How to: Increase value with an added bedroom

How to: Increase value with an added bedroom
How to: Increase value with an added bedroom

If you own a property and are looking for a quick equity boost, or some extra rent, then adding a room might be a good option.

While this strategy suits some, not every house is going to be suited to the task. Before you even touch the toolkit, you need to hit up the numbers.

As always, head on to a listings website. You need to create an understanding in your mind about the difference between prices of say, comparative two bedroom homes and three bedroom homes that have the majority of other factors (such as land size, location and amenity) similar to yours.

Once you have worked out what this number is, you can very easily do a similar task with rental prices.

For suburbs where fewer properties transact or rent, you might find yourself collecting this data over a period of time – particularly where there is a mixture of housing types. You could also phone a local real estate agent and ask them to appraise your home and ask them how much it would add value with an extra bedroom.

Let’s assume the difference in price is $50,000 - a substantial sum, which can vary significantly between suburbs. We’ll also assume that, based on the rule of $100 rent for every $100,000 in home value, there’s an extra $50 a week in rent potentially available. We note that these are very rough sums and your result may be substantially different.

If there’s a potential $50,000 to be made, it’s certainly worth looking at.

With the $50,000 figure now in your mind, you need to turn your attention towards the property itself and consider where you can fit this extra room.

Understand what constitutes a bedroom

Of course, you can put a desk in a bedroom and call it a study, or you could put a table in there and make it a new living room, but a bedroom does have to fit certain standards. The Building Code of Australia will be a useful guide to head to.

To make it legally fit the definition of a bedroom when it comes to sell, there are a number of standards that need to be adhered to.

There are specific rules about ventilation, windows, floor space and ceiling height (2.4 metres for habitable rooms) that you need to be mindful of. Bringing in the council early, especially where permits are required, can be crucial.

Ensuring you fit these requirements is necessary, otherwise you will be legally required to sell your property as having the initial number of rooms and an extra “storage room” regardless of whether you think it is perfectly fine to be a bedroom.

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Firstly, look towards your floor plan

Cherie Barber from Renovating for Profit has previously told us to look for a “big open space” where you can put in a cheap $1,000 wall, add some paint and a bit of cleaning up and change an L-shaped room into two spaces – one of which becomes your extra bedroom.

You can also look for non load bearing walls that can be moved within a larger room to create two rooms, or an office that just needs to be slightly bigger.

Changing a room in this way is going to be your cheapest option, perhaps costing up to around $5,000, leaving you a nice $45,000 in equitable profit.

Look for alternative spaces

Garages, attics and similar spaces can be converted into bedrooms, however these can incur substantial costs – particularly if, for instance, the attic requires proper walls to be installed and windows to be put in. This can easily make the $50,000 profit potential erode, leaving you over capitalizing.

In some areas, a garage is going to be seen as an absolutely crucial aspect to your property. Turning this into a bedroom may, in fact, be detrimental to your investment – even if the numbers appear to stack up on first glance.

Other options

An extension may also be a consideration, however this is a costly measure. If you are looking to achieve substantial profit from adding a room, then you may consider this approach. This works particularly well in locations where you have a substantial sized yard and where house space commands a premium price.

Remember to factor in the length of the construction, as this is going to be a bigger project than just putting in an extra wall. You’ll also want to be particularly mindful of where you place the extension – perhaps the extension itself becomes a living area and you can convert a current living area into a bedroom.

When considering the costs to undertake any renovation, remember to factor in time that your tenant may need to be out of the property if it is currently rented. You may need to provide them a rental discount or other sort of compensation, such as alternative accommodation, to keep them on-side through all the improvements. Similarly, you may not be able to increase the rent if they are not close to the end of their lease.

You also want to make sure that the addition of an extra bedroom “makes sense” to the property that you have. If you own a three bedroom, one bathroom house, an extra bedroom may see you considering putting in an extra bathroom as well.

Remember that, just as with most renovations, it’s likely to cost you more and take you longer than expected. Ensure you have worked out the best and worst case scenarios for your profit before undertaking any work and risking over capitalizing.


Lastly, remember that presentation is everything when it comes to offering your property to prospective buyers or tenants.

Considering staging, either professionally or on your own, to show the functionality of the space. This is particularly important if a room is small, but fits the requirements. Place beds, furniture and other necessary items to show how you envision someone using the space. Perception is everything.

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Jennifer Duke

Jennifer Duke

Jennifer Duke is an economics correspondent for The Sydney Morning Herald and The Age, based at Parliament House in Canberra.


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