two, if you are handy with tools it is possible to throw up a timber or steel frame wall yourself.

It may, however, be best left to professionals – particularly as it may not be that expensive.

“If you do want to install a non-load bearing wall a carpenter is all you need and it should only take them a couple of hours to knock up a timber stud wall, for example, given the bulk of Australian councils don’t require approval for internal works, such as adding a wall,” she says.

“To install a four metre wall your carpentry labour costs combined with all material expenses, such as timber, plasterboard and skirting board, should amount to roughly $1,000 in total charges.

“The return on investment far outweighs the cost of this project provided you don’t compromise the living spaces elsewhere in the house,” she says.

Other considerations

How much an extra bedroom can add will also be relative to the property values in the suburb and while in the suburb of Balmain it can add an extra $200,000 to $400,000 to the price tag, in other suburbs it may only add an extra $50,000.

Figuring out how your property will perform with this addition is crucial, and investors will want to source real estate agents’ opinions ahead of time.

You also need to think about what installing a wall to a space will mean to the lighting and ventilation of the newly created room.
Some properties will have their windows located at one end of the room and not the other which, in terms of cross flow ventilation and natural air, needs to be consider before chopping a room in half. A bedroom with no windows is generally something buyers don’t like.

Reno Kings’ Paul Eslick also says that this is one of his favourite value-adding strategies, and while it's particularly easier with older properties that typically have larger spaces available for changing, there are some properties where it becomes more difficult.

He warns that, if it’s a unit, “then changing it from a one-bedroom to two-bedroom means advising the body corporate and going through all the permission to do that.”

Quick ways to work out if it's feasible:

- Check out the floorplan. Look for rooms that no longer exist (as was the case with our property), but also for spaces that are larger than necessary.

- Identify any L-shaped rooms that can be turned into two smaller rooms

- See if that "office" is actually large enough to fit building code requirements for a bedroom

- Masking tape along the floor where the potential wall line will be. If you still can't get an idea of how the room will look, consider putting furniture into the space allotted or masking tape out where furniture will be. Grab your tape measure!

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